---

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, 2008

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)

1

---

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.

|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 17,2009.

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 has submitted
electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such
files).[ ] YES [ ] NO

2

---

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



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          | 30                                                        
|                                                      | A.                                                          | Operating
      Results                                    | 30  
|                                                      | B.                                                          | Liquidity
      and Capital Resources                      | 32  
|                                                      | C.                                                          | Research
      and Development, Patents and Licenses, etc. | 34  
|                                                      | D.                                                          | Trend
      Information                                    | 35  
|                                                      | E.                                                          | Off-Balance
      Sheet Arrangements                       | 35  
|                                                      | F.                                                          | Tabular
      Disclosure of Contractual Obligations        | 35  
|Item
      6                                          | Directors,
      Senior Management and Employees            | 35                                                        
|                                                      | A.                                                          | Directors
      and Senior Management                      | 35  
|                                                      | B.                                                          | Compensation                                               | 37  
|                                                      | C.                                                          | Board
      Practices                                      | 38  
|                                                      | D.                                                          | Employees                                                  | 39  

3

---

|               | E.                                                                                 | Share
      Ownership                                                         | 39
|-------------- | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | --
|Item
      7   | Major
      Shareholders and Related Party Transactions                            | 40                                                                           
|               | A.                                                                                 | Major
      Shareholders                                                      | 41
|               | B.                                                                                 | Related
      Party Transactions                                              | 41
|               | C.                                                                                 | Interests
      of Experts and Counsel                                        | 42
|Item
      8   | Financial
      Information                                                        | 42                                                                           
|               | A.                                                                                 | Financial
      Statements and Other Financial Information                    | 42
|               | B.                                                                                 | Significant
      Changes                                                     | 44
|Item
      9   | The
      Offer and Listing                                                        | 44                                                                           
|               | A.                                                                                 | Offer
      and Listing Details                                               | 44
|               | B.                                                                                 | Markets                                                                       | 47
|Item
      10  | Additional
      Information                                                       | 47                                                                           
|               | A.                                                                                 | Share
      Capital                                                           | 47
|               | B.                                                                                 | Articles
      of Incorporation and By-laws                                   | 50
|               | C.                                                                                 | Material
      Contracts                                                      | 56
|               | D.                                                                                 | Exchange
      Controls                                                       | 57
|               | E.                                                                                 | Taxation                                                                      | 57
|               | F.                                                                                 | Dividends
      and Paying Agents                                             | 58
|               | 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

4

---

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

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, 2006, 2007 and 2008 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 17, 2009 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
    #503-1771 Nelson Street
      Vancouver, BC V6M 1M6 Canada
    As a non-executive director,
      Mr. Sookochoff is responsible for the corporate governance of our
      company.Tom Milner
    PO Box 10 McLeese Lake, BC
      V0L 1P0 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.


5

---

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. (Mr.
      Hitchins ceased to be COO on June 2, 2008.)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
    5991 Gibbons Drive Richmond BC V7C 2C6
      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.


|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, 2008, 2007, 2006, 2005, and 2004
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

6

---

US GAAP
    2008 Audited
    2007 Audited
    2006 Audited
    2005 Audited
    2004 AuditedNet Sales or Operating Revenue
    NIL
    NIL
    NIL
    NIL
    NILNet Loss
    $5,480,641
    $8,960,241
    $5,738,018
    $3,332,394
    $4,648,724Net Loss from Operations (January
      17, 1983 (inception to December 31, 2008)
    $40,287,926
    $34,807,285
    $25,847,044
    $20,109,026
    $16,776,632Depreciation
    $20,860
    $14,528
    $7,493
    $6,780
    $6,076General and Administrative Expenses
    $2,072,166
    $1,654,437
    $1,049,305
    $570,745
    $1,104,084Mineral Property Exploration Costs
    $3,522,375
    $7,182,030
    $5,509,087
    $2,679,212
    $2,987,287Other Income
    $565,874
    $440,586
    $1,660,137
    $237,508
    $249,376Basic and Diluted Net Loss per
      Share
    $0.09
    $0.16
    $0.14
    $0.11
    $0.20Assets
    $6,685,512
    $11,767,456
    $2,220,698
    $1,697,951
    $1,303,553Current Assets
    $6,429,027
    $11,529,201
    $1,834,442
    $846,465
    $607,583Capital Stock
    $40,976,100
    $40,847,875
    $23,800,546
    $18,632,327
    $15,059,286Common Stock (adjusted to reflect
      changes in capital)
    60,370,592 common
      shares
    60,220,592 common
      shares
    49,322,614
    37,675,494
    28,310,394Basic and Diluted Net Loss per
      Common Share
    $0.09
    $0.16
    $0.14
    $0.11
    $0.20Cash Dividends per Common Share
    NIL
    NIL
    NIL
    NIL
    NIL


|B. | Capitalization and Indebtedness
|-- | -------------------------------

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 17, 2009, 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, 2008. You should read this table
in conjunction with the audited and unaudited financial statements and
accompanying notes included in this registration statement.

7

---

|As at December 31, 2008               |  
|------------------------------------- | -
|(Stated in Canadian Dollars)          |  
|                                      |  
|Liabilities                           |  
|Current, unsecured and unguaranteed   | $
|Current, secured and
      guaranteed |  
|                                      | $
|                                      |  
|Shareholders Equity                  |  
|Common stock                          | $
|Additional paid-in capital            |  
|Deficit                               |  
|                                      | $

|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

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

8

---

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.

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

9

---

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 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
$4,125,235, recoverable taxes of $28,286 and mining tax credits of $2,222,020 as
of December 31, 2008. We estimate our average monthly operating expenses to be
approximately $163,000. As a result, we need to generate

10

---

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 2009, 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, 2009, 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.

Risks Relating to our Securities

Trading in our common shares on the Toronto Stock
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 Toronto Stock
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,

11

---

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 17, 2009, 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 8,162,302 of our
common shares which, if exercised, would represent approximately 14 % 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 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 32 hours per week, which is
approximately 80% of his working hours, to the

12

---

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 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

13

---

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.

Our common shares are listed on the Toronto Stock 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.

14

---

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 varied in size from 1,500 to 5,500
hectares and totaled 9,000 hectares and were located in northern British
Columbia, between 20km west and 100km northwest of the Turnagain property. After
preliminary site investigations it was decided that all of these properties did
not warrant further work and subsequently these claims were allowed to lapse.
They are no longer owned by the company.

In January and February, 2005 we acquired, by staking on-line,
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 block 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 of approximately 4,489 hectares located approximately 130km
southeast of the Turnagain property. Some reconnaissance prospecting was
completed in the summer of 2006. It was determined that no further work was
warranted and the claims were allowed to lapse in 2008. They are no longer owned
by the company.

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 additional follow up work completed in 2008. Work was filed
on the properties with the expiry date of the properties extended until
September 30, 2010.

In July, 2006 we acquired by staking on-line, one additional
claim block consisting of approximately 18,050 hectares located on the west side
of Vancouver Island approximately 130km west of Campbell River, B.C. Some
reconnaissance prospecting was completed in late 2006. It was determined that no
further work was warranted and the claims were allowed to lapse in 2008. They
are no longer owned by the company.

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.
Some reconnaissance prospecting was completed in the summer of 2008. An
additional area of 305 hectares contiguous to the existing claim area was added
by map staking in August 2008. Work was filed on the property with the expiry
date of the properties extended until July 5, 2012.

15

---

On April 16, 2007 we acquired by staking on-line, one
additional claim block consisting of approximately 1,971hectares located on the
west side of Vancouver Island approximately 45km southwest of Gold River, B.C.
Some reconnaissance prospecting was completed on the claim in 2008 with no
further work warranted. The claim block was allowed to lapse and is no longer
owned by the company.

On August 25, 2008 we acquired by staking on-line, one
additional claim block known as the Dease Lime property. It consists of
approximately 780 hectares and is located approximately 48km west of the
Turnagain property. Some reconnaissance prospecting is scheduled for the summer
of 2009.

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, 2008,
we have drilled 273 core holes for a total depth of 76,367m (250,548 feet).
Approximate total exploration expenditure during this period was CAN$25,400,000.

As of December 31, 2008, we had approximately $6,376,000 in
cash or cash equivalents on hand, which is sufficient to cover our operating
costs for at least 20 months based on an estimated $163,000 per month plus our
anticipated 2009 exploration program of approximately $3,100,000.

|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.

16

---

Our primary natural resource property is the Turnagain
Property, located in the Liard Mining Division of northern British Columbia. We
also own four 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 the
Dease Lime property in 2009.

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 Meziadin 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

17

---

companies, including Hunter Dickenson Inc., Equity Engineering
and Ivanhoe Mines, and international mining companies, including Billiton-BHP,
Rio Tinto and Anglo American.

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,
and 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

18

---

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.

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 require 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 is
presently considered the most significant and is described below. The Bobner,
Dease Lime, Lime 1 and Lime 2 are believed to contain favorable geology. We
intend to conduct prospecting and sampling on the Turnagain and the Dease Lime
properties in 2009.

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.

19

---

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, vehicle, and exploration equipment with a cost of approximately
$88,000 located at our Vancouver Office and the Turnagain camp. We lease a
photocopier at the rate of $700 per three months. The company leases a borehole
survey tool on occasion 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 main mineral property the Turnagain is described more fully
below:



20

---



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 2008 exploration
programs was done under the supervision of Neil Froc, P. Eng., and Tony
Hitchins, M.Sc., all employees of Hard Creek Nickel Corporation.

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

21

---

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 930 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 2, 2009.

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)
    Issue Date
    Expiry DateLegacy Mineral Claim407627
    PUP 4
    500.0
    2004/jan/01
    2019/jan/01On-Line Cell Mineral Claims501131
    Drift 1
    422.0
    2005/jan/12
    2019/jan/12501168
    Drift 2
    421.8
    2005/jan/12
    2019/jan/12501234
    Drift 3
    421.7
    2005/jan/12
    2019/jan/12501298
    Drift 4
    421.8
    2005/jan/12
    2019/jan/12508218
    Dinah 1
    407.2
    2005/mar/03
    2019/mar/03508219
    Dinah 2
    407.1
    2005/mar/03
    2019/mar/03508221
    Dinah 3
    406.9
    2005/mar/03
    2019/mar/03


22

---

508222
    Dinah 4
    406.7
    2005/mar/03
    2019/mar/03508223
    Dinah 5
    407.1
    2005/mar/03
    2019/mar/03508225
    Dinah 6
    407.1
    2005/mar/03
    2019/mar/03508226
    Dinah 7
    254.6
    2005/mar/03
    2019/mar/03508227
    Dinah 8
    407.3
    2005/mar/03
    2019/mar/03508228
    Dinah 9
    135.5
    2005/mar/03
    2019/mar/03508229
    Dinah 10
    203.4
    2005/mar/03
    2019/mar/03528780
    T1
    67.7
    2006/feb/23
    2019/feb/23528781
    T2
    203.3
    2006/feb/23
    2019/feb/23528782
    T3
    152.6
    2006/feb/23
    2019/feb/23528784
    T4
    288.3
    2006/feb/23
    2019/feb/23528787
    T5
    169.6
    2006/feb/23
    2019/feb/23528788
    T6
    270.2
    2006/feb/23
    2019/feb/23528789
    T7
    422.5
    2006/feb/23
    2019/feb/23528790
    T8
    253.6
    2006/feb/23
    2019/feb/23Converted Legacy to On-Line Cell Mineral Claims (April 2005
      and November 2007)503365
    Hard
      2
    793.3
    2005/jan/14
    2019/feb/18510889
    Flat
      10, 13, 15
    1627.9
    2005/apr/18
    2019/apr/07510892
    Flat
      2, 6
    1219.3
    2005/apr/18
    2019/apr/07510910
    Flat
      9, 12, 14
    1424.3
    2005/apr/18
    2019/apr/07510911
    Flat
      1, 5
    1066.9
    2005/apr/18
    2019/apr/07510912
    Flat
      8, 11
    779.9
    2005/apr/18
    2019/apr/07511214
    Hard
      4, 6
    979.9
    2005/apr/20
    2019/feb/18511226
    Hill
      1, 2
    1216.1
    2005/apr/20
    2019/feb/18511227
    Hill
      3
    506.7
    2005/apr/20
    2019/feb/17511230
    Hill
      4, 5
    760.5
    2005/apr/20
    2019/feb/17511234
    Hill
      6
    185.9
    2005/apr/20
    2019/feb/16511244
    Hard
      5, 7
    489.9
    2005/apr/20
    2019/feb/18511251
    Hard
      8
    473.4
    2005/apr/20
    2019/feb/17511257
    Hill
      9, 10
    1014.4
    2005/apr/20
    2019/feb/17511279
    Hard
      9, 10
    896.7
    2005/apr/20
    2019/feb/17511304
    Hill
      7, 8
    1149.7
    2005/apr/21
    2019/feb/17511305
    Hound 3
    271.0
    2005/apr/21
    2019/sep/27511306
    Turn
      2, Flat 7
    881.2
    2005/apr/21
    2019/feb/19511329
    Hound 1, 2
    1015.4
    2005/apr/21
    2019/sep/27511330
    Cub
    592.6
    2005/apr/21
    2018/dec/01511337
    Cub
      10, 18, Pup 1
    1065.8
    2005/apr/21
    2018/dec/01511340
    Cub
      17
    253.9
    2005/apr/21
    2018/dec/01511344
    Turn
      1, Bear 2
    271.0
    2005/apr/21
    2019/feb/19511347
    Flat
      3, 4
    474.3
    2005/apr/21
    2019/apr/07511348
    Cub
      2
    389.4
    2005/apr/21
    2018/dec/01511586
    Pup
      2
    236.9
    2005/apr/25
    2019/jan/01511593
    Pup
      3
    101.5
    2005/apr/25
    2019/jan/01511627
    Cub
      11
    592.1
    2005/apr/25
    2018/dec/01511628
    Hard
      1
    709.0
    2005/apr/25
    2019/feb/18511629
    Hard
      3
    472.9
    2005/apr/25
    2019/feb/18570454
    Bear
      1
    456.8
    2007/nov/22
    2019/may/26570455
    Bear
      19, Bear 21 to 28
    237.0
    2007/nov/22
    2019/may/26


23

---

570456
    Bear
      3 to 18
    220.2
    2007/nov/22
    2019/may/26570457
    Bear
      20
    16.9
    2007/nov/22
    2019/may/26


The last four cell claims in the list with an issue date of
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 following figure shows the claims for the Turnagain
property listed above.



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.

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.

24

---

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 24,325 meters of diamond drilling in 72 holes, surface mapping and
sampling in several areas and continuation of fish habitat surveys and water
sampling. Metallurgical testwork was directed towards further definition of the
reagent scheme and nickel flotation kinetics for future pilot plant testing.

Our 2008 exploration program was completed by early September
and included 4,105 meters of diamond drilling in 15 holes, surface mapping and
sampling in several areas and continuation of fish habitat surveys and water
sampling. Metallurgical testwork continued towards further definition of the
reagent scheme and nickel flotation kinetics for future pilot plant testing.
This testwork is on-going and will continue through 2009. Additional testwork
will also be initiated in 2009 to determine the viability of the Activox®
Process as the potential hydrometallurgical plant option.

Present Condition of the Property

25

---

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.

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).

26

---

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.

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 (HPS) has
been contracted as the Turnagain Project Manager and is supervising all
metallurgical and mill process design work. Completed 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

27

---

- Various hydrometallurgical tests at SGS Lakefield, Ontario under the
  supervision of Dr. David Dreisinger.

Jim Gulyas, P.Eng. of AMEC Americas Limited of Vancouver, B.C.
was contracted in November 2008 to provide an overview of the hydrometallurgical
plant options available to the Company to extract nickel and cobalt from the
Turnagain concentrate. As a result of the overview the Company entered into an
agreement in January 2009 with Norilsk Processing Technology Pty. Ltd. to
determine the viability of the Activox® Process on Turnagain concentrate. This
work will proceed in 2009.

Metallurgical testwork continues towards refining the
parameters necessary for projecting actual mill performance. This testwork is
being carried out by G&T Laboratories in Kamloops, B.C., and at Western
Minerals Technology Pty Ltd (WMT) a division of Norilsk Processing Pty Ltd (NPT)
of Perth, Australia. This work is being managed and supervised under the
direction of Mr. John Hoffert, P.Eng. (HPS). Gary Johnson, WMTs Managing
Director will also be providing metallurgical consulting services to the
Company.

Recommendations and Cost Estimate

The following program for the complete 2009 year for the
Turnagain Property was recommended to our company by Neil Froc, P. Eng. in April
of 2009. On-site field work will initiate on June 10, 2009 and should be
completed within one month. Additional short (less than a week) site visits
maybe required within 2009.

Project Management
      (Camp Watchman, Geologists, Professional Advisors, etc.)
    $370,400On-Site Work
      (transportation, camp costs, etc.)
    $136,900Software
      maintenance and upgrades
    $8,400Miscellaneous
      sample maintenance and re-run projects
    $55,800Permitting Studies (Further environmental, First Nations
      agreements and traditional use studies)
    $624,000Metallurgical test
      work and services
    $711,400Engineering
      Studies
    $871,000Contingencies @
      10%
    $277,800Total
    $3,055,700


The program is directed primarily on refining the process
parameters necessary for projecting actual mill performance, determining the
viability of the Activox® Process as the potential hydrometallurgical plant
option, and establishing solid First Nations relationships.

|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, 2008
and 2007 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

28

---

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 $5,738,018 ($0.14 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.

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

29

---

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
$8,960,241 ($0.16 per share) compared to a net loss of $5,738,018 ($0.14 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.

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.

Year Ended December 31, 2008 Compared to Year Ended December
31, 2007

30

---

During fiscal 2008, the Company incurred a net loss of
$5,480,641 ($0.09 per share) compared to a net loss of $8,960,241 ($0.16 per
share) in fiscal 2007. Our General and administrative expenses for 2008 were
$2,072,166, up from $1,654,437 in the prior year. The increase of $417,729 can
be attributed to the $426,700 of financing costs associated with the re-pricing
of share purchase warrants. Consulting fees in 2008 were $150,180 while in 2007,
consulting fees were $979,706, the decrease of $829,526 is due primarily from
the $812,452 decrease in consulting stock based compensation. Professional fees
of $280,935 in 2008 were up $133,824 from $147,111 the previous year primarily
from the Cornerstone Agreement with the Kaska Dena and the TSX application.

During the year ended December 31, 2008, the Company incurred
exploration expenses of $3,522,375 on the Turnagain property (2007: $7,182,030).
Drilling expenses for 2008 were 23% of the total exploration expense down
significantly from the 54% in 2007.

Field activity resumed in June 2008, and prior thereto, efforts
were focused on compiling and analyzing data from the 2007 program. The program
was significantly smaller than the 2007 program with a total of 4,105 metres of
diamond drilling in 15 holes. Four of these holes were drilled in the Cliff Zone
area. One hole was abandoned in the Cliff Zone near the Turnagain River due to
difficult overburden conditions.

One of the Horsetrail holes was drilled horizontal to test an
area which has been selected as a potential adit site. An adit maybe required in
2009 to provide a bulk sample for future pilot plant testing. It also provided
confirmation testing of the deposit geological model as well as valuable
geotechnical information which will aid in developing future pit design
parameters.

Another of the Horsetrail holes was drilled between the present
proposed pit and the Turnagain River to provide hydrogeological and acid base
accounting information which will be required as part of future environmental
and pit design work. In addition, a similar shallow (30 metres) drill hole has
been drilled at the southern end of the airstrip.

Field work was completed in early September 2008.

On June 17, 2008 a new resource estimate was completed by AMEC
Americas Limited of Vancouver, B.C. The updated resource is a 45% increase in
Measured resources and 14% increase in Indicated resources using all the new
drill information from the 2007 exploration program. A total of 66,393 metres
(217,825 feet) of diamond drilling in 257 drill holes were used in interpolating
grade in the resource area. This total includes 16,533 metres of diamond
drilling in 53 holes drilled in late 2007 which were not available for use in
the 2007 resource estimate and results of a re-assay program on 4,317 samples
completed in 2008.

Metallurgical testwork continued towards refining the
parameters necessary for projecting actual mill performance. The testwork being
carried out by Xstrata Process Support (XPS) in Falconbridge, Ontario was
completed and a report on the results was received dated June 17, 2008. The XPS
testwork consisted of quantitative mineralogy, mineral processing flotation
testing including QEMSCAN and Microprobe analyses, one rougher and one cleaner
test for mineralogy and metallurgical alignment.

SGS in Lakefield Ontario continued work on crushing, grinding,
and abrasion testwork. A simulation summary on the suggested overall grinding
circuit was provided by SGS on July 3, 2008. Additional work is being considered
for finalizing the design parameters.

Additional hydrometallurgical testwork has also been completed
at SGS under the direction of Dr. David Dreisinger with a draft summary letter
report completed on June 22, 2008. The report outlines the simplified process
design flow sheet which involves pressure leaching of the concentrate to
dissolve copper, nickel and cobalt. It concludes that the hydrometallurgical
testing on the two Hard Creek concentrates as provided has been highly
successful. Dr. Dreisinger provided recommendations for the next steps in moving
forward to develop the hydrometallurgical process.

31

---

Jim Gulyas, P.Eng. of AMEC Americas Limited of Vancouver, B.C.
was contracted in November 2008 to provide an overview of the hydrometallurgical
plant options available to the Company to extract nickel and cobalt from the
Turnagain concentrate. As a result of the overview the Company entered into an
agreement in January 2009 with Norilsk Processing Technology Pty. Ltd. to
determine the viability of the Activox® Process on Turnagain concentrate. This
work will proceed in the 2nd quarter of 2009.

Locked cycle and open cycle testwork of the Phase I Test
Program at G&T Laboratories in Kamloops, B.C. has been completed. The
optimum scoping test conditions have been determined. The locked cycle testing
utilizing these conditions on the two major composites (A and B) and the open
circuit testing on the first 16 variability composites has also been completed.
An additional five low sulphur composites were collected and tested (Samples 17
to 21). A final report from G&T on the Phase I Testwork was received in
October 2008.

The objective of the present Phase II testwork at G&T
Laboratories is to develop a plant design using conventional grinding and
flotation technology with reduction of nickel recovery losses in the cleaner
circuit aimed at producing a concentrate for feed into the future
hydrometallurgical plant. This work will also define the reagent scheme and
nickel flotation kinetics for future pilot plant testing and plant design. This
work should be completed in the 2nd quarter of 2009.

Discussions initiated in 2004 with First Nations resulted in
the signing of the October 15, 2008 Cornerstone Agreement. This agreement lays
the foundation of a respectful, cooperation and progressive relationship to
facilitate the development of the Turnagain Project between the Kaska Dena and
the Company. The details of a Socio-Economic Participation Agreement (SEPA) are
presently being negotiated with the Kaska Dena. Discussions are also on-going
with the Tahltan to develop similar type agreements.

Plan of Operation

As of June 17, 2009, we had approximately $2,800,000 in cash
and $2,200,000 in cash equivalents, which is sufficient to cover our operating
costs for at least 15 months based on an estimated $163,000 per month plus the
remaining $2,500,000 of our $3,100,000 budgeted 2009 exploration program.

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, 2008, we had working capital of $6,,256,286.
Accounts payable and accrued liabilities at December 31, 2008 were $172,741.

During the year ended December 31, 2008, we raised $70,000 in
cash proceeds, net of issue costs, from the issuance of shares, details are
below.

| | i) | 150,000 share purchase options were exercised
      for total proceeds of $70,000.
| | -- | ----------------------------------------------------------------------------------

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 17, 2009, we had approximately $2,800,000 in cash
and $2,200,000 in cash equivalents, which is sufficient to cover our operating
costs for at least 15 months based on an estimated $163,000 per month plus the
remaining $2,500,000 of our $3,100,000 budgeted 2009 exploration program.

32

---

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 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, 2008, we raised
proceeds, net of issue costs, of $70,000 through the issuance of common shares.
Management believes that proceeds from this and the cash and cash equivalents on
hand 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.

33

---

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.

|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, 2008 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:

34

---

Name Office Held Age
    Area of Experience and Functions in Our
      CompanyMark Jarvis Director and 
      Chief Executive Officer Age: 54
    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: 57
    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: 63
    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: 53
    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: 47
    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.Neil Froc Executive Vice President
      Age: 47
    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: 50
    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

35

---

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 President and CEO of PBX Ventures Ltd. (TSX  PBX) which explores for
Copper, Gold and Molybdenum in Chile and is committed 10% 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.

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 80% 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.

36

---

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, 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 were paid to directors and
officers.

During the fiscal year ended December 31, 2008 the aggregate
remuneration paid to directors in their capacity as directors of our company was
$Nil. Management fees totaling $154,000 were paid to our directors and officers.
Geological and consulting fees totaling $292,400, together with $203,056 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, 2008 and 2007 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):

Name
      and principal position
    Year Ending
    Salary(10)($)
    Share-based
      **awards**($)
    **Option-** based
      **awards**($)
    Non-equity incentive plan
      compensation ($)
    Pensionvalue
      ($)
    All other
      **compen-**sation ($)
    Total **compen-**
      sation ($)Annual
      **incentive**plans
    Long- term
      **incentive** plansMark Jarvis President and
      CEO(1)
    12/31/08 12/31/07
    25,500 (11)
    Nil Nil
    97,084 Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    122,584 NilBrian Fiddler CFO(2)
    12/31/08 12/31/07
    60,000(3)55,500
    Nil Nil
    9,967 Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil 5,000
    69,967 60,500Neil Froc Executive Vice-
      President(4)
    12/31/08 12/31/07
    150,000(5)150,000
    Nil Nil
    19,934 Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil 10,000
    169,934 160,000Leslie Young Corporate
      Secretary(6)
    12/31/08 12/31/07
    68,500(7)53,500
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil 10,000
    68,500 63,500Tony Hitchins Chief Operating
      Officer(8)(9)
    12/31/08 12/31/07
    50,000 (9)120,000
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil Nil
    Nil 60,000
    50,000 180,000


37

---

|(1)  | Mark Jarvis was appointed Chief Executive Officer and
      President of the Company on January 9, 2004.                                                                                                                                                                                                                   
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                            
|(2)  | Brian Fiddler was appointed as Chief Financial Officer of
      the Company on January 9, 2003.                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                            
|(3)  | Effective March 20, 2008, the Company entered into a one
      year consulting agreement with Brian Fiddler pursuant to which Mr. Fiddler
      serves as the Chief Financial Officer and is paid a monthly salary of
      $5,000.                                                                                        
|     |                                                                                                                                                                                                                                                                                                                            
|(4)  | Neil Froc was appointed as Executive Vice President of
      the Company on June 5, 2006.                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                            
|(5)  | Effective June 5, 2008, the Company entered into a one
      year employment agreement with Neil Froc pursuant to which Mr. Froc serves
      as the Executive Vice President and is paid a monthly salary of
      $12,500.00.                                                                                            
|     |                                                                                                                                                                                                                                                                                                                            
|(6)  | Leslie Young was appointed as Corporate Secretary of the
      Company on February 26, 2004.                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                            
|(7)  | Effective January 2008, the Company entered into a one
      year employment agreement with Leslie Young pursuant to which Ms. Young
      serves as the Corporate Secretary and is paid a monthly salary of
      $5,000.00. On April 30, 2008 the monthly salary was increased to
      $6,000.00.                       
|     |                                                                                                                                                                                                                                                                                                                            
|(8)  | Tony Hitchins was appointed as Chief Operating Officer of
      the Company on January 7, 2005 and ceased to be an officer of the Company
      on June 2, 2008.                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                            
|(9)  | Effective February 1, 2008, the Company entered into a
      one year employment agreement with Tony Hitchins pursuant to which Mr.
      Hitchins served as the Chief Operating Officer and was paid a monthly
      salary of $10,000. The agreement was terminated on June 2, 2008.                                     
|     |                                                                                                                                                                                                                                                                                                                            
|(10) | The value of perquisites including property or other
      personal benefits provided to an NEO that are generally available to all
      employees, and that in the aggregate are worth less than $50,000, or are
      worth less than 10% of an NEOs total salary for the financial year are
      not reported herein.
|     |                                                                                                                                                                                                                                                                                                                            
|(11) | Effective October 1, 2008 the Company entered into a one
      year employment agreement with Mark Jarvis pursuant to which Mr. Jarvis
      serves as President and Chief Executive Officer and is paid a monthly
      salary of $8,500.00.                                                                              

|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, 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.

38

---

We currently do not have a remuneration or compensation
committee.

|D. | Employees
|-- | ---------

As of June 17, 2009, we have seven 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 17, 2009. Of the shares issued and outstanding, warrants held and stock
options granted, our directors and officers owned the following Common Shares as
of June 17, 2009:

Name
    Number of Common Shares Beneficially Owned
      as of June 17, 2009
    Percentage(1)Mark Jarvis
    5,524,756 (2)
    8.06%George Sookochoff
    184,000(3)
    0.27%Tom Milner
    560,000(4)
    0.78%Lyle Davis
    526,000(5)
    0.87%Brian Fiddler
    254,368(7)
    0.37%Leslie Young
    235,000(8)
    0.34%Neil Froc
    689,000(9)
    1.01%


|(1) | Based on 60,370,592 Common Shares issued and outstanding
      as at June 2, 2009, 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 2, 2009.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                              
|(2) | Includes stock options to purchase up to 1,300,000 of our
      Common Shares at exercise prices ranging from $.30 - $1.00 per share
      expiring up to February 17, 2014.                                                                                 
|    |                                                                                                                                                                                                                                                              
|(3) | Includes stock options to purchase up to 150,000 of our
      Common Shares at exercise prices ranging from $.30 - $1.00 per share
      expiring up to February 17, 2014.                                                                                   
|    |                                                                                                                                                                                                                                                              
|(4) | Includes stock options to purchase up to 550,000 of our
      Common Shares at exercise prices ranging from $.30 - $2.20 per share
      expiring up to February 17, 2014.                                                                                   
|    |                                                                                                                                                                                                                                                              
|(5) | Includes stock options to purchase up to 350,000 of our
      Common Shares at exercise prices ranging from $.30 - $1.00 per share
      expiring up to February 17, 2014.                                                                                   
|    |                                                                                                                                                                                                                                                              
|(7) | Includes stock options to purchase up to 200,000 of our
      Common Shares at exercise prices ranging from $.30 - $1.00 per share
      expiring February 17, 2014.                                                                                         
|    |                                                                                                                                                                                                                                                              
|(8) | Includes stock options to purchase up to 200,000 of our
      Common Shares at exercise prices ranging from $0.30 - $1.00 per share
      expiring February 17, 2014.                                                                                        
|    |                                                                                                                                                                                                                                                              
|(9) | Includes stock options to purchase up to 650,000 of our
      Common Shares at exercise prices ranging from $0.30 - $1.00 per share
      expiring February 17, 2014.                                                                                        

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

39

---

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, 2008 we have the
following stock options outstanding to our directors and officers:

Name
    Number of Options
    Exercise Price
    Expiry DateMark Jarvis
    1,600,000
    $0.60  1.00
    June
      27, 2013Tom Milner
    450,000
    $1.00  2.20
    June 27, 2013George Sookochoff
    160,000
    $0.60  1.00
    January 16, 2011Lyle Davis
    337,500
    $0.60  1.00
    June 27, 2013Brian Fiddler
    150,000
    $0.60  1.00
    July 22, 2013Leslie Young
    150,000
    $0.60  1.00
    January 16, 2011Neil Froc
    400,000
    $0.60  1.00
    July 22, 2013


|Item 7 | Major Shareholders and Related Party
      Transactions
|------ | -------------------------------------------------------

|A. | Major Shareholders
|-- | ------------------

The following table sets forth, as of June 17, 2009, 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
    5,524,756(2)
    8.06%


|(1) | Based on 60,370,592 Common Shares issued and outstanding
      as at June 17, 2009, 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 17, 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                
|(2) | Includes stock options to purchase up to 1,300,000 of our
      Common Shares at exercise prices ranging from $0.30  1.00 per share
      expiring February 17, 2014.                                                                                         

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 17, 2009, 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

40

---

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 31,2008
    2007
    2006Mark Jarvis (Director) President and
      CEO
    $25,500
    $Nil
    $NilTom Milner (Director) Exploration
      Expenditures
    $22,400
    $5,600
    $NilGeorge Sookochoff (Director)
      Exploration Expenditures
    $Nil
    $82,690
    $102,375Lyle Davis (Director) Consulting Fees
    $Nil
    $Nil
    $2,050Neil Froc (VP) Exploration
      Expenditures
    $150,000
    $160,000
    $86,364Neil Froc (VP) Consulting Fees
    $Nil
    $Nil
    $4,429Brian Fiddler (CFO) Management fees
    $60,000
    $60,500
    $42,000Leslie Young (Secretary)
      Management fees
    $68,500
    $63,500
    $46,750


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

41

---

these transactions was on terms at least as favorable as we
could have obtained from unaffiliated third parties.

Mr. Jarvis (Former Director), an employee, is a professional
executive who oversees the company on behalf of the shareholders; his fees are
expensed as management fees. 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 8 | Financial 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 Canada
with a note and account reconciliation to accounting principles generally
accepted in the United States of America.

Financial Statements filed as part of this annual report
:

Financial Statements of Hard Creek Nickel Corporation for
the years ended December 31, 2008 and 2007 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 February 25, 2009                                                                    
| | Consolidated Balance Sheets as
      at December 31, 2008 and 2007                                               
| | Consolidated Statements of Loss and
      Comprehensive Loss for the years ended December 31, 2008, 2007 and 2006
| | Consolidated Statements of
      Deficit for the years ended December 31, 2008, 2007 and 2006                    
| | Consolidated Statements of Cash Flows for the
      years ended December 31, 2008, 2007 and 2006                 
| | Notes to Consolidated Financial
      Statements                                                                 

42

---

Legal Proceedings

As of June 17, 2009, there are no legal proceedings to which
our company is a party and, to our knowledge, no such proceedings are
pending.

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 9 | The 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 17, 2009, 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.

43

---

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 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, 2004 through to December 31,
2008) on the TSX Venture Exchange (formerly the Canadian Venture Exchange) were
as follows:

Year/Period Ended
    High
    Low31-Dec-04
    $0.85
    $0.4331-Dec-05
    $0.58
    $0.3631-Dec-06
    $1.04
    $0.5531-Dec-07
    $3.26
    $0.7631-Dec-08
    $1.06
    $0.08


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, 2007
    $2.80
    $0.76June 30, 2007
    $3.00
    $1.63September 30, 2007
    $2.20
    $1.16December 31, 2007
    $1.35
    $0.80March 31, 2008
    $1.06
    $0.60June 30, 2008
    $0.84
    $0.51September 30, 2008
    $0.58
    $0.27December 31,
      2008
    $0.30
    $0.08


44

---



The high and low market prices for 2008, for each financial
quarter on the Toronto Stock Exchange is as follows:

Quarter Ended
    High
    Low31-Mar-08
    $1.06
    $0.6030-Jun-08
    $0.84
    $0.5130-Sep-08
    $0.58
    $0.2731-Dec-08
    $0.30
    $0.08


We have no principle trading market outside of our host market,
the Toronto Stock 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 17, 2009, 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

45

---

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.

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. | Plan of Distribution
|-- | --------------------

Not Applicable.

|C. | Markets
|-- | -------

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

|D. | Selling Shareholders
|-- | --------------------

Not Applicable.

|E. | Dilution
|-- | --------

Not Applicable.

|F. | Expenses of the Issues
|-- | ----------------------

Not Applicable.

|Item 10 | Additional Information
|------- | ----------------------

|A. | Share Capital
|-- | -------------

As at June 17, 2009 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 17, 2009 we had 60,370,592
common shares issued and outstanding and no Class A Preference Shares issued and
outstanding.

On January 1, 2008 we had 60,220,592 common shares issued and
outstanding. During the year ended December 31, 2008 we issued a total of
150,000 common shares so that we had 60,370,592 common shares issued and
outstanding as at December 31, 2008.

We do not own any shares of our company.

As at December 31, 2008 we had 2,719,802 warrants outstanding
as follows:

46

---

Type
    Amount
    Exercise Price
    Expiration DateWarrants
    2,709,802
    $0.30
    May 22, 2010Warrants
    10,000
    $0.30
    May 29, 2010


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

As at December 31, 2008 we had 5,200,000 options, each for the
purchase of one share of our common stock, outstanding as follows:

Type
    Amount
    Exercise Price
    Expiration DateOptions
    30,000
    $0.40
    January 7, 2009Options
    550,000
    $0.60
    January 23, 2009Options
    455,000
    $1.00
    January 23, 2009Options
    162,500
    $0.60
    January 23, 2009Options
    25,000
    $1.00
    January 23, 2009Options
    200,000
    $1.30
    February 16, 2009Options
    75,000
    $0.60
    June 11, 2009Options
    75,000
    $1.00
    June 11, 2009Options
    25,000
    $0.60
    August 24, 2009Options
    75,000
    $0.60
    September 24, 2009Options
    210,000
    $1.00
    January 7, 2010Options
    10,000
    $0.60
    May 10, 2010Options
    200,000
    $1.00
    May 12, 2010Options
    150,000
    $0.75
    May 19, 2010Options
    860,000
    $0.75
    January 16, 2011Options
    150,000
    $0.80
    June 16, 2011Options
    10,000
    $0.80
    September 21, 2011Options
    450,000
    $2.15
    March 27, 2012Options
    15,000
    $2.70
    April 23, 2012Options
    32,500
    $2.80
    May 29, 2012Options
    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
    650,000
    $1.00
    June 27, 2013Options
    310,000
    $1.00
    July 22, 2013


As at June 17, 2009 we had 2,719,802 warrants outstanding as
follows:

47

---

Type
    Amount
    Exercise Price
    Expiration DateWarrants
    2,709,802
    $0.30
    May 22, 2010Warrants
    10,000
    $0.30
    May 29, 2010


As at June 17, 2009, we had 5,442,500 options, each for the
purchase of one share of our common stock, outstanding as follows:

Type
    Amount
    Exercise Price
    Expiration DateOptions
    25,000
    $0.60
    August
      24, 2009Options
    50,000
    $0.60
    September 24, 2009Options
    160,000
    $1.00
    January 7, 2010Options
    10,000
    $0.60
    May 10, 2010Options
    200,000
    $1.00
    May 12, 2010Options
    150,000
    $0.75
    May 19, 2010Options
    810,000
    $0.75
    January 16, 2011Options
    150,000
    $0.80
    June 16, 2011Options
    10,000
    $0.80
    September 21, 2011Options
    450,000
    $2.15
    March 27, 2012Options
    15,000
    $2.70
    April 23, 2012Options
    32,500
    $2.80
    May 29, 2012Options
    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
    650,000
    $1.00
    June 27, 2013Options
    310,000
    $1.00
    July 22, 2013Options
    1,940,000
    $0.30
    February 17, 2014


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

Balance as at
      December 31, 2005
    37,675,494Common Shares
      issued for cash proceeds (i)
    4,726,836Warrants converted
      to Common Shares (ii)
    6,790,284Options converted
      to Common Shares (ii)
    130,000Balance as at
      December 31, 2006
    49,322,614Common Shares
      issued for cash proceeds (iii)
    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


48

---

Options converted
      to Common Shares (v)
    150,000Balance as at
      December 31, 2008
    60,370,592


|(i)   | During the year ended December 31, 2006, we issued by
      private placement, 4,726,836 Common Shares for cash proceeds of
      $3,704,378.                                                            
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                                                          
|(ii)  | During the year ended December 31, 2006, we 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.
|      |                                                                                                                                                                                                          
|(iii) | During the year ended December 31, 2007, we issued by
      private placement, 6,844,571 Common Shares for cash proceeds of
      $14,566,147.                                                           
|      |                                                                                                                                                                                                          
|(iv)  | During the year ended December 31, 2007, we 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.
|      |                                                                                                                                                                                                          
|(v)   | During the year ended December 31, 2008, we issued
      150,000 stock options for cash proceeds of
$70,000.                                                                                             

|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.

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

49

---

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

50

---

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:

(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;

51

---

(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.

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.

52

---

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 re-appointment 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.

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

53

---

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.

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.

54

---

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. | 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
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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.

55

---

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.

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:

56

---

| | (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
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

57

---

tax-exempt organizations, qualified retirement plans, financial
institutions, insurance companies, real estate investment trusts, regulated
investment companies, broker-dealers, non-resident 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 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

58

---

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.

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.

59

---

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.

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, 2008
and 2007 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 Toronto Stock 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.

60

---

The 2008 exploration program on the Turnagain Property was
recommended and managed by Neil Froc, P. Eng and Tony Hitchins, M.Sc. Neil Froc
is a qualified person as the term is defined under National Instrument 43-101.
Messrs. Froc and Hitchins have been involved with exploration of the Turnagain
Property for the past five to six 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 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 12 | Description of Securities Other than Equity
      Securities
|------- | ------------------------------------------------------------

None

PART II

|Item 13 | Defaults, Dividend Arrearages and
      Delinquencies.
|------- | ------------------------------------------------------

None

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

Not Applicable

61

---

|Item 15 | Controls 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, 2008, 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 our companys disclosure controls and procedures
were effective as of December 31, 2008.

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, 2008. 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, 2008. Based on its assessment as per the standards of the Public
Company Accounting Oversight Board, , we concluded that the Corporations
internal controls over financial reporting were effective as of December 31,
2008.

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

62

---

|B. | Code of Ethics
|-- | --------------

Not Applicable

|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

|F. | Change in Registrants Certifying
      Accountant
|-- | --------------------------------------------------

Not Applicable.

|G. | Corporate Governance
|-- | --------------------

Company Disclosure Obligations

- Timely disclosure.
- True and accurate disclosure.
- Disclosure of material changes/transactions.
- Financial statements.
- Annual Information Form (AIF).
- Management Discussion and Analysis (MD&A).

Insider Reporting

- Directors and officers are insiders of the company.
- Directors and officers are obligated to report their holdings and trades
  in company securities in compliance with securities regulations.
- The board has authorized the company secretary to assist and file insider
  reports on behalf of the directors and insiders.

Insider Trading

- Directors and officers must not buy or sell the companys securities when
  material information has not been disclosed.
- Directors and officers shall not inform others of undisclosed material
  information. Exceptions are available where disclosure is required, for
  example, consultation with employees, lawyers, geologists, etc. In these
  situations, the employee or outside advisor is also restricted from trading
  (deemed insider).
- Subsequent to the release of material information, insiders shall not
  trade until 24 hours subsequent to release of the information in order that
  the material information is widely disseminated.
- Employees of the company must agree to abide by the companys policy on
  trading restrictions, which policy shall forbid market activity in advance of,
  and immediately after, disclosure of material information (the restricted
  period).
- The president shall advise the directors, officers, consultants, and
  employees in writing when there is a restricted period.

63

---

PART III

|Item 17 | Financial 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,                     
|-----------------------------------------------------------------------------------------------------------------
|2008 and 2007 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 February 25, 2009                                                                    
|Consolidated Balance Sheets as at December
      31, 2008 and 2007                                               
|Consolidated Statements of Loss and Comprehensive Loss for
      the years ended December 31, 2008, 2007 and 2006
|Consolidated Statements of Deficit for the
      years ended December 31, 2008, 2007 and 2006                    
|Consolidated Statements of Cash Flows for the years ended
      December 31, 2008, 2007 and 2006                 
|Notes to Consolidated Financial Statements                                                                       

64

---

|Hard Creek Nickel
      Corporation
|-----------------------------------
|Consolidated Financial Statements  
|December 31,
      2008            





|Auditors report                                             |            
|------------------------------------------------------------ | -----------
|Consolidated Balance Sheets                                  | Statement 1
|Consolidated Statements of Loss and
      Comprehensive Loss | Statement 2
|Consolidated Statements of Deficit                           | Statement 3
|Consolidated Statements of Cash Flows                        | Statement 4
|Notes to Consolidated Financial Statements                   |            
|Consolidated Schedule of Deferred
      Exploration Costs    | Schedule 1 

---



AUDITORS REPORT

To the Shareholders of Hard Creek Nickel Corporation:

We have audited the consolidated balance sheets of Hard Creek
  Nickel Corporation (an exploration stage company) as at December 31, 2008 and
  December 31, 2007 and the consolidated statements of loss and comprehensive
  loss, deficit and cash flows for the years ended December 31, 2008 and 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.

We conducted our audits in accordance with Canadian generally
  accepted auditing standards and 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. An audit 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.

In our opinion, these consolidated financial statements present
  fairly, in all material respects, the financial position of the Company as at
  December 31, 2008 and 2007 and the results of its operations and its cash flows
  for the years ended December 31, 2008 and 2007 in accordance with Canadian
  generally accepted accounting principles.

DMCL

DALE MATHESON CARR-HILTON LABONTE LLP 
  DMCL CHARTERED
  ACCOUNTANTS

Vancouver, Canada 
  February 25, 2009

|COMMENTS BY AUDITORS FOR UNITED STATES READERS ON
      CANADA-UNITED STATES
|----------------------------------------------------------------------------
|REPORTING
      DIFFERENCES                                                 

In the United States, reporting standards for auditors require
  the addition of an explanatory paragraph (following the opinion paragraph) when
  the financial statements are affected by conditions and events that cast
  substantial doubt on the Companys ability to continue as a going concern, such
  as those described in Note 1 to the financial statements. Our report to the
  shareholders dated March 2, 2009 is expressed in accordance with Canadian
  reporting standards which do not permit a reference to such events and
  conditions in the auditors report when these are adequately disclosed in the
  financial statements.

DMCL

DALE MATHESON CARR-HILTON LABONTE LLP 
  DMCL CHARTERED
  ACCOUNTANTS

Vancouver, Canada 
  February 25, 2009



---

|Statement 1                     
|--------------------------------
|Hard Creek Nickel Corporation   
|Consolidated Balance Sheets     
|December 31,
      2008 and 2007

|ASSETS                                                                      |   |             |   |   |             |  
|--------------------------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                            |   | 2008        |   |   | 2007        |  
|CURRENT                                                                     |   |             |   |   |             |  
|Cash and cash equivalents                                                   | $ | 4,125,235   |   | $ | 9,707,914   |  
|Recoverable taxes                                                           |   | 28,286      |   |   | 486,721     |  
|Mining tax credits (Note 8)                                                 |   | 2,222,020   |   |   | 1,238,700   |  
|Prepaid
      expenses                                                      |   | 53,486      |   |   | 95,866      |  
|                                                                            |   | 6,429,027   |   |   | 11,529,201  |  
|                                                                            |   |             |   |   |             |  
|RECLAMATION BONDS                                                           |   | 187,900     |   |   | 187,900     |  
|EQUIPMENT, net of accumulated amortization
      of $59,058 (2007: $38,198) |   | 68,585      |   |   | 50,355      |  
|MINERAL PROPERTY INTERESTS (Note 4)                                         |   | 179,500     |   |   | 179,500     |  
|DEFERRED EXPLORATION COSTS (Schedule
      1)                               |   | 24,771,994  |   |   | 21,899,565  |  
|                                                                            | $ | 31,637,006  |   | $ | 33,846,521  |  
|                                                                            |   |             |   |   |             |  
|LIABILITIES                                                                 |   |             |   |   |             |  
|CURRENT                                                                     |   |             |   |   |             |  
|Accounts payable and
      accrued liabilities                              | $ | 172,741     |   | $ | 740,832     |  
|Due to
      related party (Note 6)                                         |   | -           |   |   | 1,484       |  
|                                                                            |   | 172,741     |   |   | 742,316     |  
|                                                                            |   |             |   |   |             |  
|FUTURE INCOME TAXES (Note 8)                                                |   | 376,703     |   |   | 1,084,809   |  
|                                                                            |   | 549,444     |   |   | 1,827,125   |  
|CONTINGENCIES AND COMMITMENTS (Notes 1 and 7)                               |   |             |   |   |             |  
|                                                                            |   |             |   |   |             |  
|SHAREHOLDERS' EQUITY                                                        |   |             |   |   |             |  
|SHARE CAPITAL (Note 5)                                                      |   | 39,562,338  |   |   | 39,434,113  |  
|CONTRIBUTED SURPLUS (Note 5)                                                |   | 4,363,875   |   |   | 3,465,667   |  
|DEFICIT                                                                     |   | (12,838,651 | ) |   | (10,880,384 | )
|                                                                            |   | 31,087,562  |   |   | 32,019,396  |  
|                                                                            | $ | 31,637,006  |   | $ | 33,846,521  |  

APPROVED BY:

|DIRECTOR | MARK JARVIS | DIRECTOR | LYLE DAVIS
|-------- | ------------- | -------- | ------------

(See accompanying notes)

---

|Statement
        2                                         
|------------------------------------------------------------
|Hard Creek Nickel Corporation                               
|Consolidated Statements of Loss and Comprehensive
      Loss
|Years Ended
      December 31, 2008, 2007 and 2006          

|                                             |   | 2008       |   |   | 2007       |   |   | 2006       |  
|-------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|ADMINISTRATIVE EXPENSES                      |   |            |   |   |            |   |   |            |  
|Amortization                                 | $ | 20,860     |   | $ | 14,528     |   | $ | 7,493      |  
|Consulting                                   |   | 150,180    |   |   | 167,254    |   |   | 152,278    |  
|Consulting  stock-based (Note 6)            |   | -          |   |   | 812,452    |   |   | 128,745    |  
|Financing costs (Note 5)                     |   | 426,700    |   |   | -          |   |   | -          |  
|Office and general                           |   | 380,328    |   |   | 294,033    |   |   | 243,435    |  
|Investor
      relations                     |   | 597,397    |   |   | 732,165    |   |   | 332,293    |  
|Investor relations  stock-based             |   | 184,121    |   |   | 273,201    |   |   | -          |  
|Legal and audit                              |   | 280,935    |   |   | 147,111    |   |   | 204,250    |  
|Management fees (Note 6)                     |   | 154,000    |   |   | 124,000    |   |   | 88,750     |  
|Management fees
       stock-based (Note 6) |   | 131,322    |   |   | -          |   |   | 295,773    |  
|Property evaluation                          |   | 8,018      |   |   | 3,314      |   |   | -          |  
|Property
      impairment                    |   | 44,662     |   |   | 68,158     |   |   | -          |  
|Salaries and benefits                        |   | 28,880     |   |   | 21,460     |   |   | -          |  
|Salaries and
      benefits  stock-based    |   | 1,993      |   |   | -          |   |   | -          |  
|Travel and promotion                         |   | 114,745    |   |   | 195,050    |   |   | 81,561     |  
|                                             |   |            |   |   |            |   |   |            |  
|LOSS BEFORE OTHER INCOME AND INCOME          |   |            |   |   |            |   |   |            |  
|TAXES                                        |   | 2,524,141  |   |   | 2,852,726  |   |   | 1,534,578  |  
|                                             |   |            |   |   |            |   |   |            |  
|OTHER INCOME                                 |   |            |   |   |            |   |   |            |  
|Interest                                     |   | (463,052   | ) |   | (134,592   | ) |   | (33,697    | )
|                                             |   |            |   |   |            |   |   |            |  
|LOSS BEFORE INCOME TAXES                     |   | 2,061,089  |   |   | 2,718,134  |   |   | 1,500,881  |  
|                                             |   |            |   |   |            |   |   |            |  
|FUTURE INCOME TAXE RECOVERY (Notes 5 and 8)  |   | (102,822   | ) |   | (939,923   | ) |   | (1,271,950 | )
|                                             |   |            |   |   |            |   |   |            |  
|                                             |   |            |   |   |            |   |   |            |  
|NET AND COMPREHENSIVE LOSS                   |   | 1,958,267  |   |   | 1,778,211  |   |   | 228,931    |  
|                                             |   |            |   |   |            |   |   |            |  
|                                             |   |            |   |   |            |   |   |            |  
|BASIC AND DILUTED LOSS PER SHARE             | $ | (0.03      | ) | $ | (0.03      | ) | $ | (0.01      | )
|                                             |   |            |   |   |            |   |   |            |  
|WEIGHTED NUMBER OF COMMON SHARES             |   |            |   |   |            |   |   |            |  
|OUTSTANDING                                  |   |            |   |   |            |   |   |            |  
|- BASIC AND DILUTED                          |   | 60,317,860 |   |   | 55,031,402 |   |   | 42,206,318 |  

(See accompanying notes)

---

|Statement 3                                       
|--------------------------------------------------
|Hard Creek Nickel Corporation                     
|Consolidated Statements of Deficit                
|Years Ended
      December 31, 2008, 2007 and 2006

|                   |   | 2008       |  |   | 2007       |  |   | 2006      | 
|------------------ | - | ---------- |  | - | ---------- |  | - | --------- | 
|DEFICIT, BEGINNING | $ | 10,880,384 |  | $ | 9,102,173  |  | $ | 8,873,242 | 
|NET LOSS           |   | 1,958,267  |  |   | 1,778,211  |  |   | 228,931   | 
|DEFICIT, ENDING    | $ | 12,838,651 |  | $ | 10,880,384 |  | $ | 9,102,173 | 

(See accompanying notes)

---

|Statement 4                                               
|----------------------------------------------------------
|Hard Creek Nickel Corporation                             
|Consolidated Statements of Cash Flows                     
|For The Years
      Ended December 31, 2008, 2007 and 2006

|                                                                                                                                      |   | 2008       |   |   | 2007       |   |   | 2006       |  
|------------------------------------------------------------------------------------------------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|OPERATING ACTIVITIES                                                                                                                  |   |            |   |   |            |   |   |            |  
|Net loss                                                                                                                              | $ | (1,958,267 | ) | $ | (1,778,211 | ) | $ | (228,931   | )
|Non cash items                                                                                                                        |   |            |   |   |            |   |   |            |  
|Amortization                                                                                                                          |   | 20,860     |   |   | 14,528     |   |   | 7,493      |  
|Property
      impairment                                                                                                             |   | 44,662     |   |   | 68,158     |   |   | -          |  
|Stock-based compensation                                                                                                              |   | 317,436    |   |   | 1,085,653  |   |   | 424,518    |  
|Financing costs                                                                                                                       |   | 426,700    |   |   | -          |   |   | -          |  
|Future income tax recovery                                                                                                            |   | (102,822   | ) |   | (939,923   | ) |   | (1,271,950 | )
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|Changes in operating assets and liabilities:                                                                                          |   |            |   |   |            |   |   |            |  
|Recoverable taxes                                                                                                                     |   | 458,435    |   |   | (258,372   | ) |   | (167,671   | )
|Mining tax credits                                                                                                                    |   | -          |   |   | (1,238,700 | ) |   | -          |  
|Prepaid
      expenses                                                                                                                |   | 42,380     |   |   | (48,764    | ) |   | (2,586     | )
|Accounts payable and accrued
      liabilities                                                                                        |   | (568,091   | ) |   | 1,037,300  |   |   | 114,811    |  
|Due to
      related party                                                                                                            |   | (1,484     | ) |   | 1,484      |   |   | -          |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|                                                                                                                                      |   | (1,320,191 | ) |   | (2,056,847 | ) |   | (1,124,316 | )
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|INVESTING ACTIVITIES                                                                                                                  |   |            |   |   |            |   |   |            |  
|Reclamation bond                                                                                                                      |   | -          |   |   | -          |   |   | (60,000    | )
|Purchase of
      office equipment and vehicle                                                                                        |   | (39,090    | ) |   | (29,585    | ) |   | (22,013    | )
|Exploration and development
      costs                                                                                               |   | (4,293,398 | ) |   | (7,763,726 | ) |   | (5,424,497 | )
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|                                                                                                                                      |   | (4,332,488 | ) |   | (7,793,311 | ) |   | (5,506,510 | )
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|FINANCING ACTIVITIES                                                                                                                  |   |            |   |   |            |   |   |            |  
|Proceeds from
      share issuances, net of issue costs                                                                               |   | 70,000     |   |   | 17,836,023 |   |   | 6,908,796  |  
|Net decrease in restricted cash                                                                                                       |   | -          |   |   | 163,058    |   |   | 539,750    |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|                                                                                                                                      |   | 70,000     |   |   | 17,999,081 |   |   | 7,448,546  |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                                                                             |   | (5,582,679 | ) |   | 8,148,923  |   |   | 817,720    |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|CASH AND CASH EQUIVALENTS, BEGINNING                                                                                                  |   | 9,707,914  |   |   | 1,558,991  |   |   | 741,271    |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|CASH AND CASH EQUIVALENTS, ENDING                                                                                                     | $ | 4,125,235  |   | $ | 9,707,914  |   | $ | 1,558,991  |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|Supplementary Information                                                                                                             |   |            |   |   |            |   |   |            |  
|Cash paid for income tax                                                                                                              | $ | -          |   | $ | -          |   | $ | -          |  
|Cash paid for
      interest                                                                                                          | $ | -          |   | $ | -          |   | $ | -          |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|Cash and cash equivalents is comprised
      of:                                                                                      |   |            |   |   |            |   |   |            |  
|Cash                                                                                                                                  | $ | 25,098     |   | $ | 161,914    |   | $ | 1,035,991  |  
|Guaranteed
      Investment certificates                                                                                              | $ | 4 ,100,137 |   | $ | 9,546,000  |   | $ | 523,000    |  
|                                                                                                                                      |   |            |   |   |            |   |   |            |  
|Non-cash transactions:                                                                                                                |  
|2006                                                                                                                                  |  
|Warrants with an estimated fair value of $114,135 were issued to
      brokers as fees relating to brokered private placements.       |  
|                                                                                                                                      |  
|2007                                                                                                                                  |  
|Warrants with an estimated fair value of $482,700 were issued to
      brokers as fees relating to brokered private placements. (Note |  
|5)                                                                                                                                    |  
|                                                                                                                                      |  
|2008                                                                                                                                  |  
|Warrants were re-priced with an estimated fair value of $426,700,
      these warrants were previously related to brokered private    |  
|placements
      in 2007. (Note 5)                                                                                                    |  

(See accompanying notes)

---

|Hard Creek Nickel
      Corporation       
|------------------------------------------
|Notes to Consolidated Financial Statements
|December 31,
      2008                   

|1. | NATURE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | The Company is engaged in the acquisition and exploration
      of mineral properties. The Companys common shares are listed for trading
      on the Toronto Stock Exchange (TSX) under the symbol HNC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | These consolidated financial statements have been
      prepared on a going concern basis, which assumes the Company will realize
      its assets and discharge its liabilities in the normal course of
      operations. Should the Company be unable to continue as a going concern
      significant adjustment to asset values may be necessary. The ability of
      the Company to continue as a going concern is dependent upon the company
      raising sufficient financing to complete exploration and development
      activities, the discovery of economically recoverable reserves, and upon
      future profitable operations or proceeds from disposition of resource
      property interests. The Company presently, has not yet determined whether
      its mineral property contains economically recoverable resources.
      Management anticipates that the Company has sufficient current cash
      reserves to continue operations for the ensuing twelve months. Management
      is also aware that significant material uncertainties exist, related to
      current economic conditions that could cast significant doubt upon the
      entitys ability to continue to finance its exploration activities. As a
      result, management plans on reducing spending in order to preserve cash
      and maintain liquidity until overall market conditions improve. Management
      is not able to assess the likelihood or timing of improvements in the
      equity markets for raising capital for future acquisitions or
      expenditures. This uncertainty represents a liquidity risk and may impact
      the Companys ability to continue as a going concern in the future. The
      Company is in the process of exploring and evaluating its mineral property
      interests.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2. | CHANGES IN ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | On January 1, 2008, the Company adopted the following new
      accounting standards related to financial statement presentation, capital
      disclosures, and financial instrument disclosures and presentation that
      were issued by the Canadian Institute of Chartered Accountants (CICA).
      These changes in accounting policies have been adopted on a prospective
      basis. At January 1, 2008, management determined there were no adjustments
      required to the Companys financial instruments as a result of adopting
      these policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Accounting Changes  CICA Handbook Section 1506                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | This standard establishes criteria for changes in
      accounting policies, accounting treatment and disclosure regarding changes
      in accounting policies, estimates and corrections of errors. In
      particular, this section allows for voluntary changes in accounting
      policies only when they result in the financial statements providing
      reliable and more relevant information. This section requires changes in
      accounting policies to be applied retrospectively unless doing so is
      impracticable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Capital Disclosures  CICA Handbook Section
      1535                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | This section specifies the disclosure of (i) an entitys
      objectives, policies and processes for managing capital; (ii) quantitative
      data about what the entity regards as capital; (iii) whether the entity
      has not complied with any capital requirements; and (iv) if it has not
      complied, the consequences of such noncompliance. The Company has included
      disclosures recommended by this new section in Note 10 to these financial
      statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Financial Instruments  Disclosures, CICA Handbook
      Section 3862, and Financial Instruments  Presentation, CICA Handbook
      Section 3863
        These new standards, which replaced Section 3861 
          Disclosure and Presentation, revise and enhance disclosure requirements
          while carrying forward presentation requirements. These new sections will
          place increased emphasis on disclosure about the nature and extent of
          risks arising from financial instruments and how the entity manages those
          risks. The Company has included disclosure recommended by these new
          sections in Note 9.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

---

|   | Going Concern  CICA Handbook Section 1400                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | In June 2007, the CICA modified section 1400 General
      Standards of Financial Statement Presentation in order to require that
      management make an assessment of the Companys ability to continue as a
      going concern over a period which is at least, but not limited to, twelve
      months from the balance sheet date. These new requirements were adopted by
      the Company on January 1, 2008.                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | RECENT ACCOUNTING PRONOUNCEMENTS, NOT YET
      ADOPTED                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | Goodwill and Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | As of January 1, 2009, the Company will be required to
      adopt the CICA Handbook Section 3064 Goodwill and Intangible Assets,
      which will replace the existing Goodwill and Intangible Assets standard.
      The new standard revises the requirement for recognition, measurement,
      presentation and disclosure of intangible assets. The adoption of this
      standard is not expected to have a material impact on the Companys
      financial statements.                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | International Financial Reporting Standards
      (IFRS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In 2006, the Accounting Standards Board of Canada
      (ACSB) ratified a strategic plan that will result in the convergence of
      Canadian GAAP, as used by publicly accountable entities, with IFRS over a
      transitional period. The ACSB has developed and published a detailed
      implementation plan, with changeover required for fiscal years beginning
      on or after January 1, 2011. The Company is in the process of reviewing
      the impact of this initiative on its financial statements.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company prepares its consolidated financial
      statements in accordance with Canadian generally accepted accounting
      principles (GAAP), the more significant of which are as
      follows:                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | Computer equipment | 30% declining balance
| | ------------------ | ---------------------
| | Vehicles           | 30% declining balance
| | Equipment          | 20% declining balance

| | c) | Mineral property interests                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | The Company records its interests in unproven mineral
      properties at the lower of cost or estimated recoverable value. Where
      specific exploration programs are planned and budgeted by management,
      mineral exploration costs are capitalized and carried at cost until the
      properties to which they relate are placed into commercial production,
      sold, abandoned or determined by management to be impaired in
      value.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Costs incurred for acquisition, including where
      applicable, option payments under acquisition agreements, are capitalized
      until such time as the related interest is placed into production, sold,
      abandoned or management has determined impairment in value.                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    | Mineral property interests, where future cash flows are
      not reasonably determinable, are evaluated for impairment on a reporting
      period basis or as events and changes in circumstances warrant based on
      managements intentions and determination of the extent to which future
      exploration programs are warranted and likely to be
      funded.                                                                               

---

| |    | Capitalized costs for acquisition and deferred
      exploration as reported on the balance sheet represent costs incurred to
      date or estimated recoverable value if lower than cost. Recovery of
      carrying value is dependent upon future commercial success or proceeds
      from disposition of the mineral interests. Upon the establishment of
      commercial production, carrying values of deferred acquisition and
      exploration costs will be amortized over the estimated life of the
      resource on the units of production method.                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | d) | Stock-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company may grant, from time to time, stock options
      to executive officers, directors and consultants. The Company records all
      stock based awards at fair value as determined using the Black- Scholes
      option pricing model. All stock based awards to employees and
      non-employees are measured at the time of grant, or revision, and the fair
      value attributed is charged to operations, allocated to specific asset
      accounts, and recognized over the vesting period. Upon exercise, the fair
      value of share purchase options or specified warrants is allocated from
      the contributed surplus account to share capital.                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | e) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The preparation of financial statements in conformity
      with Canadian generally accepted accounting principles requires management
      to make estimates and assumptions that affect the reported amounts of
      assets and liabilities, 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. Significant areas requiring the
      use of management estimates relate to the determination of impairment of
      assets, mineral property interest carrying values, useful lives of
      equipment for amortization, determination of fair value for stock based
      transactions, fair value of financial instruments, reporting of tax
      credits and future income taxes. Financial results as determined by actual
      events could differ from those estimates.                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | f) | Future income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company follows CICA Handbook Section 3465, Income
      Taxes in accounting for income taxes. Future income taxes are recorded
      using the asset and liability method whereby future tax assets and
      liabilities are recognized for the future tax consequences attributable to
      differences between the financial statement carrying amounts of assets and
      liabilities and their respective tax bases. Future tax assets and
      liabilities are measured using the enacted or substantively enacted tax
      rates expected to apply when the asset is realized or the liability
      settled. The effect on future tax assets and liabilities of a change in
      tax rates is recognized in income in the period that substantive enactment
      or enactment occurs. To the extent that the Company does not consider it
      more likely than not that a future tax asset will be recovered, it
      provides a valuation allowance against the excess.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | g) | Risk Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company is engaged primarily in mineral exploration
      and is exposed to related industry risks including recovery, commodity and
      market risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company is at risk for environmental issues relating
      to mineral exploration. In managements opinion, the Company develops and
      follows policies that are designed to comply with and follow government
      and industry environmental regulations related to its principal activity.
      However, there is no certainty that all environmental risks can be
      addressed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company is not exposed to significant credit
      concentration risk, interest rate risk or foreign exchange
      risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

| | h) | Loss per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Loss per share is calculated using the weighted average
      number of shares outstanding during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Diluted loss per share is calculated using the treasury
      stock method, which assumes that any proceeds obtained upon exercise of
      options and warrants would be used to purchase common shares at average
      market price during the period. Diluted loss per share is equal to that of
      basic loss per share as the effects of stock options and warrants are
      anti-dilutive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | i) | Share capital  Flow-through shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company renounces qualifying Canadian exploration
      expenditures to certain share subscribers who subscribe for flow-through
      shares in accordance with the Income Tax Act (Canada). Under these
      provisions the Company is required to incur and renounce qualifying
      expenditures on a timely basis for the respective flow-though
      subscriptions and accordingly, it is not entitled to the related tax
      deductions and tax credits for such expenditures.                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company follows recommendations by the Emerging
      Issues Committee (EIC) of the CICA relating to the issuance of
      flow-through shares. EIC 146 requires the recognition of future income tax
      liabilities relating to the issuance of flow-through shares as a direct
      reduction in share capital in the period of completion of applicable tax
      filings renouncing qualifying Canadian exploration expenditures to the
      share subscribers. The Company will recognize future income tax recoveries
      by applying available non-capital losses and other deductible temporary
      differences not previously recognized to offset any future income tax
      liability resulting from the issuance of flow-through shares. The
      resulting future income tax recovery is recognized in operating results in
      the same period.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | j) | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Company reviews and recognizes legal obligations
      associated with the retirement of tangible long- lived assets, including
      rights to explore or exploit natural resources. When such obligations are
      identified and measurable, the estimated fair values of the obligations
      are recognized on a systematic basis over the remaining period until the
      obligations are expected to be settled.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Mineral property interest related retirement obligations
      are capitalized as part of deferred exploration and development costs and
      are accounted for in the same manner as all other capitalized
      costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | The Companys resource activities 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 continually evolving with more
      onerous standards, including the imposition of fines and penalties for
      non-compliance.                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    | Management is not aware of any significant known or
      anticipated liability or reclamation requirement arising from its past or
      current operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

| | k) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | l) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company considers all highly liquid investments with
      original maturities of three months or less to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | m) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | n) | Non-monetary transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | All non-monetary transactions are measured at the fair
      value of the asset surrendered or the asset received, whichever is more
      reliable, unless the transaction lacks commercial substance or the fair
      value cannot be reliably established. The commercial substance requirement
      is met when the future cash flows are expected to change significantly as
      a result of the transaction. When the fair value of a non- monetary
      transaction cannot be accurately measured it is recorded at the carrying
      amount of the asset given up adjusted by the fair value of any monetary
      consideration received or given.                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | o) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Company follows the CICA Handbook Section 3855,
      Financial Instruments. This section prescribes when a financial
      instrument is to be recognized on the balance sheet and at what amount.
      Under Section 3855, financial instruments must be classified into one of
      five categories: held-for- trading, held-to-maturity, loans and
      receivables, available-for-sale financial assets, or other financial
      liabilities. All financial instruments, including derivatives, are
      measured at the balance sheet date at fair value except for loans and
      receivables, held-to-maturity investments, and other financial liabilities
      which are measured at amortized cost.                                                                                                             
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | The Companys financial instruments consist of cash,
      recoverable taxes, mining tax credits, accounts payable and amounts due to
      related parties. Cash, which is measured at its face value, representing
      fair value, is classified as held-for-trading. Recoverable taxes and
      mining tax credits are classified as loans and receivables. Accounts
      payable and amounts due to related parties, which are measured at
      amortized cost, are classified as other financial liabilities. Unless
      otherwise noted, it is managements opinion that the Company is not
      exposed to significant interest, currency or credit risks arising from
      these financial instruments. The fair value of these financial instruments
      approximates their carrying values, unless otherwise noted.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |    | For the years ended December 31, 2008 and 2007, the
      Company has no derivatives or embedded
      derivatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

| | p) | Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    | The Company follows CICA Handbook Section 1530,
      Comprehensive Income. Comprehensive income is defined as the change in
      equity from transactions and other events from non-owner sources. Section
      1530 establishes standards for reporting and presenting certain gains and
      losses not normally included in net income or loss, such as unrealized
      gains and losses related to available for sale securities, and gains and
      losses resulting from the translation of self-sustaining foreign
      operations, in a statement of comprehensive
      income.

|4. | INTEREST IN MINERAL PROPERTIES                                     
|-- | -------------------------------------------------------------------
|   |                                                                    
|   | Turnagain property acquisition costs and terms are as
      follow:

| |                   |   | December 31, 2008 |  |   | December 31, 2007 | 
| | ----------------- | - | ----------------- |  | - | ----------------- | 
| | Acquisition costs | $ | 179,500           |  | $ | 179,500           | 

The Company has a 100% interest in 81
  mineral claims, located along the Turnagain River in Northern British Columbia.
  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 2008, the Company
  incurred costs totalling $4,505,695 (2007 - $8,745,020) (Refer to Schedule
  1).

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

In March 2006, the Company acquired by
  staking the Lunar property located Southeast of the Turnagain property. No work
  on the claims was completed in 2008.

In May 2006, the Company acquired by
  staking, two additional claim blocks which are known as the Lime property which
  includes non-contiguous Lime 1 and Lime 2 claim blocks. The property is located
  West of the Turnagain property. During the year ended December 31, 2008, the Co
  mpany incurred costs totalling $7,441 (2007 - $Nil) on this property.

In July 2006, the Company acquired, by
  map staking, the Conuma claim block on Vancouver Island. During the year ending
  December 31, 2008 the Company incurred costs totalling $32,082 (2006 - $Nil),
  however, these claims were allowed to lapse during the fourth quarter of 2008.
  As a result, the Company wrote down the $32,082 of costs incurred to $Nil.

The Nootka claims, located 28km south
  of the Conuma claims, were acquired in April 2007 by map staking. During the
  year ending December 31, 2008 the Company incurred costs totalling $12,580 (2006
  - $Nil), however, these claims were allowed to lapse during the fourth quarter
  of 2008. As a result, the Company wrote down the $12,580 of costs incurred to
  $Nil.

---

|5. | SHARE CAPITAL
|-- | -------------

Authorized:

Unlimited common shares without par
  value

| |                                        |  | December 31, 2008 |  |  | December 31, 2007 | 
| | -------------------------------------- |  | ----------------- |  |  | ----------------- | 
| |                                        |  | Number of         |  |  |                   | 
| |                                        |  | Shares            |  |  | **$**             | 
| | Issued and outstanding:                |  |                   |  |  |                   | 
| | Balance, beginning of year             |  | 60,220,592        |  |  | 39,434,113        | 
| | Private placements, net of costs       |  | -                 |  |  | -                 | 
| | Exercise of options                    |  | 150,000           |  |  | 128,225           | 
| | Exercise of warrants                   |  | -                 |  |  | -                 | 
| | Future income taxes on renounced flow- |  | -                 |  |  | -                 | 
| | through expenditures                   |  |                   |  |  |                   | 
| |                                        |  |                   |  |  |                   | 
| | Balance, end of year                   |  | 60,370,592        |  |  | 39,562,338        | 

2008 share transactions:

During the year, 150,000 share purchase
  options were exercised for total cash proceeds of $70,000. The Company
  previously allocated $58,225 to contributed surplus for the fair value of these
  options. Upon exercise, contributed surplus was reduced by this amount and
  reallocated to share capital.

2007 share transactions:

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. The fair value of these warrants were not separately
  recorded. During the year ended December 31, 2008, the Company re-priced the
  exercise price of the warrants to $0.30 and extended the exercise date to May
  22, 2010.

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 with a fair value of $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. The fair value of these warrants were not separately recorded. During the
  year ended December 31, 2008, the Company re-priced the exercise price of the
  warrants to $0.30 and extended the exercise date to May 29, 2010.

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. The Company
  previously allocated $76,468 to contributed surplus for the fair value of these
  options. Upon exercise, contributed surplus was reduced by this amount and
  reallocated to share capital.

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 $3,077,627. The Company previously
  allocated $93,052 to contributed surplus for the fair value of 311,334 agent
  warrants. Upon exercise, contributed surplus was reduced by this amount and
  reallocated to share capital.

Flow-through shares:

In accordance with Canadian generally
  accepted accounting standards relating to the issuance of flow-through shares
  (refer to note 3(i)), the Company recorded a future income tax liability and a
  corresponding reduction to share capital on completion of applicable tax filings
  renouncing qualifying Canadian exploration expenditures of $Nil
  (2007-$6,937,405) on flow-through share subscriptions during the year ended
  December 31, 2008.

As a result of the renunciation, the
  Company recognized a future income tax liability of $Nil (2007-$2,365,655) which
  has been reduced by the realization of previously unrecognized losses and
  available tax benefits from tax pools and other deductible temporary deductions.
  The realized potential tax benefit of the losses and other items from the
  current and prior periods was recorded as a future income tax recovery of
  $102,822 (2007 - $939,923) in the results of operations in 2008. (Note 8)

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. A summary of the Companys stock option
  activity is as follows:

| |                             |  | December 31, 2008 |   |   | December 31, 2007 | 
| | --------------------------- |  | ----------------- | - | - | ----------------- | 
| |                             |  |                   |   |   | Weighted          | 
| |                             |  |                   |   |   | Average           | 
| |                             |  |                   |   |   | Exercise          | 
| |                             |  | Shares            |   |   | Price             | 
| | Balance, beginning of year  |  | 4,595,000         |   | $ | 1.05              | 
| | Granted                     |  | 1,795,000         |   |   | 1.00              | 
| | Exercised                   |  | (150,000          | ) |   | 0.47              | 
| | Cancelled/Expired           |  | (1,040,000        | ) |   | 1.20              | 
| | Balance, end of year        |  | 5,200,000         |   | $ | 0.96              | 
| | Exercisable, at end of year |  | 4,860,500         |   | $ | 1.05              | 

During the year ended December 31,
  2008, the Company granted a total of 1,795,000 stock options to consultants and
  employees. The stock options were determined to have a fair value of $488,454 or
  $0.27 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. As of December 31, 2008, the non-vesting portion of the 1,795,000 stock
  options fair value was $43,469. The fair value is to be recognized in the
  statement of loss and comprehensive loss at $270,079 and $6,078 for the years
  ended December 31, 2008 and 2009. During the year ended December 31, 2008,
  $212,297 was capitalized to mineral property interests.

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 $1,121,953
  or $0.98 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 loss and comprehensive loss at $1,074,596 and $47,357 for the 2007
  and 2008 fiscal periods, respectively. During the year ended December 31, 2007,
  $Nil was capitalized to mineral property interests.

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

| |                         |  | 2008     |  |  | 2007     | 
| | ----------------------- |  | -------- |  |  | -------- | 
| | Risk-free interest rate |  | 2.80     |  |  | 2.80     | 
| | Dividend yield          |  | 0%       |  |  | 0%       | 
| | Volatility factor       |  | 64-88%   |  |  | 63-67%   | 
| | Expected option life    |  | 2-5 Yrs. |  |  | 2-5 Yrs. | 

The following stock options were
  outstanding at December 31, 2008:

| | Number of Shares | Exercise Price | Expiry Date       
| | ---------------- | -------------- | ------------------
| |                  |                |                   
| | 30,000           | 0.40           | January 7, 2009   
| | 550,000          | 0.60           | January 23, 2009  
| | 455,000          | 1.00           | January 23, 2009  
| | 162,500          | 0.60           | January 23, 2009  
| | 25,000           | 1.00           | January 23, 2009  
| | 200,000          | 1.30           | February 16, 2009 
| | 75,000           | 0.60           | June 11, 2009     
| | 75,000           | 1.00           | June 11, 2009     
| | 25,000           | 0.60           | August 24, 2009   
| | 75,000           | 0.60           | September 24, 2009
| | 210,000          | 1.00           | January 7, 2010   
| | 10,000           | 0.60           | May 10, 2010      
| | 200,000          | 1.00           | May 12, 2010      
| | 150,000          | 0.75           | May 19, 2010      
| | 860,000          | 0.75           | January 16, 2011  
| | 150,000          | 0.80           | June 16, 2011     
| | 10,000           | 0.80           | September 21, 2011
| | 200,000          | 2.15           | March 27, 2012    
| | 50,000           | 2.15           | March 27, 2012    
| | 200,000          | 2.15           | March 27, 2012    
| | 15,000           | 2.70           | April 23, 2012    
| | 2,500            | 2.80           | May 29, 2012      
| | 30,000           | 2.80           | May 29, 2012      
| | 20,000           | 2.30           | July 23, 2012     
| | 50,000           | 2.20           | October 1, 2012   
| | 50,000           | 2.20           | October 10, 2012  
| | 50,000           | 2.20           | October 30, 2012  
| | 310,000          | 1.00           | April 1, 2013     
| | 650,000          | 1.00           | June 27, 2013     
| | 310,000          | 1.00           | July 22, 2013     
| |                  |                |                   
| | 5,200,000        |                |                   

---

As of December 31, 2008, 4,860,000
  stock options have vested and 340,000 stock options remain unvested. The
  weighted average remaining lives of the vested and unvested stock options are
  1.61 years and 2.70 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:

| |                            |  | December 31, 2008 |   |   | December 31, 2007 | 
| | -------------------------- |  | ----------------- | - | - | ----------------- | 
| |                            |  |                   |   |   | Weighted          | 
| |                            |  |                   |   |   | Average           | 
| |                            |  |                   |   |   | Exercise          | 
| |                            |  | Shares            |   |   | Price             | 
| | Balance, beginning of year |  | 3,373,689         |   | $ | 2.96              | 
| | Issued                     |  | -                 |   |   | -                 | 
| | Exercised                  |  | -                 |   |   | -                 | 
| | Expired/Cancelled          |  | (653,887          | ) |   | 2.80              | 
| | Balance, end of year       |  | 2,719,802         |   | $ | 0.30              | 

The following share purchase warrants
  are outstanding at December 31, 2008:

| | Number of Shares | Exercise Price | Expiry Date 
| | ---------------- | -------------- | ------------
| | 2,709,802        | $ 0.30         | May 22, 2010
| | 10,000           | 0.30           | May 29, 2010
| | 2,719,802        |                |             

The weighted average remaining life of
  all outstanding share purchase warrants is 1.39 years.

During the year ended December 31,
  2008, the Company re-priced the 2,719,802 warrants to $0.30 and extended the
  warrant exercise periods to May 22 and May 29, 2010 respectively. Management
  determined the incremental fair value of the re-priced warrants to be $426,700
  using the Black-Scholes option pricing model with the following assumptions:

| | Risk-free interest rate | 2.80    
| | ----------------------- | --------
| | Dividend yield          | 0%      
| | Volatility factor       | 89%     
| | Expected option life    | 1.5 Yrs.

---

Contributed Surplus:

Changes to the Companys contributed
  surplus are summarized as follows:

| |                                                    |   | December 31, 2008 |   |   | December 31, 2007 |  
| | -------------------------------------------------- | - | ----------------- | - | - | ----------------- | -
| | Balance, beginning of year                         | $ | 3,465,667         |   | $ | 2,066,834         |  
| | Stock-based compensation                           |   | 529,733           |   |   | 1,085,653         |  
| | Increase in fair value of re-priced
      warrants |   | 426,700           |   |   | -                 |  
| | Stock options and warrants exercised               |   | (58,225           | ) |   | (169,520          | )
| |                                                    |   |                   |   |   |                   |  
| | Balance, end of year                               | $ | 4,363,875         |   | $ | 3,465,667         |  

|6. | RELATED PARTY TRANSACTIONS                                                                                                                                        
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                   
|   | During the year, the Company incurred the following
      expenditures with directors and officers and/or companies controlled by
      directors and/or officers:

| |                                            |   | December 31, 2008 |  |   | December 31, 2007 | 
| | ------------------------------------------ | - | ----------------- |  | - | ----------------- | 
| |                                            |   |                   |  |   |                   | 
| | Geological and project management services | $ | 292,400           |  | $ | 456,978           | 
| | Management fees                            |   | 154,000           |  |   | 109,000           | 
| | Stock-based compensation                   |   | 203,056           |  |   | -                 | 
| |                                            | $ | 649,456           |  | $ | 565,978           | 

|   | Related party transactions other than stock based
      compensation have been recorded at their exchange amount, which is the
      amount agreed to by the related parties representing managements estimate
      of fair value for the services provided.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                               
|7. | COMMITMENTS                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                               
|   | i)                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                               

| | Years ending December 31, |   |         | 
| | ------------------------- | - | ------- | 
| | 2009                      | $ | 48,880  | 
| | 2010                      |   | 48,880  | 
| | 2011                      |   | 40,733  | 
| |                           |   |         | 
| |                           | $ | 138,493 | 

|8. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                          
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                       
|   | The actual income tax provision differs from the expected
      amounts calculated by applying the Canadian combined statutory federal and
      provincial corporate income tax rates to the Companys loss before income
      taxes. The components of these differences are as follows for the years
      ended December 31, 2008, 2007 and 2006.

---

| |                                                         |   | December 31, |   |   | December 31, |   |   | December 31, |  
| | ------------------------------------------------------- | - | ------------ | - | - | ------------ | - | - | ------------ | -
| |                                                         |   | 2008         |   |   | 2007         |   |   | 2006         |  
| |                                                         |   |              |   |   |              |   |   |              |  
| | Loss before income taxes                                | $ | (2,061,089   | ) | $ | (2,718,134   | ) | $ | (1,500,881   | )
| | Statutory income tax rate                               |   | 31.0%        |   |   | 34.1%        |   |   | 34.1%        |  
| |                                                         |   |              |   |   |              |   |   |              |  
| | Expected tax recovery                                   |   | (638,938     | ) |   | (926,884     | ) |   | (511,800     | )
| | Increase (decrease) resulting from:                     |   |              |   |   |              |   |   |              |  
| | Expired non-capital operating losses                    |   | 76,094       |   |   | 14,591       |   |   | 128,571      |  
| | Stock-based
      compensation                          |   | 94,173       |   |   | 322,077      |   |   | 144,761      |  
| | Warrant expense                                         |   | 126,588      |   |   | -            |   |   | -            |  
| | Share issuance expenses                                 |   | -            |   |   | (336,684     | ) |   | (71,890      | )
| | Changes in tax rates                                    |   | 6,478        |   |   | 25,697       |   |   | 6,597        |  
| | Realization of
      previously unrecognized tax assets |   | -            |   |   | -            |   |   | (968,189     | )
| | Increase in valuation allowance                         |   | 204,787      |   |   | -            |   |   | -            |  
| | Other Adjustments                                       |   | 27,995       |   |   | (38,720      | ) |   | -            |  
| | Future income tax recovery                              | $ | (102,823     | ) | $ | (939,923     | ) | $ | (1,271,950   | )

The significant components of the
  Companys future income tax assets and liabilities, at substantially enacted tax
  rates of 28.33 % (2007  29.67% and 2006 - 34.1%), are as follows:

| |                                                    |   | December 31, |   |   | December 31, |  
| | -------------------------------------------------- | - | ------------ | - | - | ------------ | -
| |                                                    |   | 2008         |   |   | 2007         |  
| | Components:                                        |   |              |   |   |              |  
| | Mineral properties                                 | $ | (3,217,853   | ) | $ | (3,319,923   | )
| | Non-capital and net-capital losses
      available |   | 2,171,233    |   |   | 1,839,738    |  
| | Share issuance costs and other tax                 |   | 269,421      |   |   | 395,376      |  
| | deductions                                         |   |              |   |   |              |  
| | Federal non-refundable investment tax              |   |              |   |   |              |  
| | credits, net of future income taxes                |   | 605,284      |   |   | -            |  
| |                                                    |   |              |   |   |              |  
| | Net future tax asset (liability) before            |   |              |   |   |              |  
| | valuation allowance                                |   | (171,915     | ) |   | (1,084,809   | )
| | Valuation Allowance                                |   | (204,787     | ) |   | -            |  
| |                                                    |   |              |   |   |              |  
| | Net future income tax liability                    | $ | (376,702     | ) | $ | (1,084,809   | )

The Company has approximately
  $7,655,000 of non-capital tax losses available to reduce taxable income in
  future periods and which expire between 2009 to 2028. The Company has
  approximately $14,200,000 in resource tax pools that may be carried forward
  indefinitely to reduce taxable income of future periods and approximately
  $844,000 of Federal non-refundable tax credits which may be applied to reduce
  Federal tax otherwise payable and which expire in 2028.

The Company has applied or will apply
  for both provincial refundable tax credits and Federal non-refundable tax
  credits related to certain qualifying resource expenditures incurred. These
  amounts are recorded when a reasonable expectation of collection or utilization
  exists and will reduce the carrying value of the deferred exploration costs.

At December 31, 2008, there were
  $2,222,020 (2007 - $1,238,700) of provincial refundable tax credits for which
  reasonable expectation of collection exists and which have been recorded as
  recoverable and credited to deferred exploration and development costs. As well,
  there were $605,284 (2007 - nil) of Federal non-refundable tax credits (net of
  future taxes thereon) which have been recorded as a reduction of the companys
  future tax liability and credited to deferred exploration costs.

---

|9.  | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Financial Risk Management                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Company is exposed in varying degrees to a variety of
      financial instrument related risks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    | Credit risk is the risk that one party to a financial
      instrument will fail to discharge an obligation and cause the other party
      to incur a financial loss. The Companys primary exposure to credit risk
      is on its bank accounts. The Companys bank accounts are held with a major
      bank in Canada. As all of the Companys cash is held by one bank in
      Canada, there is a concentration of credit risk. This risk is managed by
      using a major bank that is a high credit quality financial institution as
      determined by rating agencies.                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Currency Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company mainly operates in Canada and is therefore
      not exposed to significant foreign exchange risk arising from transactions
      denominated in a foreign currency. The Company is not exposed to credit
      risk on mineral tax credit receivable, as these are due from the
      Government of Canada.                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Liquidity Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Liquidity risk arises through the excess of financial
      obligations over available financial assets due at any point in time. The
      Companys objective in managing liquidity risk is to maintain sufficient
      readily available reserves in order to meet its liquidity requirements at
      any point in time. The Company achieves this by maintaining sufficient
      cash and banking facilities.                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10. | CAPITAL MANAGEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Company identifies capital as cash and cash
      equivalents and accounts receivable that is expected to be realized in
      cash, The Company raises capital through private and public share
      offerings and by related party loans and advances. Capital is managed in a
      manner consistent with the risk criteria and policies provided by the
      board of directors and followed by management. All sources of financing
      and major expenditures are analyzed by management and approved by the
      board of directors.                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | The Companys primary objectives when managing capital is
      to safeguard and maintain the Companys financial resources for continued
      operations and to fund expenditure programs to further advance mineral
      property interests The Company is meeting its objective of managing
      capital through detailed review and due diligence on all potential
      acquisitions, preparing short-term and long-term cash flow analysis to
      maintain sufficient resources . The company is able to scale its
      expenditure programs and the use of capital to address market conditions
      by reducing expenditure and the scope of operations during periods of
      commodity pricing decline and economic downturn.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | There are no externally imposed capital
      restrictions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

|11. | DIFFERENCES BETWEEN CANADIAN AND UNITED STATES
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND PRACTICES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | The consolidated financial statements have been prepared
      in accordance with accounting principles generally accepted in Canada
      (CDN GAAP) which differ in certain material respects from those
      principles and practices that the Company would have followed had its
      consolidated financial statements been prepared in accordance with United
      States generally accepted accounting principles (US GAAP). Had the
      Company followed US GAAP, certain items on the consolidated statements of
      net loss and comprehensive loss and cash flow and consolidated balance
      sheets would have been reported as follows:                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Mineral interests acquisition costs are accounted for in
      accordance with CDN GAAP as disclosed in Note 3 c). For US GAAP, mineral
      interest acquisition costs are capitalized in accordance with EITF 04-2.
      Mineral property acquisition costs are reviewed for impairment on a
      reporting period basis. For US GAAP, mineral property exploration costs
      are expensed as incurred. When it has been determined that a mineral
      interest can be economically developed as a result of establishing proven
      and probable reserves and pre feasibility, the costs incurred to develop
      such property are capitalized. As of the date of these financial
      statements, the Company has incurred only acquisition and exploration
      costs. For US GAAP, these acquisition and exploration costs have been
      impaired and expensed. To date the Company has not established any proven
      or probable reserves on its mineral interests.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Under US GAAP the Company needs to complete an analysis
      which involves determining whether it is more likely than not that a tax
      position would be sustained on audit based solely on its technical merits.
      The amount of benefit recognized in the financial statements is the
      maximum amount which is more likely than not to be realized based on a
      cumulative probability approach. FIN 48 became effective for the Company
      on January 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

| | CONSOLIDATED                         |   |            |  |   |           |  |   |            |  |   |            | 
| | ------------------------------------ | - | ---------- |  | - | --------- |  | - | ---------- |  | - | ---------- | 
| | BALANCE SHEETS                       |   | 2008       |  |   | 2007      | 
| |                                      |   |            |  |   |           |  |   |            |  |   |            | 
| |                                      |   |            |  |   |           |  |   | CDN        |  |   |            | 
| |                                      |   | CDN GAAP   |  |   | US GAAP   |  |   | GAAP       |  |   | US GAAP    | 
| |                                      |   |            |  |   |           |  |   |            |  |   |            | 
| | Assets                               |   |            |  |   |           |  |   |            |  |   |            | 
| | Current                              | $ | 6,429,027  |  | $ | 6,429,027 |  | $ | 11,529,201 |  | $ | 11,529,201 | 
| | Reclamation bonds                    |   | 187,900    |  |   | 187,900   |  |   | 187,900    |  |   | 187,900    | 
| | Equipment                            |   | 68,585     |  |   | 68,585    |  |   | 50,355     |  |   | 50,355     | 
| | Interest
      in mineral properties |   | 179,500    |  |   | -         |  |   | 179,500    |  |   | -          | 
| | Deferred exploration cost            |   | 24,771,994 |  |   | -         |  |   | 21,899,565 |  |   | -          | 
| |                                      | $ | 31,637,006 |  | $ | 6,685,512 |  | $ | 33,846,521 |  | $ | 11,767,456 | 
| | Liabilities                          |   |            |  |   |           |  |   |            |  |   |            | 
| | Current                              | $ | 172,741    |  |   | 172,741   |  |   | 742,316    |  |   | 742,316    | 
| | Future income taxes                  |   | 376,703    |  |   | 376,703   |  |   | 1,084,809  |  |   | 1,084,809  | 
| | Shareholders equity                 |   | 31,087,562 |  |   | 6,136,068 |  |   | 32,019,396 |  |   | 11,025,140 | 
| |                                      | $ | 31,637,006 |  | $ | 6,685,512 |  | $ | 32,761,712 |  | $ | 11,767,456 | 

---

| | CONSOLIDATED                                |   |            |   |   |            |   |   |            |  
| | ------------------------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
| | STATEMENTS OF OPERATIONS                    |   | 2008       |   |   | 2007       |   |   | 2006       |  
| |                                             |   |            |   |   |            |   |   |            |  
| | Net loss as shown on the
      financial    |   |            |   |   |            |   |   |            |  
| | statements  CDN GAAP                       | $ | (1,958,266 | ) | $ | (1,778,211 | ) | $ | (228,931   | )
| | Mineral interests costs
      expensed      |   | (3,522,375 | ) |   | (7,182,030 | ) |   | (5,509,087 | )
| |                                             |   |            |   |   |            |   |   |            |  
| | Net and comprehensive                       |   |            |   |   |            |   |   |            |  
| | loss  US GAAP                              | $ | (5,480,641 | ) | $ | (8,960,241 | ) | $ | (5,738,018 | )
| |                                             |   |            |   |   |            |   |   |            |  
| |                                             |   |            |   |   |            |   |   |            |  
| | Basic and diluted loss per                  |   |            |   |   |            |   |   |            |  
| | share  US GAAP                             | $ | (0.09      | ) | $ | (0.16      | ) | $ | (0.14      | )
| | Weighted average number of                  |   |            |   |   |            |   |   |            |  
| | common shares outstanding                   |   | 60,317,860 |   |   | 55,031,402 |   |   | 42,206,318 |  
| |                                             |   |            |   |   |            |   |   |            |  
| | CONSOLIDATED STATEMENTS OF                  |   |            |   |   |            |   |   |            |  
| | CASH FLOW                                   |   | 2008       |   |   | 2007       |   |   | 2006       |  
| |                                             |   |            |   |   |            |   |   |            |  
| | Net cash flows from operating               |   |            |   |   |            |   |   |            |  
| | activities under Canadian GAAP              | $ | (1,320,191 | ) | $ | (2,056,847 | ) | $ | (1,124,316 | )
| | Mineral Interest Expenditures               |   | (4,293,398 | ) |   | (7,763,726 | ) |   | (5,424,497 |  
| |                                             |   |            |   |   |            |   |   |            |  
| | Net cash used in operating
      activities |   |            |   |   |            |   |   |            |  
| | under US GAAP                               |   | (5,613,589 | ) |   | (9,820,573 | ) |   | (6,548,813 | )
| | Net cash flows from financing               |   |            |   |   |            |   |   |            |  
| | activities under                            |   |            |   |   |            |   |   |            |  
| | CDN GAAP and US GAAP                        |   | 70,000     |   |   | 17,999,081 |   |   | 7,448,546  |  
| |                                             |   |            |   |   |            |   |   |            |  
| | Net cash flows used in
      investing      |   | (4,332,488 | ) |   |            |   |   |            |  
| | activities under CDN GAAP                   |   |            |   |   | (7,793,311 | ) |   | (5,506,510 | )
| | Mineral Interest Expenditures               |   | 4,293,398  |   |   | 7,763,726  |   |   | 5,424,497  |  
| | Net cash used in investing activities       |   |            |   |   |            |   |   |            |  
| | under US GAAP                               |   | (39,090    | ) |   | (29,585    | ) |   | (82,013    | )
| | Net change in cash and cash                 |   |            |   |   |            |   |   |            |  
| | equivalents                                 |   | (5,582,679 | ) |   | 8,148,923  |   |   | 817,720    |  
| | Cash and cash equivalents, beginning        |   | 9,707,914  |   |   | 1,558,991  |   |   | 741,271    |  
| | Cash and cash equivalents,
      ending     | $ | 4,125,235  |   | $ | 9,707,914  |   | $ | 1,558,991  |  

---

US Recent Accounting Pronouncements

In May 2008, the Financial Accounting
  Standards Board (FASB) issued SFAS No. 163, Accounting for Financial
  Guarantee Insurance Contracts  An interpretation of FASB Statement No. 60.
  SFAS 163 requires that an insurance enterprise recognize a claim liability prior
  to an event of default when there is evidence that credit deterioration has
  occurred in an insured financial obligation. It also clarifies how SFAS 60
  applies to financial guarantee insurance contracts, including the recognition
  and measurement to be used to account for premium revenue and claim liabilities,
  and requires expanded disclosures about financial guarantee insurance contracts.
  It is effective for financial statements issued for fiscal years beginning after
  December 15, 2008, except for some disclosures about the insurance enterprises
  risk-management activities. SFAS 163 requires that disclosures about the
  risk-management activities of the insurance enterprise be effective for the
  first period beginning after issuance. Except for those disclosures, earlier
  application is not permitted. The adoption of this statement will have no effect
  on the Companys financial statements.

In May 2008, the FASB issued SFAS No.
  162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162
  identifies the sources of accounting principles and the framework for selecting
  the principles to be used in the preparation of financial statements of
  non-governmental entities that are presented in conformity with generally
  accepted accounting principles in the United States. It is effective 60 days
  following the SECs approval of the Public Company Accounting Oversight Board
  amendments to AU Section 411, The Meaning of Present Fairly in Conformity With
  Generally Accepted Accounting Principles. The adoption of this statement is not
  expected to have a material effect on the Companys financial statements.

In March 2008, FASB issued SFAS No.
  161, Disclosures about Derivative Instruments and Hedging Activities  an
  amendment to FASB Statement No. 133. SFAS No. 161 is intended to improve
  financial standards for 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. Entities are required to provide enhanced disclosures about: (a) how and
  why an entity uses derivative instruments; (b) how derivative instruments and
  related hedged items are accounted for under Statement 133 and its related
  interpretations; and (c) how derivative instruments and related hedged items
  affect an entitys financial position, financial performance, and cash flows. It
  is effective for financial statements issued for fiscal years beginning after
  November 15, 2008, with early adoption encouraged. The adoption of this
  statement is not expected to have a material effect on the Companys financial
  statements.

---

|Schedule 1                                                   
|-------------------------------------------------------------
|Hard Creek Nickel Corporation                                
|Consolidated Schedule of Deferred Exploration and
      Costs
|For The Years
      Ended December 31, 2008 and 2007         

|                                 |   | Balance,     |  |   |              |   |   | Balance,     |   |   |              |   |   | Balance,     |  
|-------------------------------- | - | ------------ |  | - | ------------ | - | - | ------------ | - | - | ------------ | - | - | ------------ | -
|                                 |   | December 31, |  |   | Expenditures |   |   | December 31, |   |   | Expenditures |   |   | December 31, |  
|                                 |   | 2006         |  |   | 2007         |   |   | 2007         |   |   | 2008         |   |   | 2008         |  
|                                 |   |              |  |   |              |   |   |              |   |   |              |   |   |              |  
|Assays and testing               | $ | 1,320,636    |  | $ | 506,243      |   | $ | 1,826,879    |   | $ | 159,009      |   | $ | 1,985,888    |  
|Claims renewal /Staking          |   | 301,990      |  |   | 88,552       |   |   | 390,542      |   |   | 25,660       |   |   | 416,202      |  
|Drilling                         |   | 7,241,362    |  |   | 4,367,019    |   |   | 11,608,381   |   |   | 800,333      |   |   | 12,408,714   |  
|Environmental studies            |   | 146,125      |  |   | 330,587      |   |   | 476,712      |   |   | 534,141      |   |   | 1,010,853    |  
|Exploration data management      |   | 560,922      |  |   | 154,042      |   |   | 714,964      |   |   | 89,121       |   |   | 804,085      |  
|First Nations                    |   | -            |  |   | -            |   |   | -            |   |   | 21,835       |   |   | 21,835       |  
|Geochemistry                     |   | 60,136       |  |   | 20,835       |   |   | 80,971       |   |   | 19,985       |   |   | 100,956      |  
|Geological services              |   | 2,362,395    |  |   | 1,700,874    |   |   | 4,063,269    |   |   | 1,460,399    |   |   | 5,523,668    |  
|Geophysical services             |   | 550,170      |  |   | 60,145       |   |   | 610,315      |   |   | 76,468       |   |   | 686,783      |  
|Metallurgy                       |   | 472,149      |  |   | 576,827      |   |   | 1,048,976    |   |   | 583,696      |   |   | 1,632,672    |  
|Petrographic work                |   | 23,992       |  |   | 12,327       |   |   | 36,319       |   |   | 7,638        |   |   | 43,957       |  
|Project management               |   | 106,015      |  |   | -            |   |   | 106,015      |   |   | -            |   |   | 106,015      |  
|Survey, mapping and camp         |   | 561,528      |  |   | 334,027      |   |   | 895,555      |   |   | 240,581      |   |   | 1,136,136    |  
|Transportation                   |   | 1,081,587    |  |   | 593,542      |   |   | 1,675,129    |   |   | 486,829      |   |   | 2,161,958    |  
|Write down property              |   | -            |  |   | (68,158      | ) |   | (68,158      | ) |   | (44,662      | ) |   | (112,820     | )
|BC refundable mining tax credits |   | -            |  |   | (1,566,304   | ) |   | (1,566,304   | ) |   | (983,320     | ) |   | (2,549,624   | )
|Federal non-refundable           |   |              |  |   |              |   |   |              |   |   |              |   |   |              |  
|mining tax credits               |   | -            |  |   | -            |   |   | -            |   |   | (605,284     | ) |   | (605,284     | )
|                                 |   |              |  |   |              |   |   |              |   |   |              |   |   |              |  
|                                 | $ | 14,789,007   |  | $ | 7,110,558    |   | $ | 21,899,565   |   | $ | 2,872,429    |   | $ | 24,771,994   |  

---

|Item 19 | Exhibits
|------- | --------

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     | Financial Advisory Services Agreement between Hard Creek
      Nickel Corporation and The Balloch Group dated May 29, 2006 (1)
|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.

(Signature page follows)



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 22, 2009           | 

65

---