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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 20-F

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(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, 2015

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

Date of event requiring this shell company report
_____________

Commission file number 000-52326

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

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

British Columbia, Canada(Jurisdiction of
incorporation or organization)

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

Copy of communications to:Bernard Pinsky, Esq.

1

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Clark Wilson LLPBarristers and SolicitorsSuite 800  885
West Georgia StreetVancouver, British Columbia, Canada V6C 3H1Telephone:
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.

18,074,696 Common Shares without par value issued and
outstanding as at December 31, 2015.

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.[X]
YES      [   ] 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

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):

2

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|Large accelerated filer [   ] | Accelerated filer [   ] | Non-accelerated filer [X]
|----------------------------- | ----------------------- | -------------------------

Indicate by check mark which basis of accounting the registrant
has used to prepare the financial statements included in this filing:

|U.S. GAAP [   ] | International Financial Reporting Standards as
      issued by the International Accounting Standards Board [ X] | Other [   ]
|--------------- | ---------------------------------------------------------------------------------------------------------------- | -----------

If Other has been checked in response to the previous
question, 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

3

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TABLE OF CONTENTS

|                                                    |                                                           |                                                                       | Page
|--------------------------------------------------- | --------------------------------------------------------- | --------------------------------------------------------------------- | ----
|Forward-Looking
    Statements                      | 5                                                        
|PART I                                              |                                                           |                                                                       | 6   
|Financial
    Information And Accounting Principles | 6                                                        
|Item 1                                              | Identity of
    Directors, Senior Management and Advisers | 7                                                                    
|                                                    | A.                                                        | Directors and
    Senior Management                                   | 7   
|                                                    | B.                                                        | Advisers                                                              | 7   
|                                                    | C.                                                        | Auditors                                                              | 7   
|Item 2                                              | Offer
    Statistics and Expected Timetable               | 7                                                                    
|Item 3                                              | Key
      Information                                     | 7                                                                    
|                                                    | A.                                                        | Selected Financial
    Data                                           | 7   
|                                                    | B.                                                        | Capitalization and
    Indebtedness                                   | 8   
|                                                    | 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                                                     | 15  
|                                                    | C.                                                        | Organizational
    Structure                                          | 18  
|                                                    | D.                                                        | Property, Plant
    and Equipment                                     | 18  
|Item 5                                              | Operating and
      Financial Review and Prospects        | 25                                                                   
|                                                    | A.                                                        | Operating Results                                                     | 25  
|                                                    | B.                                                        | Liquidity and
    Capital Resources                                   | 26  
|                                                    | C.                                                        | Research and
    Development, Patents and Licenses, etc.              | 27  
|                                                    | D.                                                        | Trend Information                                                     | 27  
|                                                    | E.                                                        | Off-Balance Sheet
    Arrangements                                    | 27  
|                                                    | F.                                                        | Tabular
    Disclosure of Contractual Obligations                     | 27  
|Item 6                                              | Directors,
    Senior Management and Employees            | 28                                                                   
|                                                    | A.                                                        | Directors and
    Senior Management                                   | 28  
|                                                    | B.                                                        | Compensation                                                          | 30  
|                                                    | C.                                                        | Board Practices                                                       | 31  
|                                                    | D.                                                        | Employees                                                             | 31  
|                                                    | E.                                                        | Share Ownership                                                       | 31  
|Item 7                                              | Major
    Shareholders and Related Party Transactions     | 32                                                                   
|                                                    | A.                                                        | Major
    Shareholders                                                | 32  
|                                                    | B.                                                        | Related Party
    Transactions                                        | 32  
|                                                    | C.                                                        | Interests of
    Experts and Counsel                                  | 33  
|Item 8                                              | Financial
    Information                                 | 33                                                                   
|                                                    | A.                                                        | Consolidated
    Financial Statements and Other Financial Information | 33  
|                                                    | B.                                                        | Significant
    Changes                                               | 33  
|Item 9                                              | The Offer and
      Listing                               | 33                                                                   
|                                                    | A.                                                        | Common Share
    Trading Information                                  | 33  
|                                                    | B.                                                        | Plan of
    Distribution                                              | 34  
|Item 10                                             | Additional
    Information                                | 35                                                                   

4

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|         | A.                                                                                 | Share Capital                                                               | 35
|-------- | ---------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --
|         | B.                                                                                 | Articles of
    Incorporation and By-laws                                   | 35
|         | C.                                                                                 | Material
    Contracts                                                      | 41
|         | D.                                                                                 | Exchange Controls                                                           | 41
|         | E.                                                                                 | Taxation                                                                    | 43
|         | F.                                                                                 | Dividends and
    Paying Agents                                             | 44
|         | G.                                                                                 | Statement by
    Experts                                                    | 44
|         | H.                                                                                 | Documents on
    Display                                                    | 44
|         | I.                                                                                 | Subsidiary
    Information                                                  | 44
|Item 11  | Quantitative
    and Qualitative Disclosures About Market Risk                     | 44                                                                         
|Item 12  | Description of
    Securities Other than Equity Securities                         | 44                                                                         
|PART II  |                                                                                    |                                                                             | 44
|Item 13  | Defaults,
    Dividend Arrearages and Delinquencies                                | 44                                                                         
|Item 14  | Material
      Modifications to the Rights of Security Holders and Use of Proceeds | 44                                                                         
|Item 15  | Controls and
    Procedures                                                        | 44                                                                         
|Item 16  | [Reserved]                                                                         | 45                                                                         
|         | A.                                                                                 | Audit Committee
    Financial Expert                                        | 45
|         | B.                                                                                 | Code of Ethics                                                              | 45
|         | C.                                                                                 | Principal
    Accountant Fees and Services                                  | 46
|         | D.                                                                                 | Exemptions from
    the Listing Standards for Audit Committees.             | 46
|         | E.                                                                                 | Purchases of
    Equity Securities by the Issuer and Affiliated Purchasers. | 46
|PART III |                                                                                    |                                                                             | 46
|Item 17  | Financial
    Statements                                                           | 46                                                                         
|Item 18  | Financial
    Statements                                                           | 46                                                                         
|Item 19  | Exhibits                                                                           | 46                                                                         
|         | SIGNATURE                                                                          | 47                                                                         

FORWARD-LOOKING STATEMENTS

Except for the statements of historical fact contained herein,
some information presented in this annual report constitutes forward-looking
statements. When used in this annual report, the words estimate, project,
believe, anticipate, intend, expect, predict, may, should, the
negative thereof or other variations thereon or comparable terminology are
intended to identify forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of our company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
changes in project parameters as plans continue to be refined, future prices of
nickel, as well as those factors discussed in the section entitled Risk
Factors on page 8. Although our company has attempted to identify important
factors that could cause actual results to differ materially, there may be other
factors that cause actual results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove to be
accurate as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, prospective investors should not
place undue reliance on forward-looking statements. The forward-looking
statements in this annual report 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 annual report, the terms we, us, our and
Hard Creek mean Hard Creek Nickel Corporation, unless otherwise indicated.

5

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CAUTIONARY NOTE TO UNITED STATES INVESTORS

Unless otherwise indicated, all mineral resource estimates
included in this Annual Report on Form 20-F have been prepared in accordance
with Canadian National Instrument 43-101  Standards of Disclosure for
Mineral Projects (NI 43-101), and the Canadian Institute of Mining,
Metallurgy and Petroleum Definition Standards for Mineral Resources and Mineral
Reserves (CIM Definition Standards). NI 43-101 is a rule developed by the
Canadian Securities Administrators which establishes standards for public
disclosure an issuer makes of scientific and technical information concerning
mineral projects. NI 43-101 permits the disclosure of a historical estimate made
prior to the adoption of NI 43-101 that does not comply with NI 43-101 using the
historical terminology if the disclosure: (a) identifies the source and date of
the historical estimate; (b) comments on the relevance and reliability of the
historical estimate; (c) states whether the historical estimate uses categories
other than those prescribed by NI 43-101 and, if so, includes an explanation of
the differences; and (d) includes any more recent estimates or data available.

Canadian standards, including NI 43-101, differ significantly
from the requirements of the Securities and Exchange Commission (the SEC), and reserve and resource
information contained in this Annual Report on Form 20-F may not be comparable
to similar information disclosed by U.S. companies. In particular, and without
limiting the generality of the foregoing, the term resource does not equate to
the term reserves. Under U.S. standards, mineralization may not be classified
as a reserve unless the determination has been made that the mineralization
could be economically and legally produced or extracted at the time the reserve
determination is made. The SECs disclosure standards normally do not permit the
inclusion of information concerning measured mineral resources, indicated
mineral resources or inferred mineral resources or other descriptions of the
amount of mineralization in mineral deposits that do not constitute reserves
by U.S. standards in documents filed with the SEC. U.S. investors should also
understand that inferred mineral resources have a great amount of uncertainty
as to their existence and great uncertainty as to their economic and legal
feasibility. It cannot be assumed that all or any part of an inferred mineral
resource will ever be upgraded to a higher category. Under Canadian rules,
estimated inferred mineral resources may not form the basis of feasibility or
pre-feasibility studies except in rare cases. Investors are cautioned not to
assume that all or any part of an inferred mineral resource exists or is
economically or legally mineable. Disclosure of contained ounces in a resource
is permitted disclosure under Canadian regulations; however, the SEC normally
only permits issuers to report mineralization that does not constitute
reserves by SEC standards as in-place tonnage and grade without reference to
unit measures. The requirements of NI 43-101 for identification of reserves
are also not the same as those of the SEC, and reserves reported by our company
in compliance with NI 43-101 may not qualify as reserves under SEC standards.
Accordingly, information concerning mineral deposits set forth herein may not be
comparable with information made public by companies that report in accordance
with U.S. standards.

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 2,204.6 pounds.

FIRST TIME APPLICATION OF INTERNATIONAL FINANCIAL REPORTING
STANDARDS

Effective from January 1, 2010, the Company adopted
International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board. Unless otherwise stated, all
information presented herein has been prepared in accordance with IFRS and all
prior period amounts have been reclassified to conform with IFRS. Please note
that our prior annual financial statements were prepared in accordance with
Canadian generally accepted accounting principles, which may not be comparable
to IFRS.

6

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|Item 1 | Identity of Directors, Senior Management and
      Advisers
|------ | -----------------------------------------------------------

Not required.

|Item 2 | Offer Statistics and Expected Timetable
|------ | ---------------------------------------

Not required.

|Item 3 | Key Information
|------ | ---------------

|A. | Selected Financial
Data
|-- | -----------------------

The following financial data summarizes selected financial data
for our company prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) for the three fiscal years ended December 31, 2015, 2014 and
2013. The information presented below for the three year period ended December
31, 2015, 2014 and 2013 is derived from our financial statements which were
examined by our independent auditors. The information set forth below should be
read in conjunction with our audited annual financial statements and related
notes thereto included in this annual report, and with the information appearing
under the heading Item 5  Operating and Financial Review and Prospects.

Hard Creek Nickel Corporation

Selected Financial Data in accordance with IFRS for the years
2015, 2014 and 2013: (Expressed in Canadian Dollars)

|                                                             |   | 2015        |   |  | 2014        |   |  | 2013       |  
|------------------------------------------------------------ | - | ----------- | - |  | ----------- | - |  | ---------- | -
|Net operating revenues                                       | $ | 0           |   |  | 0           |   |  | 0          |  
|                                                             |   |             |   |  |             |   |  |            |  
|Loss from continued
      operations                         | $ | 0           |   |  | 0           |   |  | 0          |  
|Income from discontinued operations                          | $ | N/a         |   |  | N/a         |   |  | N/a        |  
|Net loss                                                     | $ | (10,230,524 | ) |  | (22,803,513 | ) |  | (295,579   | )
|Comprehensive loss                                           | $ | (10,230,524 | ) |  | (22,803,513 | ) |  | (295,579   | )
|                                                             |   |             |   |  |             |   |  |            |  
|Loss per share from continued operations                     | $ | (0.00       | ) |  | (0.00       | ) |  | (0.00      | )
|Income per share from
      discontinued operations          | $ | N/a         |   |  | N/a         |   |  | N/a        |  
|Income per share after discontinued
      operations         | $ | N/a         |   |  | N/a         |   |  | N/a        |  
|                                                             |   |             |   |  |             |   |  |            |  
|Share capital                                                | $ | 48,642,413  |   |  | 48,642,413  |   |  | 48,642,413 |  
|Common shares issued                                         |   | 18,074,696  |   |  | 90,373,493  |   |  | 90,373,493 |  
|Weighted average shares outstanding                          |   | 18,074,696  |   |  | 90,373,493  |   |  | 90,373,493 |  
|                                                             |   |             |   |  |             |   |  |            |  
|Total assets                                                 | $ | 239,665     |   |  | 10,480,933  |   |  | 33,490,472 |  
|                                                             |   |             |   |  |             |   |  |            |  
|Net assets (liabilities)                                     | $ | 223,816     |   |  | 10,454,340  |   |  | 33,257,853 |  
|                                                             |   |             |   |  |             |   |  |            |  
|Convertible debentures(current and long term
      portions) | $ | N/a         |   |  | N/a         |   |  | N/a        |  
|                                                             |   |             |   |  |             |   |  |            |  
|Cash dividends declared per common share                     | $ | 0           |   |  | 0           |   |  | 0          |  
|Exchange rates (CDN$ to US$)
      period average            | $ | 1.2787      |   |  | 1.1045      |   |  | 1.0299     |  

7

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|Exchange rates (CDN$ to US$) for most
      recent six |   |             |  |  |            | 
|------------------------------------------------------ | - | ----------- |  |  | ---------- | 
|months                                                 |   | Period High |  |  | Period Low | 
|October 2015                                           | $ | 1.3266      |  |  | 1.2847     | 
|November 2015                                          | $ | 1.3360      |  |  | 1.3095     | 
|December 2015                                          | $ | 1.3990      |  |  | 1.3360     | 
|January 2016                                           | $ | 1.4589      |  |  | 1.3969     | 
|February 2016                                          | $ | 1.4040      |  |  | 1.3523     | 
|March 2016                                             | $ | 1.3468      |  |  | 1.2962     | 
|Exchange rate (CDN$ to US$)
      April 27, 2016       | $ | 1.3157      |  |  | 1.2650     | 

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

On July 14, 2015, the Company consolidated its common shares on
a basis of one (1) new common share for five (5) old common shares held.

|C. | Reasons for the Offer and Use of
      Proceeds
|-- | -----------------------------------------------

Not required.

|D. | Risk Factors
|-- | ------------

This Annual Report 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 Annual Report. 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 annual report 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

The Company is engaged in the business of acquiring and
exploring mineral properties in the expectation of locating
mineral reserves. The Companys property interests are in the
exploration stageonly and are without a known body of commercial
ore. Accordingly, there is little likelihood that the Company will realize any
profits in the short to medium term. Any profitability in the future from theCompanys business will be dependent upon locating mineral
reserves, which itself is subject tonumerous risk factors. 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.

8

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The business of exploring for minerals and mining involves a
high degree of risk. Few properties that are explored are ultimately developed
into producing, profitable mines. In developing its mineral deposits, the
Company will be subjected to an array of complex economic factors and
accordingly there is no assurance that a positive feasibility study or any
projected results contained in a feasibility study of a mineral deposit will be
attained. 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 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 against or
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
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.

9

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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 incur costs, which would reduce the amount of money we have
available to spend on exploration and could cause our company to suspend
operations. Our potential exposure to liability for environmental damage is 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 are likely to cease
operations. If that happens, investors are likely to lose all of their
investment in our company.

Please see the section entitled Governmental Regulations on
page 19 of this annual report 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
$11,964 and receivables of $19,916 as of December 31, 2015. We estimate our
average monthly operating expenses to be approximately $15,000. We cannot
provide assurances that we will be able to successfully explore and develop our
mining properties or assure that viable mineral reserves exist on our 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 2016, 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.

10

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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 do not have sufficient funds to cover
administrative expenses for the 12 month period ending December 31, 2016 or for
continued exploration. The Company is currently looking for a partner to take
the Turnagain project to the feasibility level as well as raising additional
working capital through the issuance of shares and or debt. We have also
identified a PGE exploration program on the Turnagain property that will require
the Company to seek additional financing or a joint venture partnership. We do
not currently have any arrangements for financing or joint venture partnerships
and may not be able to find such if required. 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 is likely to result in a delay or
indefinite postponement of further exploration and development of our projects
and possible loss of our properties, in which case our companys securities
would never increase in value and investors would lose their entire
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
occurs 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 Venture
Exchange is limited and sporadic, making it difficult for our shareholders to
sell their shares or liquidate their investments.

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

11

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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 funds, our current shareholders interests in our company will
be diluted and our current shareholders may suffer dilution in their net book
value per share depending on the price at which such securities are sold. As at
April 27, 2016, 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 2,036,093 of our common shares which, if exercised,
would represent approximately 10 % 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 for the
foreseeable future, so investors will realize a return on their investment only
if the price of shares of our stock increases. There are no guarantees that this
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 increases. There are no guarantees that
will ever happen and investors may never realize a return on their investment in
our company and may lose their entire investment.

All of our directors, officers and control persons live
outside of the U.S. and. 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 against our directors and
officers or may be unsuccessful even if they bring such suits. 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, there 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 16 hours per week, which is
approximately 40% 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.
Leslie Young, the Corporate Secretary of our company, will devote approximately
16 hours per week, which is approximately 40% of her working hours, to the
management of our company.

12

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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 Annual Report for a more detailed
description of the PFIC rules and how those rules may affect their ownership of
our capital shares.

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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 CEO,
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 TSX Venture Exchange under
the symbol HNC.

Since inception, we have been engaged in natural resource
exploration and development primarily in British Columbia and, since 1996, have
focused on the Turnagain Property in the Liard Mining Division of northern
British Columbia. We first acquired the mineral claims on the Turnagain Property
in 1996 under an option agreement with John Schussler and Ernie Hatzl. The
original option agreement gave us the right to earn a 100% interest in the
mineral claims on the Turnagain Property in exchange for the issuance of 200,000
of our common shares and the expenditure of CAN$1,000,000 on exploration of the
property within 5 years of acquisition. We have now earned the 100% interest and
it is subject to a 4% net smelter royalty on possible future production from
claim 511330. We have the right to pay out the net smelter royalty by paying
CAN$1,000,000 for each 1% of the royalty. To pay out the entire 4% royalty, we
would be required to pay CAN$4,000,000.

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.

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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, and
additional staking in 2009, the Turnagain property now covers 33,220 hectares.

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, 2015,
we have drilled 273 core holes for a total depth of 76,367m (250,548 feet).
Approximate total exploration expenditure from January 1, 2013 to December 31,
2015 was CDN$291,000.

As of December 31, 2015, we had approximately $22,627 in
working capital, which is not sufficient to cover our operating costs for the
next twelve months at $15,000 per month. To make up the shortfall, the Company
will have to raise additional funds by issuing shares or debt. If the Company is
to carry out a 2016 exploration program, we will be required to obtain
additional equity funding or secure a joint venture partner to provide funding
to cover 100% of the anticipated costs.

|B. | Business
Overview
|-- | -----------------

Nature of Operations and Principal Activities

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

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

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

Our primary natural resource property is the Turnagain
Property, located in the Liard Mining Division of northern British Columbia. We
have not identified the existence of any commercially viable mineral deposits at
any of our mineral properties.

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It is unlikely that a commercially viable mineral deposit
exists on any of our properties, and further exploration is required before we
can evaluate whether any exist and, if so, whether it would be economically and
legally feasible to develop or exploit those resources. Even if we complete our
current exploration program and we are successful in identifying a mineral
deposit, we would be required to spend substantial funds on further drilling and
engineering studies before we could know whether that mineral deposit will
constitute a reserve (a reserve is a commercially viable mineral deposit).
Please refer to the section entitled Risk Factors, beginning on page 10 of
this annual report 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 would
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 completed Northwest Transmission Line at Bob Quinn Lake,
207km 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

The mineral exploration industry is highly competitive. 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. We compete for
qualified employees with Vancouver based companies, including Hunter Dickenson
Inc., Equity Engineering and Ivanhoe Mines, and international mining companies,
including Billiton-BHP, Rio Tinto and Anglo American, among others.

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Governmental Regulations

Mining operations are subject to a wide range of national and
provincial government regulations such as restrictions on production, price
controls, tax increases, expropriation of property, environmental protection,
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. Assessment work
requirements are CAN$5.00 per hectare per year during the first 2 years
following the location of the mineral claims, increasing to CAN$10.00 per
hectare in the third and fourth years, CAN$15.00 per hectare in the fifth and
sixth years and CAN$20.00 per hectare for all succeeding years. Cash-in-lieu of
exploration and development work is double the value of the corresponding
assessment work requirement.

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

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

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

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

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

Where significant surface disturbance through road building and
drill site preparation is planned, the Ministry of Energy, Mines and Petroleum
Resources 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 incur substantial costs, which would reduce the amount of money we
have to spend on exploration and could cause us to cease operations. Our
potential exposure to liability for environmental damage is 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 are likely to 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.

|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, the Turnagain is presently
the only material exploration property and is described below.

Our executive office is located at 1060  1090 West Georgia
Street, Vancouver, British Columbia V6E 3V7, Canada. The Company leases 1,014
square feet of space for $51,363 per year and the lease expires on September 30,
2016, we sublease 75% of this space which costs the Company approximately $1,500
per month in total office rent. This space accommodates all of our executive and
administrative offices. We believe that this existing space is adequate for our
current needs. Should we require additional space, we believe that such space
can be secured on commercially reasonable terms.

The company has recently rented a warehouse near Vancouver,
British Columbia in which to store drill core samples and to prepare composite
samples for metallurgical test-work. 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
test-work. We rent this facility for $1,000 per month on a six-month renewable
lease. The cost to run the freezer is $95 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 $15,000 located at our Vancouver Office and our camp at the
Turnagain property. Satellite internet and telephone service at our camp at the
Turnagain property costs $150 per month.

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Our main mineral property the Turnagain is described more fully
below:



The Turnagain Property

This section provides a summary of the geology and exploration
activities on the Turnagain Property.

Exploration data collected during the 2003 to 2015 exploration
programs was completed under the supervision of Tony Hitchins, M.Sc., an
employee of Hard Creek Nickel Corporation.

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Location and Accessibility

The Turnagain Property consists of 65 neighboring mineral
claims situated in the Liard Mining Division of northern British Columbia, 70 km
east of Dease Lake and 1,350 km north-northwest of Vancouver. The maps above
indicate where the property is located in the province of British Columbia,
Canada. The mineral claims collectively cover an area of 33,220 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 1,500 meters. Bedrock is reasonably well
exposed in the areas above tree line and along drainages.

Description of Claims

The Turnagain Property consists of 65 neighboring mineral
claims situated in the Liard Mining Division of northern British Columbia, 70 km
east of Dease Lake and 1,350 km north-northwest of Vancouver. The mineral claims
collectively cover an area of 33,220 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 Company 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) subject to a buyout clause of $4 million. The
following table summarizes the claim name, size, and expiry date for the 65
claims in the Turnagain Property as of April 27, 2016.

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

20

---

|Tenure Number                                                                        | Claim Name        | Area (ha) | Issue Date  | Expiry Date
|------------------------------------------------------------------------------------ | ----------------- | --------- | ----------- | -----------
|Legacy Mineral Claim                                                                
|407627                                                                               | PUP 4             | 500.0     | 2004/Jan/01 | 2021/Jan/01
|On-Line Cell Mineral Claims                                                         
|501131                                                                               | Drift 1           | 422.0     | 2005/Jan/12 | 2019/Jan/12
|501168                                                                               | Drift 2           | 421.8     | 2005/Jan/12 | 2019/Jan/12
|501234                                                                               | Drift 3           | 421.7     | 2005/Jan/12 | 2019/Jan/12
|501298                                                                               | Drift 4           | 421.8     | 2005/Jan/12 | 2019/Jan/12
|508218                                                                               | Dinah 1           | 407.2     | 2005/Mar/03 | 2019/Mar/03
|508219                                                                               | Dinah 2           | 407.1     | 2005/Mar/03 | 2019/Mar/03
|508221                                                                               | Dinah 3           | 406.9     | 2005/Mar/03 | 2019/Mar/03
|508222                                                                               | Dinah 4           | 406.7     | 2005/Mar/03 | 2019/Mar/03
|508223                                                                               | Dinah 5           | 407.1     | 2005/Mar/03 | 2019/Mar/03
|508225                                                                               | Dinah 6           | 407.1     | 2005/Mar/03 | 2019/Mar/03
|508226                                                                               | Dinah 7           | 254.6     | 2005/Mar/03 | 2019/Mar/03
|508227                                                                               | Dinah 8           | 407.3     | 2005/Mar/03 | 2019/Mar/03
|508228                                                                               | Dinah 9           | 135.5     | 2005/Mar/03 | 2019/Mar/03
|508229                                                                               | Dinah 10          | 203.4     | 2005/Mar/03 | 2019/Mar/03
|528780                                                                               | T1                | 67.7      | 2006/Feb/23 | 2019/Feb/23
|528781                                                                               | T2                | 203.3     | 2006/Feb/23 | 2019/Feb/23
|528782                                                                               | T3                | 152.6     | 2006/Feb/23 | 2019/Feb/23
|528784                                                                               | T4                | 288.3     | 2006/Feb/23 | 2019/Feb/23
|528787                                                                               | T5                | 169.6     | 2006/Feb/23 | 2019/Feb/23
|528788                                                                               | T6                | 270.2     | 2006/Feb/23 | 2019/Feb/23
|528789                                                                               | T7                | 422.5     | 2006/Feb/23 | 2019/Feb/23
|528790                                                                               | T8                | 253.6     | 2006/Feb/23 | 2019/Feb/23
|Converted Legacy to On-Line Cell Mineral Claims (April
      2005 and November 2007)
|503365                                                                               | Hard 2            | 793.3     | 2005/Jan/14 | 2019/Feb/18
|510889                                                                               | Flat 10, 13, 15   | 1627.9    | 2005/Apr/18 | 2019/Apr/07
|510892                                                                               | Flat 2, 6         | 1219.3    | 2005/Apr/18 | 2019/Apr/07
|510910                                                                               | Flat 9, 12, 14    | 1424.3    | 2005/Apr/18 | 2019/Apr/07
|510911                                                                               | Flat 1, 5         | 1066.9    | 2005/Apr/18 | 2019/Apr/07
|510912                                                                               | Flat 8, 11        | 779.9     | 2005/Apr/18 | 2019/Apr/07
|511214                                                                               | Hard 4, 6         | 979.9     | 2005/Apr/20 | 2019/Feb/18
|511226                                                                               | Hill 1, 2         | 1216.1    | 2005/Apr/20 | 2019/Feb/18
|511227                                                                               | Hill 3            | 506.7     | 2005/Apr/20 | 2019/Feb/17
|511230                                                                               | Hill 4, 5         | 760.5     | 2005/Apr/20 | 2019/Feb/17
|511234                                                                               | Hill 6            | 185.9     | 2005/Apr/20 | 2019/Feb/16
|511244                                                                               | Hard 5, 7         | 489.9     | 2005/Apr/20 | 2019/Feb/18
|511251                                                                               | Hard 8            | 473.4     | 2005/Apr/20 | 2019/Feb/17
|511257                                                                               | Hill 9, 10        | 1014.4    | 2005/Apr/20 | 2019/Feb/17
|511279                                                                               | Hard 9, 10        | 896.7     | 2005/Apr/20 | 2019/Feb/17
|511304                                                                               | Hill 7, 8         | 1149.7    | 2005/Apr/21 | 2019/Feb/17
|511305                                                                               | Hound 3           | 271.0     | 2005/Apr/21 | 2019/Sep/27
|511306                                                                               | Turn 2, Flat 7    | 881.2     | 2005/Apr/21 | 2019/Feb/19
|511329                                                                               | Hound 1, 2        | 1015.4    | 2005/Apr/21 | 2019/Sep/27
|511330                                                                               | Cub               | 592.6     | 2005/Apr/21 | 2021/Dec/01
|511337                                                                               | Cub 10, 18, Pup 1 | 1065.8    | 2005/Apr/21 | 2018/Dec/01
|511340                                                                               | Cub 17            | 253.9     | 2005/Apr/21 | 2018/Dec/01
|511344                                                                               | Turn 1, Bear 2    | 271.0     | 2005/Apr/21 | 2019/Feb/19
|511347                                                                               | Flat 3, 4         | 474.3     | 2005/Apr/21 | 2019/Apr/07
|511348                                                                               | Cub 2             | 389.4     | 2005/Apr/21 | 2021/Dec/01

21

---

511586
    Pup 2
    236.9
    2005/Apr/25
    2019/Jan/01511593
    Pup 3
    101.5
    2005/Apr/25
    2021/Dec/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/26570456
    Bear 3 to 18
    220.2
    2007/Nov/22
    2019/May/26570457
    Bear 20
    16.9
    2007/Nov/22
    2019/May/26609390
    FLAT 7
    254.6
    2009/Jul/21
    2018/Sep/20609394
    FLAT 6
    407.4
    2009/Jul/21
    2018/Sep/20609396
    FLAT 8
    203.8
    2009/Jul/21
    2018/Sep/20609397
    FLAT 5
    407.4
    2009/Jul/21
    2018/Sep/20609398
    FLAT 4
    407.4
    2009/Jul/21
    2018/Sep/20609403
    FLAT 3
    407.3
    2009/Jul/21
    2018/Sep/20609423
    FLAT 2
    407.3
    2009/Jul/21
    2018/Sep/20609424
    FLAT 1
    424.2
    2009/Jul/21
    2018/Sep/20


22

---

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 2,895 meters of conventional and
packsack diamond drilling in 40 widely spaced drill holes.

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

23

---

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 also 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 test-work 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 test-work 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 test-work continued towards further definition of the
reagent scheme and nickel flotation kinetics for future pilot plant testing.

In 2009 we developed an extensive electronic relational drill
hole database, initiated metal leaching tests on site, and continued with
baseline water sampling. Metallurgical testwork continued towards further
definition of the reagent scheme and nickel flotation kinetics for future pilot
plant testing. A small pilot plant test was conducted and a range of
concentrates collected to develop potential hydrometallurgical refining
processes. These concentrates were used for completion of amenability testing of
the Activox® process in Perth Australia and the Outotec Nickel Chloride Leach in
Pori Finland.

In 2010 the focus was primarily on the geological and
mineralization model refinement and metallurgical test-work rather than the
traditional field work exploration programs.

24

---

In December 2011, the Company received the Turnagain Project
Preliminary Economic Assessment  (PEA) prepared by AMC Mining Consultants
(Canada) Ltd. The complete PEA was filed on SEDAR on December 5, 2011, this
technical report is also available on the Company's website www.hardcreek.com
under the heading "Projects".

During the years ended December 31, 2012 - 2015, the Company
focused on finding a partner to take the Turnagain Nickel project to the
feasibility level, reviewed possible opportunities for reducing the overall
project capital costs and identified a PGE exploration program on the Turnagain
property.

|Item 5 | Operating and Financial Review and
      Prospects
|------ | --------------------------------------------------

The following discussion and analysis should be read in
conjunction with the consolidated financial statements and notes thereto
included herein (see also "Selected Financial Data"). The consolidated financial
statements have been prepared in accordance with International Financial
Reporting Standards  (IFRS).

|A. | Operating Results
|-- | -----------------

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

Year Ended December 31, 2014 Compared to Year Ended December
31, 2015

General and Administrative - During the year ended December 31,
2015 (2015), the Company incurred a net loss of $10,230,524 ($0.57 per share)
compared to a net loss of $22,803,513 ($1.26 per share) during the year ending
December 31, 2014. The administrative expenses for 2015 were $178,242, down from
$221,709 from 2014. Total administrative expenses includes one non-cash expense,
amortization, which charges the cost of equipment against earnings over its
useful life, these amounts were $3,876 and $5,082 in 2015 and 2014,
respectively. Excluding amortization, the 2015 administrative expenses were
$174,366 down from $216,627 in 2014. Office and general expenses in were
$101,559 (2014: $125,654), a decrease of $24,095. Investor relations in 2015
were $15,263 (2014: $18,947), a decrease of $3,684, legal and audit in 2015 were
$19,544 (2014: $24,026) a decrease of $4,482. Management fees in 2015 were
$38,000, down $10,000 from the $48,000 incurred in 2014. Excluding amortization,
the total general and administrative expenses for 2015 were approximately
$14,550 per month compared to $18,050 per month in 2014. At December 31, 2015
the Company impaired the Turnagain mineral claims by $10,055,858 to $1 based on
the current nickel prices, the global over-supply of nickel held in inventories
and the weaker than expected Chinese and European demand. During 2015, the
Company earned $3,576 from interest income compared to $4,124 for 2014.

At December 31, 2015 the Company impaired the Turnagain mineral
claims by $10,055,858 to estimated net realizable value of $1 based on the
current nickel prices, the global over- supply of nickel held in inventories and
the weaker than expected Chinese and European demand.

Exploration - During the year ended December 31, 2015, the
Company incurred exploration and evaluation costs of $69,699 (2014: $91,875).

25

---

Year Ended December 31, 2013 Compared to Year Ended December
31, 2014

General and Administrative - During fiscal 2014 the Company cut
all non-essential administrative expenses. The administrative expenses for 2014
were $221,709, down from $400,304 in the prior year. Total administrative
expenses includes two non-cash expenses, the first non-cash expense is
amortization which charges the cost of equipment against earnings over its
useful life, these amounts were $5,082 and $10,117 in 2014 and 2013,
respectively. The second non-cash expense is stock-based compensation which
recognizes the fair value of stock options granted and vested; these amounts
were $Nil and $118,036 in 2014 and 2013, respectively. Excluding these items,
the 2014 administrative expenses were $216,627, down from $272,151 in 2013.
Investor relations expenses in 2014 were $18,947 (2013: $22,635), legal and
audit expenses in 2014 were $24,026 (2013: $32,545), management fees in 2014
were $48,000 (2013: $72,500) and office and general expenses in 2014 were
$125,653 (2013: $144,471). Excluding amortization and stock based compensation,
the total general and administrative expenses for the year were approximately
$18,000 per month compared to $23,000 per month in 2013.

At December 31, 2014 the Company impaired the Turnagain mineral
claims by $22,799,128 to estimated net realizable value of $10,000,000 based on
the current nickel prices, the global over- supply of nickel held in inventories
and the weaker than expected Chinese and European demand. During 2013, the CEO
forgave $51,000 in accrued management fees. In 2014 the Company earned $4,124
from interest income (2013: $5,388) and had deferred income tax recovery of $Nil
for 2014 (2013: $68,652).

Exploration - During the year ended December 31, 2014, the
Company incurred exploration and evaluation costs of $91,875 (2013: $129,470).

|B. | Liquidity and Capital
  Resources
|-- | ---------------------------------

Since the Company is organized in Canada, the Companys
December 31, 2011 consolidated financial statements have been prepared in
accordance with IFRS.

As at December 31, 2015, our company had accumulated losses
totaling $54,572,236 and a working capital of $22,627. 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 noted, these conditions raise substantial doubt about the
Companys ability to continue as a going concern. The financial statements do
not include any adjustment that might arise from this uncertainty. The auditors
report includes an explanatory paragraph disclosing the substantial doubt
regarding the Company's ability to continue as a going concern.

As at December 31, 2015 the Company had cash of $11,964 and
working capital of $22,627.

As of April 27, 2016, we had approximately $200,000 in cash,
$13,840 in recoverable taxes, and $Nil in accounts payable and may not have
sufficient working capital to cover our 2016 operating costs or 2016 exploration
program and will need to raise additional funds through further equity issuances
or loans.

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.

26

---

|C. | Research and Development, Patents and Licenses,
      etc.
|-- | ----------------------------------------------------------

Not applicable.

|D. | Trend Information
|-- | -----------------

Since the company is a mineral exploration company, we do not
currently know of any trends, uncertainties, demands, commitments or events that
are reasonably likely to have a material effect on our net sales or revenue,
income from continuing operations, profitability, liquidity or capital
resources, or that would cause reported financial information not necessarily to
be indicative of future operating results or financial condition.

|E. | Off-Balance Sheet
  Arrangements
|-- | --------------------------------

Not applicable.

|F. | Tabular Disclosure of Contractual
      Obligations
|-- | ---------------------------------------------------

Not applicable.

Critical Accounting Policies and Estimates

Basis of preparation and accounting policies

The consolidated financial statements of the Company comply
with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and interpretations of the
International Financial Reporting Interpretations Committee (IFRIC).

There were no changes to the accounting policies applied by our
company to each of the 2015 quarterly unaudited interim consolidated financial
statements, to those applied to the consolidated financial statements for the
year ended December 31, 2015.

Critical Accounting Estimates

As at December 31, 2015, the Companys financial statements
reflect Exploration and evaluation assets with a balance of $1. The
recoverability of this amount is dependent upon the discovery of economically
recoverable reserves, and the ability to attain future profitable production
from those reserves, or from their successful disposition. The Company has not
determined if its properties contain ore reserves that are economically
recoverable.

Income taxes

Preparation of the consolidated financial statements involves
determining an estimate of, or provision for, income taxes. The process also
involves making an estimate of taxes currently payable and taxes expected to be
payable or recoverable in future periods, referred to as deferred taxes.
Deferred taxes result from the effects of temporary differences due to items
that are treated differently for tax and accounting purposes. The tax effects of
these differences are reflected in the consolidated balance sheet as deferred
tax assets and liabilities. An assessment must also be made to determine the
likelihood that the Companys future taxable income will be sufficient to permit
the recovery of deferred tax assets. To the extent that such recovery is not
probable, recognized deferred tax assets must be reduced to the recoverable
amount. Judgement is required in determining the provision for income taxes and
recognition of deferred tax assets and liabilities. Management must also
exercise judgement in its assessment of continually changing tax
interpretations, regulations and legislation, to ensure deferred tax assets and
liabilities are complete and fairly presented. The effects of differing
assessments and applications could be material.

27

---

Future Accounting Changes

Accounting standards issued but not yet effective: New
standard IFRS 9 Financial Instruments is a partial replacement of IAS 39
Financial Instruments: Recognition and Measurement. IFRS 9 uses a single
approach to determine whether a financial asset is measured at amortized cost or
fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is
based on how an entity manages its financial instruments in the context of its
business model and the contractual cash flow characteristics of the financial
assets.

The new standard also requires a single impairment method to be
used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective
for annual periods beginning on or after January 1, 2018. The Company is
currently assessing the impact this new standard will have on its consolidated
financial statements.

IFRS 16 Leases replaces IAS 17 Leases and the related
interpretative guidance. IFRS 16 applies a control model to the identification
of leases, distinguishing between a lease and a service contract on the basis of
whether the customer controls the asset being leased. For those assets
determined to meet the definition of a lease, IFRS 16 introduces significant
changes to the accounting by lessees, introducing a single, on-balance sheet
accounting model that is similar to current finance lease accounting, with
limited exceptions for short-term leases or leases of low value assets. Lessor
accounting is not substantially changed. The standard is effective for annual
periods beginning on or after January 1, 2019, with early adoption permitted for
entities that have adopted IFRS 15. The Company has not yet assessed the future
impact of this new standard on its financial statements.

Other accounting standards or amendments to existing accounting
standards that have been issued but have future effective dates are either not
applicable or are not expected to have a significant impact on the Companys
consolidated financial statements.

|Item 6 | Directors, Senior Management and
      Employees
|------ | ------------------------------------------------

|A. | Directors and Senior
  Management
|-- | ---------------------------------

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

|Name Office Held
      Age                                        | Area of Experience and
    Functions in Our Company                                                                                                                                                                                                                                                                                                                                                              
|----------------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Mark Jarvis Director and Chief
      Executive Officer Age: 61    | Mr. Jarvis has been a director of our company
      and our Chief Executive Officer since January of 2004. As Chief Executive
      Officer, Mr. Jarvis is responsible for the development of our strategic
      direction and the management and supervision of our overall business. As
      director, Mr. Jarvis is responsible for the corporate governance of our
      company.                          
|Tom Milner Director Age: 70                                       | 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: 59                                       | 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. In July 2008, Mr. Davis became
      Chairman of the Board, responsible for the management and supervision of
      our board of directors. As director, Mr. Davis is responsible for the
      corporate governance of our company.
|Brian Fiddler Controller and
Chief Financial Officer 
    Age: 54 | 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.                                                                                                                             
|Leslie Young Corporate Secretary Age:
      57                    | 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.                                                                                                                   

28

---

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. $4 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 50% 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 has an M.B.A. from the University of British Columbia
with a major in finance. He 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 is a member in good standing of the Chartered
Professional Accountants Association of British Columbia, Mr. Fiddler is
committed 40% to the business of Hard Creek Nickel Corporation.

29

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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 40% to the business of Hard Creek Nickel Corporation.

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

|B. | Compensation
|-- | ------------

The following table sets out the compensation provided to our
directors and senior management for performance of their duties during the
fiscal year ended December 31, 2015:

SUMMARY COMPENSATION
    TABLEName and principal
      position
    Year
    Salary
      ($)
    Share-
      based awards ($)
    Option-
      based awards ($)
    Non-equity incentive compensation
      plan compensation ($)
    Pension
      value ($)
    All
      other Compen -sation ($)
    Total
    Compen -sation ($)Annua l
      incenti ve plans
    Long-
    term incent ive plansMark Jarvis Director and Chief Executive
      Officer
    2015
    $Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $NilTom Milner Director
    2015
    $Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $NilLyle Davis Director
    2015
    $Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $NilBrian Fiddler Controller and Chief Financial
      Officer
    2015
    $19,000
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $19,000Leslie Young Corporate Secretary
    2015
    $19,000
    Nil
    Nil
    Nil
    Nil
    Nil
    Nil
    $19,000


Our company does not have any pension or retirement plans, nor
does our company compensate its directors and officers by way of any material
bonus or profit sharing plans. Directors, officers, employees and other key
personnel of our company may be compensated by way of stock options.

30

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|C. | Board Practice
|-- | --------------

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

We currently do not have a remuneration or compensation
committee.

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

As of December 31, 2015, we had five part-time employees,
including two of our officers. We do not have any relationship with any labor
unions.

|E. | Share Ownership
|-- | ---------------

There were 43,074,696 Common Shares issued and outstanding as
of April 27, 2016. Of the shares issued and outstanding, warrants held and stock
options granted, our directors and officers owned the following Common Shares as
of April 27, 2016:

Name
    Number of Common
      Shares Beneficially Owned as of April 27, 2016
    Percentage(1)Mark Jarvis
    11,597,058 (2)
    16.49%Tom Milner
    2,082,000(3)
    2.96%Lyle Davis
    64,000(4)
    0.09%Brian Fiddler
    50,874(5)
    0.07%Leslie Young
    52,760(6)
0.08%


|(1) | Based on 43,074,696 Common Shares issued and outstanding
      as at April 27, 2016, and the number of shares issuable upon the exercise
      of issued and outstanding stock options and warrants which are exercisable
      within 60 days of April 30, 2016.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

---

|(2) | Includes stock options to purchase up to 40,000 of our
      Common Shares at an exercise price of $0.50 per share expiring up to
      January 4, 2018.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Includes stock options to purchase up to 60,000 of our
      Common Shares at an exercise price of $0.50 per share expiring up to
      January 4, 2018.
|(4) | Includes stock options to purchase up to 60,000 of our
      Common Shares at an exercise price of $0.50 per share expiring up to
      January 4, 2018.
|(5) | Includes stock options to purchase up to 40,000 of our
      Common Shares at an exercise price of $0.50 per share expiring up to
      January 4, 2018.
|(6) | Includes stock options to purchase up to 40,000 of our
      Common Shares at an exercise price of $0.50 per share expiring January 4,
      2018.      

A total of ten percent (10%) of the common shares of our
company, outstanding from time to time, are reserved for the issuance of stock
options pursuant to our companys Incentive Stock Option Plan. There were no
stock options granted during the fiscal year ending December 31, 2015.

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

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

The following table sets forth, as of April 27, 2016, 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
    11,597,058 (2)
16.49%


|(1) | Based on 43,074,696 Common Shares issued and outstanding
      as at April 27, 2016, and the number of shares issuable upon the exercise
      of issued and outstanding stock options and warrants which are exercisable
      within 60 days of April 30, 2016.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes stock options to purchase up to 40,000 of our
      Common Shares at an exercise price of 0.50 per share expiring January 4,
      2018.                                                                                                                

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
|-- | --------------------------

The following sets forth all material transactions and loans
from January 1, 2012 to the current date between our company and: (a)
enterprises that directly or indirectly through one or more intermediaries,
control or are controlled by, or are under common control with, our company; (b)
associates; (c) individuals owning, directly or indirectly, an interest in the
voting power of our company that gives them significant influence over our
company and close members of any such individuals families; (d) key management
personnel of our company, including directors and senior management of our
company and close members of such individuals families; and (e) enterprises in
which a substantial interest in the voting power is owned, directly or
indirectly, by any person described in (c) or (d) or over which such a person is
able to exercise significant influence. For the purposes of this section,
shareholders beneficially owning a 10% interest in the voting power of our
company are presumed to have a significant influence:

32

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Related party transactions

The Company incurred the following transactions with directors,
officers and companies that are controlled by directors of the Company.

|                                                            |   | Year ended   | 
|----------------------------------------------------------- | - | ------------ | 
|                                                            |   | December 31, | 
|                                                            |   | 2015         | 
|Exploration and evaluation
      expenditures (capitalized) | $ | -            | 
|Stock-based compensation to non-management directors        |   | -            | 
|                                                            | $ | -            | 

Key management personnel compensation

|                         |   | Year ended   | 
|------------------------ | - | ------------ | 
|                         |   | December 31, | 
|                         |   | 2015         | 
|Management fees          | $ | 38,000       | 
|Stock-based compensation |   | -            | 
|                         | $ | 38,000       | 

|C. | Interests of Experts and
  Counsel
|-- | ----------------------------------

Not required.

|Item 8 | Financial Information
|------ | ---------------------

|A. | Consolidated and Other Financial
Information
|-- | --------------------------------------------

See Item 18 and our consolidated financial statements and
accompanying notes.

|B. | Significant Changes
|-- | -------------------

Our company is not aware of any significant change since
December 31, 2015 that is not otherwise reported in this filing.

|Item 9 | The Offer and Listing
|------ | ---------------------

|A. | Common Share Trading
Information
|-- | --------------------------------

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, 2011 through to December 31,
2015) on the TSX Venture Exchange (formerly the Canadian Venture Exchange) prior
to September 19, 2008, and the TSX Exchange September 19, 2008 and afterwards
were as follows:

Year Ended
    High
    Low31-Dec-11
    $0.52
    $0.1631-Dec-12
    $0.20
    $0.0431-Dec-13
    $0.08
    $0.0231-Dec-14
    $0.06
    $0.0231-Dec-15
    $0.06
    $0.01


33

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Full Financial Quarters (two most recent financial years)

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

Quarter Ended
    High
    Low31-Mar-14
    $0.02
    $0.0130-Jun-14
    $0.02
    $0.0130-Sep-14
    $0.04
    $0.0331-Dec-14
    $0.02
    $0.0131-Mar-15
    $0.02
    $0.0130-Jun-15
    $0.02
    $0.0130-Sep-15
    $0.02
    $0.0131-Dec-15
    $0.02
$0.01


The high and low market prices for the most recent six months
on the TSX Exchange is as follows:

Quarter Ended
    High
    Low31-Oct-15
    $0.02
    $0.0130-Nov-15
    $0.02
    $0.0131-Dec-15
    $0.02
    $0.0131-Jan-16
    $0.02
    $0.0129-Feb-16
    $0.02
    $0.0131-Mar-16
    $0.02
$0.01


We have no principle trading market outside of our host market,
the TSX Exchange.

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

Not Applicable.

34

---

|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
|-- | -------------

Not required.

|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.

35

---

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

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

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

Qualifications of Directors

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

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

Share Rights

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

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

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

36

---

| | (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.                                                              

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.

37

---

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;

(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,

38

---

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.

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.

39

---

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 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.

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.

40

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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 Annual Report on Form 20-F, holders who own more than 5% of our issued
and outstanding shares.

Changes in the Capital of the Company

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

|C. | Material Contracts
|-- | ------------------

We have not entered into any material contracts outside the
normal course of business to which we are a party during the fiscal year ending
December 31, 2015, the two fiscal years proceeding and the current fiscal year
up to and including the date of this annual report. 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.

|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.

There are no limitations imposed by the laws of Canada, the
laws of Alberta or by the charter or other governing documents of the Company on
the right of a non-resident to hold or vote common shares of the Company, other
than as provided in the Investment Canada Act (the Investment Act) and the
potential requirement for a Competition Act Review.

The following summarizes the principal features of the
Investment Act and the Competition Act Review for a non-resident who proposes to
acquire common shares. This summary is of a general nature only and is not
intended to be, nor is it, a substitute for independent advice from an
investors own advisor. This summary does not anticipate statutory or regulatory
amendments.

The Canadian Investment Act

The Canadian Investment Act generally prohibits implementation
of a reviewable investment by an individual, government or agency thereof,
corporation, partnership, trust or joint venture that is not a Canadian as
defined in the Investment Act (a non-Canadian), unless, after review, the
minister responsible for the Investment Act (the Minister) is satisfied that
the investment is likely to be of a net benefit to Canada. Under the Investment
Act, a United States citizen qualifies as a World Trade Organization Investor.
Subject to the restrictions noted below, an investment in a Canadian business by
a World Trade Organization Investor would be reviewable under the Investment Act
only if it is an investment to acquire control of such Canadian business and the
value of the assets of the Canadian business as shown on its financial
statements is not less than a specified amount, which for 1999 was $184 million.
An investment in the shares of a Canadian business by a non-Canadian other than
a World Trade Organization Investor when the Company is not controlled by a
World Trade Organization Investor, would be reviewable under the Investment Act if it is an
investment to acquire control of the Canadian business and the value of the
assets of the Canadian business as shown on its financial statements is $5
million or more, or if an order for review is made by the federal cabinet on the
grounds that the investment relates to Canadas cultural heritage or national
identity.

41

---

The acquisition by a World Trade Organization Investor of
control of a Canadian business in any of the following sectors is also subject
to review if the value of the assets of the Canadian business exceeds $5 million
(as shown on its financial statements): uranium, financial services (except
insurance), transportation services and cultural businesses, which include
broadcast media (publication, distribution or sale of books, magazines,
periodicals, newspapers, music, film and video products and the exhibition of
film and video products), television and radio services. As the Companys
business does not fall under any of the aforementioned categories, the
acquisition of control of the Company, in excess of the $5 million threshold, by
a World Trade Organization Investor would not be subject to such review.

A non-Canadian would acquire control of the Company for
purposes of the Investment Act if the non-Canadian acquired a majority of the
common shares.

The acquisition of less than a majority but one-third or more
of the common shares would be presumed to be an acquisition of control of the
Company unless it could be established that, on acquisition, the Company was not
controlled in fact by the acquirer through the ownership of common shares.
Notwithstanding the review provisions, any transaction involving the acquisition
of control of a Canadian business or the establishment of a new business in
Canada by a non-Canadian is a notifiable transaction and must be reported to
Industry Canada by the non-Canadian making the investment either before or
within thirty days after the investment.

Certain transactions relating to common shares are exempt from
the Investment Act, including:

| | · | an acquisition of common shares by a person in the
      ordinary course of that persons business as a trader or dealer in
      securities;                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | an acquisition of control of the Company in connection
      with the realization of security granted for a loan or other financial
      assistance and not for a purpose related to the provisions of the
      Investment Act; and                                                  
| | · | an acquisition of control of the Company by reason of an
      amalgamation, merger, consolidation or corporate reorganization, following
      which the ultimate direct or indirect control in fact of the Company,
      through the ownership of common shares, remained unchanged.

Canadian Competition Act Review Investments giving
rise to the acquisition or establishment, directly or indirectly, by one or more
persons of control over, or a significant interest in the whole or part of a
business of a competitor, supplier, customer or other person are subject to
substantive review by Canadas Competition Law Authority, the Director of
Investigation and Research (the Director). If or when the Director concludes
that a merger, whether by purchase or lease of shares or assets, by amalgamation
or by combination, or otherwise, prevents or lessens, or is likely to prevent or
lessen competition substantially, he may apply as may be necessary to eliminate
the substantial lessening or prevention of competition. Such substantive merger
review power applies to all mergers, whether or not they meet limits for
pre-notification under the Competition Act.

In addition to substantive merger review, the Competition Act
provides for a pre-notification regime respecting mergers of a certain size. The
regime applies in respect of share acquisitions, asset acquisitions,
amalgamations and combinations. For ease of reference, this filing refers
specifically to share acquisition, although the pre-notification regime applies,
with the appropriate modification, to other types of acquisition of control as
well.

In order for a share acquisition transaction to be
pre-notifiable, the parties to the transaction (being the person or persons who
proposed to acquire shares, and the corporation the shares of which are to be
acquired), together with their affiliates (being all firms with a 50% or more
voting shares linkage up and down the chain) must have:

42

---

| | (i)   | aggregate gross assets in Canada that exceed $400,000,000
      in value, as shown on their audited financial statements for the most
      recently completed fiscal year (which must be within the last fifteen (15)
      months); or                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (ii)  | aggregate gross revenue from sales in, from or into
      Canada that exceed $400,000,000 for the most recently completed fiscal
      year shown on the said financial statements; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (iii) | the party being acquired or corporations controlled by
      that party must have gross assets in Canada, or gross revenues from sales
      in or from Canada, exceeding $35,000,000 as shown on the said financial
      statements. Acquisition of shares carrying up to 20% of the votes of a
      publicly-traded corporation, or 35% of the votes in a private corporation,
      will not be subject to pre-notification, regardless of the above
      thresholds. However, exceeding the 20% or the 35% threshold, and again
      exceeding the 50% threshold, gives rise to an obligation of notification
      if the size threshold is met.

If a transaction is pre-notifiable, a filing must be made with
the Director containing the prescribed information with respect to the parties,
and a waiting period (either seven or twenty-one days, depending on whether a
long or short form filing is chosen) must expire prior to closing.

As an alternative to pre-notification, the Director may grant
an Advance Ruling Certificate, which exempts the transaction from
pre-notification. Advance Ruling Certificates are granted where the Director
concludes, based on the information provided to him, that he would not have
sufficient grounds on which to apply to the Competition Tribunal to challenge
the Merger.

|E. | Taxation
|-- | --------

This summary is of a general nature only and is not intended
to be, and should not be interpreted as, legal or tax advice to any
prospective purchaser or holder of the Companys shares and no
representation with respect to the Canadian federal income tax
consequences to any such prospective purchaser is made. Accordingly,
prospective purchasers of the Companys shares should consult with their
own tax advisors with respect to their individual circumstances.

The following summary describes the principal Canadian federal
income tax considerations generally applicable to a holder of the Companys
shares who, for purposes of the Income Tax Act (Canada) (the Canadian Tax Act)
and the Canada-United States Income Tax Convention, 1980 (the Convention) and
at all relevant times is resident in the United States and not resident in
Canada, deals at arms length with the Company, holds the Companys shares as
capital property, and does not use or hold and is not deemed to use or hold the
Companys shares in or in the course of carrying on business in Canada (a
United States Holder).

This following summary is based upon the current provisions of
the Canadian Income Tax Act, the regulations thereunder, all specific proposals
to amend the Canadian Tax Act and the regulations announced by the Minister of
Finance (Canada) prior to the date hereof and the Companys understanding of the
published administrative practices of the Canada Customs and Revenue Agency
(formerly Revenue Canada, Customs, Excise and Taxation). This summary does not
take into account or anticipate any other changes in the governing law, whether
by judicial, governmental or legislative decision or action, nor does it take
into account the tax legislation or considerations of any province, territory or
non-Canadian jurisdiction (including the United States), which legislation or
considerations may differ significantly from those described herein.

Disposition of the Companys Shares

In general, a United States shareholder will not be subject to
Canadian income tax on capital gains arising on the disposition of the Companys
shares, unless such shares are taxable Canadian property within the meaning of
the Canadian Income Tax Act and no relief is afforded under any applicable tax
treaty. The shares of the Company would be taxable Canadian property of a
non-resident if at any time during the five-year period immediately preceding a
disposition by the non-resident of such shares, not less than 25% of the issued
shares of any class or series of all classes of shares of the Company belonged
to the non-resident, to persons with whom the non-resident did not deal at arms
length, or to the non-resident and persons with whom the non-resident did not deal at arms length for purposes
of the Canadian Income Tax Act. For this purpose, issued shares include options
to acquire such shares (including conversion rights) held by such persons. Under
the Convention, a capital gain realized by a resident of the United States will
not be subject to Canadian tax unless the value of the shares of the Company is
derived principally from real estate (as defined in the Convention) situated in
Canada.

43

---

|F. | Dividends and Paying
  Agents
|-- | -----------------------------

Not applicable.

|G. | Statements by
Experts
|-- | ---------------------

Not required.

|H. | Documents on
Display
|-- | --------------------

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 annual report, we have one wholly-owned
subsidiary, Canadian Metals Exploration Limited.

|Item 11 | Quantitative and Qualitative Disclosures
      About Market Risk
|------- | ----------------------------------------------------------------

Not required.

|Item 12 | Description of Securities Other than Equity
      Securities
|------- | ------------------------------------------------------------

Not required.

PART II

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

Not applicable.

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

Not Applicable

|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 company 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 company.

44

---

Our Chief Executive Officer and our Chief Financial Officer
have evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2015, 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 companys Chief Executive Officer and Chief Financial
Officer have concluded that our companys disclosure controls and procedures
were effective as of December 31, 2015.

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, 2015. 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 our company conducted an assessment of the
effectiveness of our companys internal controls over financial reporting as of
December 31, 2015. Based on its assessment as per the standards of the Public
Company Accounting Oversight Board, we concluded that our companys internal
controls over financial reporting were effective as of December 31, 2015.

We will transition to the 2013 COSO Framework in due course and
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.

Attestation Report of the Registered Public Accounting Firm

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

Changes in Internal Control over Financial Reporting

There were no changes during the period covered by this Annual
Report in our companys internal controls over financial reporting that have
materially affected, or are reasonably likely to materially affect our companys
internal control over financial reporting.

|Item 16 | [Reserved]
|------- | ----------

Audit Committee Financial Expert

The Board of Directors has determined that the Company has at
least one independent audit committee financial expert serving on its audit
committee, this person being Lyle Davis, our Chairman and who also serves as
Chair of the Audit Committee. Please refer to Item 6.A for Mr. Davis' relevant
experience.

Code of Ethics

The Board has adopted a Code of Ethics and Insider Trading
Policy which has been distributed to its directors, officers, employees and
consultants. A copy of the Code is available from the Company on written request
or may be viewed on the Companys website at www.hardcreek.com.

45

---

Principal Accountant Fees and Services

Audit-Related Fees

|Fiscal Year 2015: $10,000 | Fiscal Year 2014: $10,000
|------------------------- | -------------------------

Tax Fees

|Fiscal Year 2015: $Nil | Fiscal Year 2014: $Nil
|---------------------- | ----------------------

All Other Fees

|Fiscal Year 2015: $1,500 | Fiscal Year 2014: $1,500
|------------------------ | ------------------------

Exemptions from the Listing Standards for Audit Committees

Not Applicable

Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

Not Applicable

Change in Registrant's Certifying Accountant

Not Applicable

PART III

|Item 17 | Financial Statements
|------- | --------------------

Not applicable. See Item 18. Financial Statements below.

|Item 18 | Financial Statements
|------- | --------------------

The financial statements and notes thereto as required by Item
18 are attached hereto and found immediately after the text of this Annual
Statement. The auditors report of Dale Matheson Carr-Hilton LaBonte LLP,
independent registered public accountants, on the audited consolidated financial
statements and notes thereto is included immediately preceding the audited
consolidated financial statements.

Independent Auditors Report. Consolidated Statements of
financial position as at December 31, 2015 and 2014. Consolidated Statements
of Comprehensive Loss as at December 31, 2015 and 2014. Consolidated
Statements of cash flows for the years ended December 31, 2015 and 2014.

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

Exhibits Required by Form 20-F

46

---

|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)
|               |                                                                                                                                 
|8.             | List of Subsidiaries                                                                                                            
|               |                                                                                                                                 
|8.1            | Canadian Metals Exploration
      Ltd., incorporated under the Canada Business Corporation Act
      (Canada) on July 14, 2004. 
|               |                                                                                                                                 
|12.            | Section 302
      Certifications                                                                                                
|               |                                                                                                                                 
|12.1           | Section 302 Certification under
      Sarbanes-Oxley Act for Mark Jarvis*                                                       
|               |                                                                                                                                 
|12.2           | Section 302 Certification under
      Sarbanes-Oxley Act for Brian Fiddler*                                                     
|               |                                                                                                                                 
|13             | Section 906
      Certifications                                                                                                
|               |                                                                                                                                 
|13.1           | Section 906 Certifications
      under Sarbanes-Oxley Act for Mark Jarvis*                                                      
|               |                                                                                                                                 
|13.2           | Section 906 Certifications
      under Sarbanes-Oxley Act for Brian Fiddler*                                                    
|               |                                                                                                                                 
|15.            | Additional Exhibits                                                                                                             
|               |                                                                                                                                 
|15.1           | Consent of Tony
      Hitchins*                                                                                                 
|               |                                                                                                                                 
|15.2           | Code of Ethics
      (2)                                                                                                        

*Filed herewith.

(1)Previously submitted with our Registration
Statement on Form 20-F filed on November 17, 2006. (2)Previously
submitted with our Annual Report Form 20-F filed on July 1, 2010.

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

Brian FiddlerBrian FiddlerChief Financial OfficerDate: April 26, 2016


47

---





Hard Creek Nickel CorporationConsolidated
  Financial StatementsYears Ended December 31, 2015 and 2014

Expressed in Canadian Dollars







---

| | 
| | 

INDEPENDENT AUDITORS REPORT

To the Shareholders of Hard Creek Nickel Corporation

We have audited the accompanying consolidated financial
statements of Hard Creek Nickel Corporation, which comprise the consolidated
statements of financial position as at December 31, 2015 and 2014, and the
consolidated statements of comprehensive loss, changes in equity and cash flows
for the years then ended, and a summary of significant accounting policies and
other explanatory information.

Management's Responsibility for the Consolidated Financial
Statements Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or
error.

Auditors Responsibility Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Canadian generally accepted
auditing standards and the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors judgment, including
the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the
consolidated financial statements.

We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of
Hard Creek Nickel Corporation as at December 31, 2015 and 2014, and its
financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International
Accounting Standards Board.

Emphasis of MatterWithout modifying our opinion, we
draw attention to Note 1 to the consolidated financial statements which
describes matters and conditions that indicate the existence of a material
uncertainty that casts substantial doubt about Hard Creek Nickel Corporations
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments that might result from this uncertainty.



|                  |                                      
|----------------- | -------------------------------------
|                  | DALE MATHESON CARR-HILTON LABTONE LLP
|                  | CHARTERED PROFESSIONAL ACCOUNTANTS   
|Vancouver, Canada |                                      
|April 15, 2016    |                                      

---

Hard Creek Nickel Corporation Consolidated statements of
financial position Expressed in Canadian dollars

|                                       |  |       |  |   | December 31, |   |   | December 31, |  
|-------------------------------------- |  | ----- |  | - | ------------ | - | - | ------------ | -
|                                       |  | Notes |  |   | 2015         |   |   | 2014         |  
|                                       |  |       |  |   |              |   |   |              |  
|ASSETS                                 |  |       |  |   |              |   |   |              |  
|Current assets                         |  |       |  |   |              |   |   |              |  
|Cash                                   |  |       |  | $ | 11,964       |   | $ | 95,893       |  
|Receivables                            |  | 4     |  |   | 19,916       |   |   | 18,370       |  
|Prepaid expenses                       |  |       |  |   | 6,596        |   |   | 11,606       |  
|                                       |  |       |  |   | 38,476       |   |   | 125,869      |  
|Non-current assets                     |  |       |  |   |              |   |   |              |  
|Reclamation deposits                   |  |       |  |   | 187,900      |   |   | 337,900      |  
|Equipment                              |  | 5     |  |   | 13,288       |   |   | 17,164       |  
|Exploration and evaluation assets      |  | 6     |  |   | 1            |   |   | 10,000,000   |  
|                                       |  |       |  |   | 201,189      |   |   | 10,355,064   |  
|                                       |  |       |  |   |              |   |   |              |  
|TOTAL ASSETS                           |  |       |  | $ | 239,665      |   | $ | 10,480,933   |  
|                                       |  |       |  |   |              |   |   |              |  
|LIABILITIES                            |  |       |  |   |              |   |   |              |  
|Current liabilities                    |  |       |  |   |              |   |   |              |  
|Trade payables and accrued liabilities |  | 7     |  | $ | 15,849       |   | $ | 26,593       |  
|                                       |  |       |  |   |              |   |   |              |  
|TOTAL LIABILITIES                      |  |       |  |   | 15,849       |   |   | 26,593       |  
|                                       |  |       |  |   |              |   |   |              |  
|EQUITY                                 |  |       |  |   |              |   |   |              |  
|Share capital                          |  | 10    |  |   | 48,642,413   |   |   | 48,642,413   |  
|Share-based payment reserve            |  | 11    |  |   | 6,153,639    |   |   | 6,153,639    |  
|Deficit                                |  |       |  |   | (54,572,236  | ) |   | (44,341,712  | )
|                                       |  |       |  |   |              |   |   |              |  
|TOTAL EQUITY                           |  |       |  |   | 223,816      |   |   | 10,454,340   |  
|                                       |  |       |  |   |              |   |   |              |  
|TOTAL LIABILITIES AND EQUITY           |  |       |  | $ | 239,665      |   | $ | 10,480,933   |  

Nature and continuance of operations (Note 1) Commitment
(Note 8) Subsequent event (Note 14)

|APPROVED BY: |               |          |             
|------------ | ------------- | -------- | ------------
|DIRECTOR     | MARK JARVIS | DIRECTOR | LYLE DAVIS

|The accompanying notes are an integral part of these
      consolidated financial statements | 3
|-------------------------------------------------------------------------------------------- | -

---

Hard Creek Nickel Corporation Consolidated statements of
comprehensive loss Expressed in Canadian dollars

|                                                                      |  |       |  |   | Year ended   |  
|--------------------------------------------------------------------- |  | ----- |  | - | ------------ | -
|                                                                      |  |       |  |   | December 31, |  
|                                                                      |  | Notes |  |   | 2015         |  
|                                                                      |  |       |  |   |              |  
|Operating expenses                                                    |  |       |  |   |              |  
|Depreciation                                                          |  | 5     |  | $ | 3,876        |  
|Investor relations                                                    |  |       |  |   | 15,263       |  
|Legal and audit                                                       |  |       |  |   | 19,544       |  
|Management fees                                                       |  | 12    |  |   | 38,000       |  
|Office and general                                                    |  |       |  |   | 101,559      |  
|                                                                      |  |       |  |   | 178,242      |  
|                                                                      |  |       |  |   |              |  
|Other (income) loss                                                   |  |       |  |   |              |  
|Exploration
      property impairments                                |  | 6     |  |   | 10,055,858   |  
|Interest income                                                       |  |       |  |   | (3,576       | )
|                                                                      |  |       |  |   | 10,052,282   |  
|                                                                      |  |       |  |   |              |  
|Loss before income
      taxes                                        |  |       |  |   | 10,230,524   |  
|Deferred income tax recovery                                          |  | 9     |  |   | -            |  
|Loss and comprehensive loss for the year                              |  |       |  | $ | 10,230,524   |  
|                                                                      |  |       |  |   |              |  
|                                                                      |  |       |  |   |              |  
|Loss per sharebasic and diluted                                      |  | 10    |  | $ | (0.57        | )
|Weighted average number of shares
      outstandingbasic and diluted |  | 10    |  |   | 18,074,696   |  

|The accompanying notes are an integral part of these
      consolidated financial statements | 4
|-------------------------------------------------------------------------------------------- | -

---

Hard Creek Nickel Corporation Consolidated statement of
changes in equity Expressed in Canadian dollars

|                                |  |       |  |  | Share capital |  |   |            |  |   |                 |  |   |             |  
|------------------------------- |  | ----- |  |  | ------------- |  | - | ---------- |  | - | --------------- |  | - | ----------- | -
|                                |  |       |  |  | Number of     |  |   |            |  |   | Share-based     |  |   |             |  
|                                |  | Notes |  |  | shares        |  |   | Amount     |  |   | payment reserve |  |   | Deficit     |  
|                                |  |       |  |  |               |  |   |            |  |   |                 |  |   |             |  
|Balance at December 31, 2013    |  |       |  |  | 18,074,696    |  | $ | 48,642,413 |  | $ | 6,153,639       |  | $ | (21,538,199 | )
|                                |  |       |  |  |               |  |   |            |  |   |                 |  |   |             |  
|Comprehensive loss for the year |  |       |  |  | -             |  |   | -          |  |   | -               |  |   | (22,803,513 | )
|Balance at December 31, 2014    |  |       |  |  | 18,074,696    |  |   | 48,642,413 |  |   | 6,153,639       |  |   | (44,341,712 | )
|                                |  |       |  |  |               |  |   |            |  |   |                 |  |   |             |  
|Comprehensive loss for the year |  |       |  |  | -             |  |   | -          |  |   | -               |  |   | (10,230,524 | )
|Balance at December 31, 2015    |  |       |  |  | 18,074,696    |  | $ | 48,642,413 |  | $ | 6,153,639       |  | $ | (54,572,236 | )

On July 14, 2015, the Company consolidated its common shares on
a basis of one (1) new common share for five (5) old common shares held.
Reference to common shares, per share amounts and other securities have been
retroactively restated.

The accompanying notes are an integral part of these
      consolidated financial statements
    5


---

Hard Creek Nickel Corporation Consolidated statements of
cash flows Expressed in Canadian dollars

|                                                        |   | Year ended   |  
|------------------------------------------------------- | - | ------------ | -
|                                                        |   | December 31, |  
|                                                        |   | 2015         |  
|                                                        |   |              |  
|Operating activities                                    |   |              |  
|Loss for the year                                       | $ | (10,230,524  | )
|Adjustments for:                                        |   |              |  
|Depreciation                                            |   | 3,876        |  
|Exploration property impairments                        |   | 10,055,858   |  
|Income tax
      recovery                               |   | -            |  
|Changes in non-cash working capital items:              |   |              |  
|Receivables                                             |   | 12,294       |  
|Prepaid expense                                         |   | 5,010        |  
|Trade payables and accrued liabilities                  |   | (10,744      | )
|Net cash flows used in operating activities             |   | (164,230     | )
|                                                        |   |              |  
|Investing activities                                    |   |              |  
|Expenditures on exploration
      and evaluation assets |   | (69,699      | )
|Reclamation deposits                                    |   | 150,000      |  
|BC Mining tax credit settlement                         |   | -            |  
|Net cash flows from investing activities                |   | 80,301,m301  |  
|Change in cash                                          |   | (83,929      | )
|Cash, beginning                                         |   | 95,893       |  
|                                                        |   |              |  
|Cash, ending                                            | $ | 11,964       |  

|The accompanying notes are an integral part of these
      consolidated financial statements | 6
|-------------------------------------------------------------------------------------------- | -

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|1. | Nature and continuance of
  operations
|-- | --------------------------------------

Hard Creek Nickel Corporation (the
Company) was incorporated on January 17, 1983, under the laws of the province
of British Columbia, Canada, and its principal activity is the acquisition and
exploration of mineral properties in Canada. The Companys common shares are
listed for trading on the TSX Venture Exchange (TSXV) under the symbol HNC.

The head office, principal address and
records office of the Company are located at 1090 West Georgia Street, Suite
1060, Vancouver, British Columbia, Canada, V6E 3V7. The Companys registered
address is 885 West Georgia Street, Suite 800, Vancouver, British Columbia,
Canada, V6C 3H1.

These consolidated financial statements
have been prepared on the assumption that the Company and its subsidiary will
continue as a going concern, meaning it will continue in operation for the
foreseeable future and will be able to realize assets and discharge liabilities
in the ordinary course of operations. As at December 31, 2015 the Company had
not advanced its mineral properties to commercial production and is not able to
finance day to day activities through operations. The Companys continuation as a going
concern is dependent upon the successful results from its mineral property
exploration activities, the future price for nickel and its ability to generate
funds there from and/or raise additional equity capital or borrowings sufficient
to meet current and future obligations. With the current state of the junior
resource market the ability to raise funds for working capital is very
difficult. These uncertainties cast significant doubt on the ability of the
Company to continue operations as a going concern. Management intends to finance
operating costs over the next twelve months using existing cash, exercise of
share purchase warrants and/ or private placement of common shares.

|2. | Significant accounting policies and basis of
      preparation
|-- | --------------------------------------------------------------

These financial statements were
authorized for issue on April 15, 2016 by the directors of the Company.

Statement of compliance with
International Financial Reporting Standards

The consolidated financial statements
of the Company comply with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB) and interpretations of
the International Financial Reporting Interpretations Committee (IFRIC).

Basis of preparation

The consolidated financial statements
of the Company have been prepared on an accrual basis and are based on
historical costs, modified where applicable. The consolidated financial
statements are presented in Canadian dollars unless otherwise noted.

Certain of the comparative figures have
been reclassified to conform to current years presentation.

Consolidation

The consolidated financial statements
include the accounts of the Company and its wholly owned Canadian subsidiary,
Canadian Metals Exploration Ltd. Inter-company balances and transactions,
including unrealized income and expenses arising from inter-company
transactions, are eliminated on consolidation.

7

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|2. | Significant accounting policies and basis of
      preparation(contd)
|-- | ----------------------------------------------------------------------

Significant estimates and
assumptions

The preparation of financial statements
in accordance with IFRS requires the Company to make estimates and assumptions
concerning the future. The Companys management reviews these estimates and
underlying assumptions on an ongoing basis, based on experience and other
factors, including expectations of future events that are believed to be
reasonable under the circumstances. Revisions to estimates are adjusted for
prospectively in the period in which the estimates are revised.

Estimates and assumptions where there
is significant risk of material adjustments to assets and liabilities in future
accounting periods include the useful lives of plant and equipment, the
recoverability of the carrying value of exploration and evaluation assets, fair
value measurements for financial instruments, the recoverability and measurement
of deferred tax assets and liabilities, provisions for restoration and
environmental obligations and contingent liabilities.

Significant judgments

The preparation of financial statements
in accordance with IFRS requires the Company to make judgments, apart from those
involving estimates, in applying accounting policies. The most significant
judgments in applying the Companys financial statements include:

| | - | the assessment of the Companys ability to
      continue as a going concern and whether there are events or conditions
      that may give rise to significant uncertainty;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | whether there are indicators of impairment of
      the Companys exploration and evaluation assets and other non-current
      assets;                                     
| | - | the classification / allocation of expenditures
      as exploration and evaluation expenditures or operating expenses; and                                                 
| | - | the classification of financial instruments.                                                                                                                                

Exploration and evaluation expenditures

Costs incurred before the Company has obtained the legal rights
to explore an area are expensed as incurred.

Exploration and evaluation expenditures include the costs of
  acquiring licenses and costs associated with exploration and evaluation
  activity. Option payments are considered acquisition costs provided that the
Company has the intention of exercising the underlying option.

Property option agreements are exercisable entirely at the
  option of the optionee. Therefore, option payments (or recoveries) are recorded
when payment is made (or received) and are not accrued.

Exploration and evaluation expenditures are capitalized. The
  Company capitalizes costs to specific blocks of claims or areas of geological
  interest. Government tax credits received are recorded as a reduction to the
cumulative costs incurred and capitalized on the related property.

Exploration and evaluation assets are tested for impairment if
  facts or circumstances indicate that impairment exists. Examples of such facts
  and circumstances are as follows:

| | - | the period for which the Company has the right
      to explore in the specific area has expired during the period or will
      expire in the near future, and is not expected to be renewed;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | substantive expenditure on further exploration
      for and evaluation of mineral resources in the specific area is neither
      budgeted nor planned;                                      

8

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|2. | Significant accounting policies and basis of
      preparation(contd)
|-- | ----------------------------------------------------------------------

Exploration and evaluation
expenditures(contd)

| | - | exploration for and evaluation of mineral
      resources in the specific area have not led to the discovery of
      commercially viable quantities of mineral resources and the entity has
      decided to discontinue such activities in the specific area; and
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | sufficient data exist to indicate that,
      although a development in the specific area is likely to proceed, the
      carrying amount of the exploration and evaluation asset is unlikely to be
      recovered in full from successful development or by sale.

After technical feasibility and
commercial viability of extracting a mineral resource are demonstrable, the
Company stops capitalizing expenditures for the applicable block of claims or
geological area of interest and tests the asset for impairment. The capitalized
balance, net of any impairment recognized, is then reclassified to either
tangible or intangible mine development assets according to the nature of the
asset.

Share-based payments

The Company operates an employee stock
option plan. Share-based payments to employees are measured at the fair value of
the instruments issued and amortized over the vesting periods. Share-based
payments to non-employees are measured at the fair value of goods or services
received or the fair value of the equity instruments issued, if it is determined
the fair value of the goods or services cannot be reliably measured, and are
recorded at the date the goods or services are received. The corresponding
amount is recorded to the share-based payment reserve. The fair value of options
is determined using the BlackScholes option pricing model. The number of shares
and options expected to vest is reviewed and adjusted at the end of each
reporting period such that the amount recognized for services received as
consideration for the equity instruments granted shall be based on the number of
equity instruments that eventually vest.

The Company records any adjustments on
modification of warrants directly in equity.

Loss per share

Basic loss per share is calculated by
dividing the loss attributable to common shareholders by the weighted average
number of common shares outstanding in the period. For all periods presented,
the loss attributable to common shareholders equals the reported loss
attributable to owners of the Company. Diluted loss per share is calculated by
the treasury stock method. Under the treasury stock method, the weighted average
number of common shares outstanding for the calculation of diluted loss per
share assumes that the proceeds to be received on the exercise of dilutive share
options and warrants are used to repurchase common shares at the average market
price during the period.

Financial instruments

The Company classifies its financial
instruments in the following categories: loans and receivables, and financial
liabilities. The classification depends on the purpose for which the financial
instruments were acquired. Management determines the classification of its
financial instruments at initial recognition.

Loans and receivables are
non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortized cost. They
are included in current assets, except for maturities greater than 12 months
after the end of the reporting period. These are classified as non-current
assets.

9

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|2. | Significant accounting policies and basis of
      preparation(contd)
|-- | ----------------------------------------------------------------------

Financial instruments(contd)

Non-derivative financial liabilities
(excluding financial guarantees) are subsequently measured at amortized
cost.

Financial assets are derecognized when
the rights to receive cash flows from the investments have expired or have been
transferred and the Company has transferred substantially all risks and rewards
of ownership.

At each reporting date, the Company
assesses whether there is objective evidence that a financial instrument has
been impaired.

The Company does not have any
derivative financial assets and liabilities.

Impairment of assets

The carrying amount of the Companys
assets (which include equipment and exploration and evaluation assets) is
reviewed at each reporting date to determine whether there is any indication of
impairment. If such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss. An impairment
loss is recognized whenever the carrying amount of an asset or its cash
generating unit exceeds its recoverable amount. Impairment losses are recognized
in the statement of comprehensive loss.

The recoverable amount of assets is the
greater of an assets fair value less cost to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects the current market
assessments of the time value of money and the risks specific to the asset. For
an asset that does not generate cash inflows largely independent of those from
other assets, the recoverable amount is determined for the cash-generating unit
to which the asset belongs.

An impairment loss is only reversed if
there is an indication that the impairment loss may no longer exist and there
has been a change in the estimates used to determine the recoverable amount. Any
reversal of impairment cannot increase the carrying value of the asset to an
amount higher than the carrying amount that would have been determined had no
impairment loss been recognized in previous years.

Income taxes

Current income tax:

Current income tax assets and
liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted,
at the reporting date, in the countries where the Company operates and generates
taxable income.

Current income tax relating to items
recognized directly in other comprehensive income or equity is recognized in
other comprehensive income or equity and not in profit or loss. Management
periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.

10

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|2. | Significant accounting policies and basis of
      preparation(contd)
|-- | ----------------------------------------------------------------------

Deferred income tax:

Deferred income tax is recognized,
using the asset and liability method, on temporary differences at the reporting
date arising between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.

The carrying amount of deferred income
tax assets is reviewed at the end of each reporting period and recognized only
to the extent that it is probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be
utilized.

Deferred income tax assets and
liabilities are measured at the tax rates that are expected to apply to the year
when the asset is realized or the liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively enacted by the end of the
reporting period.

Deferred income tax assets and deferred
income tax liabilities are offset, if a legally enforceable right exists to set
off current tax assets against current income tax liabilities and the deferred
income taxes relate to the same taxable entity and the same taxation
authority.

Flow-through shares:

On the issuance of flow-through shares,
any premium received in excess of the market price of the Companys common
shares is initially recorded as a liability (flow-through tax liability).
Provided that the Company has renounced the related expenditures, or that there
is a reasonable expectation that it will do so, the flow-through tax liability
is reduced on a pro-rata basis as the expenditures are incurred. If such
expenditures are capitalized, a deferred tax liability is recognized. To the
extent that the Company has suitable unrecognized deductible temporary
differences, an offsetting recovery of deferred income taxes would be recorded.

Restoration and environmental
obligations

The Company recognizes liabilities for
statutory, contractual, constructive or legal obligations associated with the
retirement of long-term assets, when those obligations result from the
acquisition, construction, development or normal operation of the assets. The
net present value of future restoration cost estimates arising from the
decommissioning of plant and other site preparation work is capitalized to the
related asset along with a corresponding increase in the restoration provision
in the period incurred. Discount rates using a pre-tax rate that reflect the
time value of money are used to calculate the net present value.

The Companys estimates of restoration
costs could change as a result of changes in regulatory requirements, discount
rates and assumptions regarding the amount and timing of the future
expenditures. These changes are recorded directly to the related asset with a
corresponding entry to the restoration provision. The Companys estimates are
reviewed annually for changes in regulatory requirements, discount rates,
effects of inflation and changes in estimates. Changes in the net present value,
excluding changes in the Companys estimates of restoration costs, are charged
to the statement of comprehensive loss for the period.

The net present value of restoration
costs arising from subsequent site damage that is incurred on an ongoing basis
during production are charged to the statement of comprehensive loss in the
period incurred.

The costs of restoration projects that
were included in the provision are recorded against the provision as incurred.
The costs to prevent and control environmental impacts at specific properties
are capitalized in accordance with the Companys accounting policy for
exploration and evaluation assets.

11

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|2. | Significant accounting policies and basis of
      preparation(contd)
|-- | ----------------------------------------------------------------------

At December 31, 2015 and 2014, the
Company had no material restoration and environmental obligations.

Equipment

Equipment is stated at historical cost
less accumulated depreciation and accumulated impairment losses.

Subsequent costs are included in the
assets carrying amount or recognized as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognized. All other repairs and
maintenance are charged to the statement of comprehensive loss during the
financial period in which they are incurred.

Gains and losses on disposals are
determined by comparing the proceeds with the carrying amount and are recognized
in the statement of comprehensive loss.

Depreciation is calculated on a
straight-line method to write off the cost of the assets to their residual
values over their estimated useful lives. The depreciation rates applicable to
each category of equipment are as follows:

| | Class of equipment               | Depreciation rate    
| | -------------------------------- | ---------------------
| | Motor vehicles                   | 30% declining balance
| | Computer equipment               | 30% declining balance
| | Exploration and office equipment | 20% declining balance

|3. | Accounting standards issued but not yet
      effective
|-- | -------------------------------------------------------

New standard IFRS 9 Financial
Instruments is a partial replacement of IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 uses a single approach to determine whether
a financial asset is measured at amortized cost or fair value, replacing the
multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity
manages its financial instruments in the context of its business model and the
contractual cash flow characteristics of the financial assets.

The new standard also requires a single
impairment method to be used, replacing the multiple impairment methods in IAS
39. IFRS 9 is effective for annual periods beginning on or after January 1,
2018. The Company is currently assessing the impact this new standard will have
on its consolidated financial statements.

IFRS 16 Leases replaces IAS 17
Leases and the related interpretative guidance. IFRS 16 applies a control
model to the identification of leases, distinguishing between a lease and a
service contract on the basis of whether the customer controls the asset being
leased. For those assets determined to meet the definition of a lease, IFRS 16
introduces significant changes to the accounting by lessees, introducing a
single, on-balance sheet accounting model that is similar to current finance
lease accounting, with limited exceptions for short-term leases or leases of low
value assets. Lessor accounting is not substantially changed. The standard is
effective for annual periods beginning on or after January 1, 2019, with early
adoption permitted for entities that have adopted IFRS 15. The Company has not
yet assessed the future impact of this new standard on its financial statements.

Other accounting standards or
amendments to existing accounting standards that have been issued but have
future effective dates are either not applicable or are not expected to have a
significant impact on the Companys consolidated financial statements.

12

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|4. | Receivables
|-- | -----------

| |                                     |   | December 31, |  |   | December 31, | 
| | ----------------------------------- | - | ------------ |  | - | ------------ | 
| |                                     |   | 2015         |  |   | 2014         | 
| | Goods and Service sales tax         | $ | 596          |  | $ | 2,084        | 
| | British Columbia mining tax credits |   | 13,840       |  |   | 16,000       | 
| | Other receivable                    |   | 5,480        |  |   | 286          | 
| |                                     | $ | 19,916       |  | $ | 18,370       | 

|5. | Equipment
|-- | ---------

| |                               |   |          |  |   |           |  |   | Exploration |  |   |         | 
| | ----------------------------- | - | -------- |  | - | --------- |  | - | ----------- |  | - | ------- | 
| |                               |   | Motor    |  |   | Computer  |  |   | and office  |  |   |         | 
| |                               |   | vehicles |  |   | equipment |  |   | equipment   |  |   | Total   | 
| | Cost:                         |   |          |  |   |           |  |   |             |  |   |         | 
| | At December 31, 2014 and 2015 | $ | 20,330   |  | $ | 28,809    |  | $ | 61,984      |  | $ | 111,123 | 
| |                               |   |          |  |   |           |  |   |             |  |   |         | 
| | Depreciation:                 |   |          |  |   |           |  |   |             |  |   |         | 
| | At January 1, 2014            |   | 18,476   |  |   | 24,338    |  |   | 46,063      |  |   | 88,877  | 
| | Charge for the year           |   | 556      |  |   | 1,341     |  |   | 3,185       |  |   | 5,082   | 
| | At December 31, 2014          |   | 19,032   |  |   | 25,679    |  |   | 49,248      |  |   | 93,959  | 
| | Charge for the year           |   | 390      |  |   | 940       |  |   | 2,546       |  |   | 3,876   | 
| | At
      December 31, 2015    |   | 19,422   |  |   | 26,619    |  |   | 51,794      |  |   | 97,835  | 
| |                               |   |          |  |   |           |  |   |             |  |   |         | 
| | Net book value:               |   |          |  |   |           |  |   |             |  |   |         | 
| | At December 31, 2014          | $ | 1,298    |  | $ | 3,130     |  | $ | 12,736      |  | $ | 17,164  | 
| | At
      December 31, 2015    | $ | 908      |  | $ | 2,190     |  | $ | 10,190      |  | $ | 13,288  | 

13

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|6. | Exploration and evaluation
assets
|-- | ---------------------------------

The Companys deferred exploration
costs are as follows:

| |                                                                             |   | Balance,     |   |   |                |   |   | Balance,     |   |   |                |   |   | Balance,     |  
| | --------------------------------------------------------------------------- | - | ------------ | - | - | -------------- | - | - | ------------ | - | - | -------------- | - | - | ------------ | -
| |                                                                             |   | December 31, |   |   | Change in year |   |   | December 31, |   |   | Change in year |   |   | December 31, |  
| |                                                                             |   | 2013         |   |   | 2014           |   |   | 2014         |   |   | 2015           |   |   | 2015         |  
| | Mineral property interests                                                  | $ | 179,500      |   | $ | -              |   | $ | 179,500      |   | $ | -              |   | $ | 179,500      |  
| | Assays and testing                                                          |   | 2,052,292    |   |   | -              |   |   | 2,052,292    |   |   | -              |   |   | 2,052,292    |  
| | Claims renewal / staking                                                    |   | 457,505      |   |   | 1,256          |   |   | 458,761      |   |   | 500            |   |   | 459,261      |  
| | Drilling                                                                    |   | 12,488,967   |   |   | -              |   |   | 12,488,967   |   |   | -              |   |   | 12,488,967   |  
| | Environmental studies                                                       |   | 1,256,621    |   |   | -              |   |   | 1,256,621    |   |   | -              |   |   | 1,256,621    |  
| | Exploration data management                                                 |   | 917,422      |   |   | -              |   |   | 917,422      |   |   | -              |   |   | 917,422      |  
| | First Nations                                                               |   | 166,444      |   |   | -              |   |   | 166,444      |   |   | -              |   |   | 166,444      |  
| | Geochemistry                                                                |   | 111,066      |   |   | -              |   |   | 111,066      |   |   | -              |   |   | 111,066      |  
| | Geological and engineering
      services                                   |   | 8,701,898    |   |   | 46,500         |   |   | 8,748,398    |   |   | 31,500         |   |   | 8,779,898    |  
| | Geophysical services                                                        |   | 743,515      |   |   | -              |   |   | 743,515      |   |   | -              |   |   | 743,515      |  
| | Metallurgy                                                                  |   | 3,761,802    |   |   | 18,580         |   |   | 3,780,382    |   |   | 12,290         |   |   | 3,792,672    |  
| | Petrographic work                                                           |   | 43,957       |   |   | -              |   |   | 43,957       |   |   | -              |   |   | 43,957       |  
| | Project management                                                          |   | 106,015      |   |   | -              |   |   | 106,015      |   |   | -              |   |   | 106,015      |  
| | Survey, mapping and camp                                                    |   | 1,567,472    |   |   | 25,159         |   |   | 1,592,631    |   |   | 25,218         |   |   | 1,617,849    |  
| | Transportation                                                              |   | 2,603,979    |   |   | 379            |   |   | 2,604,358    |   |   | 191            |   |   | 2,604,549    |  
| | Cost recovery                                                               |   | (56,480      | ) |   | -              |   |   | (56,480      | ) |   | -              |   |   | (56,480      | )
| | Property impairments                                                        |   | (151,974     | ) |   | (22,799,128    | ) |   | (22,951,102  | ) |   | (10,055,858    | ) |   | (33,006,960  | )
| | BC refundable mining tax credits                                            |   | (1,900,703   | ) |   | (280,860       | ) |   | (2,181,563   | ) |   | (13,840        | ) |   | (2,195,403   | )
| | Federal non-refundable mining
      tax credits, net of valuation allowance |   | (61,185      | ) |   | -              |   |   | (61,185      | ) |   | -              |   |   | (61,185      | )
| |                                                                             | $ | 32,988,113   |   | $ | (22,988,113    | ) | $ | 10,000,000   |   | $ | (9,999,999     | ) | $ | 1            |  

14

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|6. | Exploration and evaluation assets(contd)
|-- | -----------------------------------------

The Company has a 100% interest in
certain mineral claims, located along the Turnagain River in British Columbia, Canada. One claim is
subject to a 4% net smelter return royalty (NSR). The Company has the option to purchase all
or part of the NSR within four years of commercial production for a price of
$1,000,000 per 1% NSR.

During the year ended December 31,
2015, the Company incurred costs totalling $69,699 (2014 - $91,874) on the
Turnagain mineral claims. In June 2015, the Company received $150,000 from the
return of one of its reclamation deposits.

At December 31, 2015 the Company
determined that impairment indicators existed and reduced he carrying value of
the Turnagain mineral claims by $10,069,698 to $1 based on managements
assessment of current nickel prices, the global over- supply of nickel held in
inventories and the weaker than expected Chinese and European demand for nickel.
Future changes to this estimate could have a significant impact on the carrying
value of the Turnagain mineral claims.

|7. | Trade payables and accrued
  liabilities
|-- | ----------------------------------------

| |                     |   | December 31, |  |   | December 31, | 
| | ------------------- | - | ------------ |  | - | ------------ | 
| |                     |   | 2015         |  |   | 2014         | 
| | Trade payables      | $ | 3,929        |  | $ | 15,641       | 
| | Accrued liabilities |   | 11,920       |  |   | 10,952       | 
| |                     | $ | 15,849       |  | $ | 26,593       | 

|8. | Lease obligations
|-- | -----------------

Lease obligations relate to the
Companys rent of office space. The term of the lease expires on September 30,
2016 with the Company holding an option to renew for a further five years.

A schedule of the Companys minimum
lease payments is as follows:

| |                                                           |   | December 31, |  |   | December 31, | 
| | --------------------------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                                           |   | 2015         |  |   | 2014         | 
| | Payable not later than one
      year                     | $ | 38,522       |  | $ | 51,363       | 
| | Payable later than one year and not later than five years |   | -            |  |   | 38,522       | 
| |                                                           | $ | 38,522       |  | $ | 89,885       | 

15

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|9. | Income taxes and mining tax
  credits
|-- | -------------------------------------

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 the Companys income tax recovery are as follows:

| |                                                              |   | Year ended   |   |   | Year ended   |  
| | ------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
| |                                                              |   | December 31, |   |   | December 31, |  
| |                                                              |   | 2015         |   |   | 2014         |  
| | Loss before income taxes                                     | $ | 10,230,524   |   | $ | 23,016,713   |  
| |                                                              |   |              |   |   |              |  
| | Statutory tax rate                                           |   | 26%          |   |   | 26%          |  
| | Expected income tax recovery at the statutory
      tax rate | $ | (2,659,936   | ) | $ | (5,988,505   | )
| | Permanent differences                                        |   | -            |   |   | 32           |  
| | Tax pool not recognized                                      |   | 2,121,995    |   |   | 5,718,733    |  
| | Other                                                        |   | 482,005      |   |   | 56,540       |  
| | Income tax recovery                                          | $ | -            |   | $ | (213,200     | )

Details of movements of deferred tax
assets and liabilities are as follows:

| |                                |   | Exploration |   |   |             |   |   |           |   |   |          |   |   | Federal non-   |   |   |          |  
| | ------------------------------ | - | ----------- | - | - | ----------- | - | - | --------- | - | - | -------- | - | - | -------------- | - | - | -------- | -
| |                                |   | and         |   |   |             |   |   |           |   |   | Share    |   |   | refundable     |   |   |          |  
| |                                |   | evaluation  |   |   | Loss carry- |   |   |           |   |   | issuance |   |   | investment tax |   |   |          |  
| |                                |   | assets      |   |   | forwards    |   |   | Equipment |   |   | costs    |   |   | credits        |   |   | Total    |  
| | At January 1, 2014             | $ | (4,736,293  | ) | $ | 4,354,640   |   | $ | 81,552    |   | $ | 12,823   |   | $ | 74,078         |   | $ | (213,200 | )
| | Credited (charged) to net loss |   | 4,736,293   |   |   | (4,354,640  | ) |   | (81,552   | ) |   | (12,823  | ) |   | (74,078        | ) |   | 213,200  |  
| | At December 31, 2014           |   | -           |   |   | -           |   |   | -         |   |   | -        |   |   | -              |   |   | -        |  
| | Charged (credited) to net loss |   | -           |   |   | -           |   |   | -         |   |   | -        |   |   | -              |   |   | -        |  
| | At December 31, 2015           | $ | -           |   | $ | -           |   | $ | -         |   | $ | -        |   | $ | -              |   | $ | -        |  

During the fiscal year ended December
31, 2009, the Canada Revenue Agency (CRA) conducted an audit of the Company's
tax filings for the fiscal years 2002 to 2008 to substantiate a $2,222,020 claim
in provincial refundable mining tax credits as of December 31, 2008 (METC).
The results of the audit resulted in a reduction of $1,062,637 in provincial
refundable mining tax credits and a reduction of $180,712 in federal
non-refundable tax credits. The Company filed a Notice of Objection during the
year ended December 31, 2010 to dispute CRAs interpretation that $983,516 of
the costs incurred by the Company did not qualify as Canadian Exploration
Expenses, which is the basis for the provincial refundable mining tax credit. In
June 2014 the Company and CRA settled for a cash refund of $264,860 which was
charged as a credit against exploration and evaluation assets.

The Company has the following deferred
tax assets and liabilities:

| |                                      |   | December 31, |   |   | December 31, |  
| | ------------------------------------ | - | ------------ | - | - | ------------ | -
| |                                      |   | 2015         |   |   | 2014         |  
| | Federal investment tax
      credits | $ | 688,331      |   | $ | 688,331      |  
| | Exploration and evaluation assets    |   | 3,664,824    |   |   | 1,471,147    |  
| | Non-capital loss
      carryforwards |   | 4,006,159    |   |   | 4,078,060    |  
| | Other                                |   | 84,667       |   |   | 84,446       |  
| | Valuation allowance                  |   | (8,443,981   | ) |   | (6,321,984   | )
| |                                      | $ | -            |   | $ | -            |  

16

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|9. | Income Tax and Mining Tax Credits(contd)
|-- | -----------------------------------------

The tax pools relating to these
deferred tax assets expire as follows:

| |                 |   | **Canadian resource** |  |   | Non-capital |  |   |         |  |   | Canadian federal investment | 
| | --------------- | - | --------------------- |  | - | ----------- |  | - | ------- |  | - | --------------------------- | 
| |                 |   | pools                 |  |   | losses      |  |   | Other   |  |   | tax credit losses           | 
| | 2025            | $ | -                     |  | $ | -           |  | $ | -       |  | $ | 25,187                      | 
| | 2026            |   | -                     |  |   | 1,663,131   |  |   | 3,024   |  |   | 92,277                      | 
| | 2027            |   | -                     |  |   | 3,323,364   |  |   | -       |  |   | 58,467                      | 
| | 2028            |   | -                     |  |   | 2,559,733   |  |   | -       |  |   | 237,882                     | 
| | 2029            |   | -                     |  |   | 2,620,757   |  |   | -       |  |   | 274,518                     | 
| | 2030            |   | -                     |  |   | 2,388,309   |  |   | -       |  |   | -                           | 
| | 2031            |   | -                     |  |   | 1,392,527   |  |   | -       |  |   | -                           | 
| | 2032            |   | -                     |  |   | 818,110     |  |   | -       |  |   | -                           | 
| | 2033            |   | -                     |  |   | 202,411     |  |   | -       |  |   | -                           | 
| | 2034            |   | -                     |  |   | 266,149     |  |   | -       |  |   | -                           | 
| | 2035            |   | -                     |  |   | 173,814     |  |   | -       |  |   | -                           | 
| | No
      expiry |   | 14,095,478            |  |   | -           |  |   | 322,619 |  |   |                             | 
| |                 | $ | 14,095,478            |  | $ | 15,408,295  |  | $ | 325,643 |  | $ | 688,331                     | 

|10. | Share capital
|--- | -------------

Authorized share capital

Unlimited number of common shares
without par value.

Issued share capital

At December 31, 2015 there were
18,074,696 issued and fully paid common shares (2014  18,074,696).

On July 14, 2015, the Company
consolidated its common shares on a basis of one (1) new common share for five
(5) old common shares held. Reference to common shares, per share amounts and
other securities have been retroactively restated.

There were no share issuances during
the fiscal years ended December 31, 2015 or 2014.

Basic and diluted loss per share

The calculation of basic and diluted
loss per share for the year ended December 31, 2015 was based on the loss
attributable to common shareholders of $10,230,524 (2014 - $22,803,513) and the
weighted average number of common shares outstanding of 18,074,696 (2014 
18,074,696).

Diluted loss per share did not include
the effect of stock options and warrants as the effect would be anti-dilutive.

Stock options

The Company has adopted an incentive
stock option plan, which provides that the Board of Directors of the Company may
from time to time, in its discretion, and in accordance with TSX requirements,
grant to directors, officers, employees and technical consultants to the
Company, non-transferable stock options to purchase common shares, provided that
the number of common shares reserved for issuance will not exceed 10% of the
Companys issued and outstanding common shares. Such options will be exercisable
for a period of up to 5 years from the date of grant. In connection with the
foregoing, the number of common shares reserved for issuance to any one optionee
will not exceed five percent (5%) of the issued and outstanding common shares
and the number of common shares reserved for issuance to all investor relations
and technical consultants will not exceed two percent (2%) of the issued and
outstanding common shares. Options may be exercised no later than 90 days
following cessation of the optionees position with the Company or 30 days
following cessation of an optionee conducting investor relations activities
position.

17

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|10. | Share capital(contd)
|--- | ---------------------

Stock options (contd)

If no vesting schedule is specified at
the time of grant, the options will vest 25% each anniversary of the date of
grant.

On exercise, each option allows the
holder to purchase one common share of the Company. The changes in options
during the years ended December 31, 2015 and 2014 are as follows:

| |                                      |  | Year ended        |   |   | Year ended        | 
| | ------------------------------------ |  | ----------------- | - | - | ----------------- | 
| |                                      |  | December 31, 2015 |   |   | December 31, 2014 | 
| |                                      |  |                   |   |   | Weighted          | 
| |                                      |  |                   |   |   | average           | 
| |                                      |  | Number of         |   |   | exercise          | 
| |                                      |  | options           |   |   | price             | 
| | Options outstanding,
      beginning |  | 1,084,400         |   | $ | 1.40              | 
| | Options expired/cancelled            |  | (615,000          | ) |   | 1.32              | 
| | Options outstanding, ending          |  | 469,400           |   | $ | 1.08              | 
| | Options exercisable, ending          |  | 469,400           |   | $ | 1.08              | 

Details of options outstanding as at
December 31, 2015 are as follows:

| | Number of options |   | Weighted average |  |  | Weighted average | 
| | ----------------- | - | ---------------- |  |  | ---------------- | 
| | outstanding       |   | exercise price   |  |  | contractual life | 
| | 330,000           | $ | 0.50             |  |  |                  | 
| | 19,400            | $ | 2.10             |  |  |                  | 
| | 120,000           | $ | 2.50             |  |  |                  | 
| | 469,400           | $ | 1.08             |  |  | 1.45 years       | 

Warrants

The changes in warrants outstanding
during the years ended December 31, 2015 and 2014 are as follows:

| |                                 |  | Year ended        |   |   | Year ended        | 
| | ------------------------------- |  | ----------------- | - | - | ----------------- | 
| |                                 |  | December 31, 2015 |   |   | December 31, 2014 | 
| |                                 |  | Number            |   |   | Weighted          | 
| |                                 |  | of                |   |   | average           | 
| |                                 |  | warrants          |   |   | exercise price    | 
| | Warrants outstanding, beginning |  | 2,418,667         |   | $ | 0.40              | 
| | Warrants expired                |  | (313,307          | ) |   | 0.40              | 
| | Warrants outstanding, ending    |  | 2,105,360         |   | $ | 0.12              | 

At December 31, 2015 and 2014, all
warrants outstanding were exercisable. Details of warrants outstanding as at
December 31, 2015 are as follows:

| | Number of warrants |   | Weighted average |  |  | Weighted average | 
| | ------------------ | - | ---------------- |  |  | ---------------- | 
| | outstanding        |   | exercise price   |  |  | contractual life | 
| | 1,686,693          | $ | 0.05             |  |  |                  | 
| | 418,667            | $ | 0.40             |  |  |                  | 
| | 2,105,360          | $ | 0.12             |  |  | 1.56 years       | 

18

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|10. | Share capital(contd)
|--- | ---------------------

Warrants (contd)

Effective November 16, 2015, the
Company extended 1,686,693 post consolidated warrants from November 27, 2015 to
November 27, 2017 and repriced them from a post consolidated strike price of
$0.40 to $0.05. If the closing price of the Company's shares is $0.0625 or
greater for a period of 10 consecutive trading days, the warrant holders will
have 30 days to exercise their warrants, otherwise, the warrants will expire on
the 31st day.

|11. | Share-based payment
reserve
|--- | ---------------------------

The share-based payment reserve records
items recognized as stock-based compensation expense, the intrinsic value of
warrants associated with private placements and the fair value of agents
warrants until such time that the stock options or warrants are exercised, at
which time the corresponding amount will be transferred to share capital.

The intrinsic value of the warrants is
the difference between the market value of the stock when issued and the unit
price of the private placement times the number of units issued.

|12. | Related party transactions
|--- | --------------------------

Key management personnel
compensation

| |                 |   | Years ended  | 
| | --------------- | - | ------------ | 
| |                 |   | December 31, | 
| |                 |   | 2015         | 
| | Management fees | $ | 38,000       | 

There are no amounts owing to related
parties at December 31, 2015 or 2014.

|13. | Financial risk and capital
  management
|--- | ---------------------------------------

The Company is exposed in varying
degrees to a variety of financial instrument related risks. The Board of
Directors approves and monitors the risk management processes, inclusive of
documented investment policies, counterparty limits, and controlling and
reporting structures. The type of risk exposure and the way in which such
exposure is managed is provided as follows:

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 cash held in bank accounts. All of the cash is deposited in bank
accounts held with one major bank in Canada. Since all of the Companys cash is
held by one bank there is a concentration of credit risk. This risk is managed
by using major banks that are high credit quality financial institutions as
determined by rating agencies.

19

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|13. | Financial risk and capital management(contd)
|--- | ---------------------------------------------

Liquidity risk

Liquidity risk is the risk that the
Company will not be able to meet its financial obligations as they fall due. The
Company has a planning and budgeting process in place to help determine the
funds required to support the Companys normal operating requirements on an
ongoing basis. The Company ensures that there are
sufficient funds to meet its short-term business requirements, taking into
account its anticipated cash flows from operations and its holdings of cash and
cash equivalents.

Historically, the Company's sole source
of funding has been the issuance of equity securities for cash, primarily
through private placements. The Companys access to financing is always
uncertain. There can be no assurance of continued access to significant equity
funding.

Foreign exchange risk

Foreign currency risk is the risk that
the fair values of future cash flows of a financial instrument will fluctuate
because they are denominated in currencies that differ from the respective
functional currency. The Company does not have any direct exposure to foreign
exchange risk.

Interest rate risk

Interest rate risk is the risk that the
fair value of future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. The Company does not have any significant
interest rate risk.

Capital management

The Company's policy is to maintain a
strong capital base so as to maintain investor and creditor confidence,
safeguard the Companys ability to support the exploration and development of
its exploration and evaluation assets and to sustain future development of the
business. The capital structure of the Company consists of equity and debt
obligations, net of cash.

There were no changes in the Company's
approach to capital management during the year and no restrictions.

Classification of financial
instruments

Financial assets included in the
statement of financial position are as follows:

| |                        |   | December 31, |  |   | December 31, | 
| | ---------------------- | - | ------------ |  | - | ------------ | 
| |                        |   | 2015         |  |   | 2014         | 
| | Loans and receivables: |   |              |  |   |              | 
| | Cash                   | $ | 11,964       |  | $ | 95,893       | 
| | Reclamation deposits   |   | 187,900      |  |   | 337,900      | 
| |                        | $ | 199,864      |  | $ | 433,793      | 

Financial liabilities included in the
statement of financial position are as follows:

| |                                             |   | December 31, |  |   | December 31, | 
| | ------------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                             |   | 2015         |  |   | 2014         | 
| | Non-derivative financial
      liabilities: |   |              |  |   |              | 
| | Trade payables                              | $ | 15,849       |  | $ | 15,641       | 

Fair value

The fair value of the Companys
financial assets and liabilities approximates the carrying amount.

20

---

|Hard Creek Nickel Corporation                       
|----------------------------------------------------
|Notes to the Consolidated Financial Statements      
|Expressed in Canadian dollars                       
|For the years
      ended December 31, 2015 and 2014

|14. | Subsequent event
|--- | ----------------

In April 2016, the Company closed a
private placement of 25,000,000 units at a price of $0.01 per unit for gross
proceeds of $250,000. Each unit consists of one common share and one share
purchase warrant exercisable into one common share at a price of $0.05 for a
period of five years. As part of the private placement, the Company paid $2,016
in finders fees and issued 201,600 in broker warrants with an expiry date of
five years.

21

---