Victory Nickel Inc.
TSX : NI

Victory Nickel Inc.

July 13, 2007 08:48 ET

Victory Nickel Comments on Bidding Process for Rio Narcea Gold

Rio Narcea shareholders should be allowed to consider all alternatives to current takeover bid

TORONTO, ONTARIO--(Marketwire - July 13, 2007) - Victory Nickel Inc. ("Victory Nickel")(TSX:NI) has been working diligently over the past several months to finance a competing bid to the offer (the "Lundin Offer") made by Lundin Mining Corporation ("Lundin"), a diversified copper, zinc and lead producer, to purchase all of the outstanding shares of Rio Narcea Gold Mines, Ltd. ("Rio").

Victory Nickel believes it could offer Rio's shareholders the opportunity to participate in the creation of an exciting, growth-oriented pure nickel company. In Victory Nickel's view, however, the restrictive terms of the support agreement between Rio and Lundin (the "Support Agreement") have impeded a Victory Nickel proposal, or any other competing bid, from surfacing.

Victory Nickel was recently formed as a pure-play junior nickel company for the purposes of bringing into production the Minago, Lac Rocher and Mel sulphide nickel projects and to expand its asset base to create a new Canadian mid-tier nickel producer replacing those companies which have disappeared as a result of the recent spate of M&A activity in the nickel sector.

At Minago, Lac Rocher and Mel, Victory Nickel has more than 660 million pounds of in-situ nickel in National Instrument 43-101-compliant measured and indicated resources, and Victory Nickel believes that all three of these deposits could be in production within three years. A combination of Victory Nickel's projects with Rio's producing Aguablanca nickel mine in Spain would create a nickel producer with an outstanding production growth profile.

Victory Nickel believes that the true value of Rio's assets is not reflected in the Lundin Offer and that the value of such assets could be maximized through a business combination involving Victory Nickel and Rio pursuant to which a separate nickel company, combining Victory Nickel's and Rio's nickel assets, would be created, along with a separate well-capitalized gold company holding Rio's current gold assets. This structure would allow Rio's shareholders the opportunity to participate in two new pure-play companies which would be well positioned to grow in their respective sectors:

Nickel: The combined nickel assets would create an intermediate nickel producer with:

- Forecasted annual nickel production of over 40 million pounds per year by 2011, giving it a compound annual growth rate in excess of 41%;

- Resources in excess of 917 million pounds of nickel in measured and indicated resources not including 774 million pounds of inferred resources, giving it one of the largest sulphide resource bases in the industry;

- Combined mine life in excess of 20 years;

- Significant exploration potential;

- A management and board structure with over 400 years of experience in nickel mining and finance; and

- A management team committed to growth for the benefit of all shareholders.

Gold: The remaining Rio assets would create a pure-play gold company with:

- Annual production in excess of 100,000 ounces of gold from the Tasiast Mine;

- A gold resource in excess of 1.24 million ounces;

- Significant exploration potential; and

- Assuming that the Aguablanca mine could command a $600 million sale price, a treasury in excess of $600 million to finance growth through exploration and/or acquisitions.

In this volatile market which has seen initial bids for nickel companies increased as a result of competitive bidding, it is unfortunate that the bidding process for Rio has been impeded by the restrictions in the Support Agreement, to the detriment of Rio's shareholders. Victory Nickel believes that the business combination described above could offer Rio's shareholders:

(1) a better alternative to the Lundin Offer that would allow them to maintain a direct interest in Rio's assets until the potential of those assets is fully understood or realized; and

(2) the upside that remains at Aguablanca, as indicated by two separate announcements by Rio since the initial bid for Rio by Lundin in April 2007:

- On May 14, 2007, Rio reported that "The (drill) program is successfully demonstrating that the nickel sulphide mineralization remains open at depth and also laterally. Six of the seven underground holes completed during the quarter returned wide intervals of disseminated, semi-massive and massive sulphide mineralization, and have returned very positive results."

- On June 5, 2007, Rio further reported that "As a result of these encouraging results, the Aguablanca exploration budget has been increased by $1 million to complete a 25x25 metre infill drilling program on the Deep Body."

It is also noteworthy that, according to Victory Nickel's analysis, the 10%, or $0.50 per share, increase to the Lundin Offer on June 30, 2007 does not even return the cash generated by Rio's Aguablanca nickel mine since the initial $5.00 per share bid made by Lundin on April 4, 2007.

"It has been demonstrated that pure-play companies command a premium in the market and that's how you maximize shareholder value," said Victory Nickel CEO Rene Galipeau. "We believe that a combination of Rio's nickel assets with Victory Nickel would create an outstanding new Canadian growth nickel company, and suggest that Rio's shareholders carefully consider whether tendering their shares to the Lundin Offer expiring on July 16, 2007 is in their best interest. In the event that Rio's shareholders choose not to accept the Lundin Offer, we would look forward to meeting with Rio management and its Board of Directors to discuss a business combination which, in our view, would be more beneficial to all of Rio's shareholders."

About Victory Nickel

Victory Nickel Inc. is a Canadian company with over 660,000,000 pounds of in-situ nickel in National Instrument 43-101-compliant measured (154,000,000 pounds) and indicated (511,000,000 pounds) resources in three sulphide nickel projects: Minago and Mel on Manitoba's Thompson nickel belt, and the high-grade Lac Rocher deposit in northwestern Quebec, and an additional 530 million pounds of in-situ nickel in inferred resources. Created from the nickel assets of Nuinsco Resources Limited (TSX:NWI), Victory Nickel is well financed and focused on becoming a producer by developing its existing properties and evaluating opportunities to expand its asset base.

Cautionary Statements Regarding Forward-Looking and Other Statements

This press release contains certain "forward-looking statements". All statements, other than statements of historical fact, that address activities, events or developments that Victory Nickel believes, expects or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements reflect the current expectations or beliefs of Victory Nickel based on information currently available to Victory Nickel. Such forward-looking statements include, among other things, statements relating to possible negotiations and transactions between Rio and Victory Nickel as well as each of Victory Nickel's and Rio's mineral projects with respect to estimates and/or assumptions in respect of mineral resources, future production, mine life, and future economic, market and other conditions. Forward-looking statements are subject to significant risks and uncertainties and other factors that could cause the actual results to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on Victory Nickel, Rio, the shareholders of Rio or the value of the shares of Rio or any successor companies. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: the completion of the Lundin Offer; the failure of Victory Nickel to enter into and/or complete negotiations with Rio; the inability to complete any business combination or other transaction between Rio and Victory Nickel; or other factors.

Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, Victory Nickel disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although Victory Nickel believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

Readers are further cautioned not to place undue reliance on the statements made by Victory Nickel in this press release. Victory Nickel encourages the reader to independently evaluate the statements made in this press release.

To the fullest extent permissible under applicable law, Victory Nickel disclaims any liability to any shareholder of Rio resulting from such shareholder's decision to act or not to act on the basis of the contents of this press release.

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