Victory Nickel Inc.

TSX : NI


Victory Nickel Inc.

January 09, 2013 07:30 ET

Victory Nickel Completes Asset Purchase Agreement for Seven Persons Sand Plant

Acquisition Marks First Step Towards Frac Sand Production, Cash Flow Generation in 2013

TORONTO, ONTARIO--(Marketwire - Jan. 9, 2013) - Victory Nickel Inc. ("Victory Nickel" or the "Company") (TSX:NI) (www.victorynickel.ca) today announced that it has completed an Asset Purchase Agreement (the "Agreement") for the Seven Persons sand recycling facility ("the 7P Facility") located southwest of Medicine Hat, Alberta (see photos at http://media3.marketwire.com/docs/sevenpersonsplant.jpg).

"The acquisition of the 7P Facility presents Victory Silica with an avenue to generate cash flow for Victory Nickel from frac sand production and sales in the near term," said René Galipeau, Vice-Chairman and CEO of Victory Nickel.

At the meeting of shareholders held in June 2012, the Company announced the creation of Victory Silica Ltd. ("VSL"). VSL was created to establish Victory Nickel's presence in the frac sand market prior to commencing production of both nickel and frac sand at the 100%-owned Minago mine in Manitoba. The Minago feasibility study envisions production of up to 1.14 million tonnes per year of premium-quality frac sand from the Winnipeg Formation sandstone resource that overlies the Minago nickel deposit.

In order to establish Victory Nickel as a premier frac sand supplier today, VSL has planned a three-phase program. Phase 1 establishes production of 400,000 tons per annum ("tpa") of premium-quality Midwest frac sand from the 7P Facility by shipping partially-processed sand purchased in Wisconsin to the 7P Facility for final processing and distribution. The 7P Facility is well located in an area populated with fracking companies (see map at http://media3.marketwire.com/docs/sevenpersonsmap.jpg), its customers, and is within only a few hours' trucking distance of the well sites. Phase 2 will reduce costs and assure security of sand supply through the acquisition of a frac sand mine in Wisconsin. In Phase 3, Victory Silica has identified a site in Winnipeg, Manitoba, where it plans to build a larger frac sand plant to process and distribute both imported and domestic sands, including sand mined at Minago.

The acquisition of the 7P Facility has now been completed subject to certain conditions and events. The terms of the agreement provide for payment in three stages:

  1. An initial payment of $10,000 on signing the Agreement.
  2. A second payment of $300,000 on receipt of approval from Alberta's Energy Resources Conservation Board ("ERCB") of a reclamation plan to convert the 7P Facility site to a frac sand processing facility; it is currently licensed as a sand recycling facility.
  3. A final payment of $400,000 on recovery from ERCB of a reclamation deposit that was posted by the vendor of the 7P Facility or within 90 days of the submission of a reclamation report, the final step of the reclamation plan mentioned in 2) above, whichever comes first.

Once the reclamation plan is approved by ERCB, the Company will commence the reclamation work, currently estimated to take approximately three months. The engineering, equipment acquisition and construction of plant upgrades to convert the 7P Facility to a 400,000 tpa frac sand processing plant will occur simultaneously with reclamation.

"The frac sand market is constantly evolving, and this presents new opportunities to VSL," said VSL CEO Ken Murdock. "High-quality Midwest frac sand remains at a premium, and the relationships we are establishing in the US and Canada today will benefit Victory Nickel in the near-term as well as down the road when Minago financing, mine development and production moves forward. Our internal forecasts indicate that margins in excess of $25 per ton of frac sand can be realized on sales from the 7P Facility."

"We are fortunate to have the expertise of Ken Murdock," said Mr. Galipeau "Today's achievement is Ken's first step in his three-phase program which calls for production of 400,000 tpa of premium-quality Wisconsin frac sand in Canada by mid-2013 expanding to 1,500,000 tpa of imported and domestic frac sand within two years. Financing discussions are advancing."

About Victory Nickel

Victory Nickel Inc. is a Canadian company with four sulphide nickel deposits containing significant NI 43-101- compliant nickel resources. Victory Nickel is focused on becoming a mid-tier nickel producer by developing its existing properties, Minago, Mel and Lynn Lake in Manitoba, and Lac Rocher in northwestern Québec, and by evaluating opportunities to expand its nickel asset base. Through a wholly-owned subsidiary, Victory Silica Ltd., Victory Nickel is establishing a presence in the frac sand market prior to commencing frac sand production and sales from Minago.

Please visit the Company's website at www.victorynickel.ca. Should you wish to receive Company news via email, please email juliet@chfir.com and specify "Victory Nickel" in the subject line.

Forward-Looking Information: This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information. This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, 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 the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; the possibility that actual circumstances will differ from estimates and assumptions; uncertainties relating to the availability and costs of financing needed in the future; failure to establish estimated mineral resources; fluctuations in commodity prices and currency exchange rates; inflation; recoveries being less than those indicated by the testwork carried out to date (there can be no assurance that recoveries in small scale laboratory tests will be duplicated in large tests under on-site conditions or during production); changes in equity markets; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company's activities; the uncertainties involved in interpreting geological data; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's amended annual information form dated November 5, 2012 filed on SEDAR at www.sedar.com. Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

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