Victory Nickel Inc.
TSX : NI

Victory Nickel Inc.

April 14, 2015 09:26 ET

Victory Nickel Temporarily Suspends Frac Sand Production

Plan on resuming after spring break-up and the market improves

TORONTO, ONTARIO--(Marketwired - April 14, 2015) - Victory Nickel Inc. ("Victory Nickel" or the "Company") (TSX:NI) today announced that frac sand sales during the first quarter of 2015 have been slower than anticipated. Sales decreased monthly from January to March and, as a result of current market conditions the Company has temporarily suspended production at its Seven Persons, Alberta frac sand plant ("7P Plant"). The 7P Plant was just entering its full production stage following the start-up period towards the end of 2014.

"Given the unusual market uncertainty and longer than expected spring break-up conditions, suspending frac sand production temporarily was a prudent business decision, and one that was in the best interest of our shareholders," said René Galipeau, Vice Chairman & Chief Executive Officer of Victory Nickel Inc. "We will continue to monitor the situation and re-start production as soon as possible. In addition, we're pleased to note that a creditor is being supportive by continuing to extend loan repayment terms."

Sales for the first quarter were 9,327 tons, compared with 44,529 tons during ramp up in the fourth quarter of 2014. Frac sand sales typically slow down during this period of the year due to spring break-up road restrictions in Alberta. This year, spring break-up is more pronounced than in prior years as the majority of the oil and gas exploration and production ("E&P") companies appear to be trying to conserve capital by postponing drilling activity to less costly periods after spring break-up.

With the price of oil dropping by approximately 50% since November 2014, E&P companies are reducing capital expenditure programs and, as a result, drilling activity has also slowed. The slowdown, combined with spring break-up is placing pressure on Victory Nickel's oilfield service company customers to reduce E&P company drilling costs. These companies, in turn, look to their suppliers, including frac sand producers, to help lower their costs. As a result of market uncertainty in Canada and the USA, a "knee jerk" reaction by predominantly the USA based frac sand retailers caused import frac sand prices in Canada to be reduced to levels that do not appear to be sustainable over the long term.

The Company has built approximately 40,000 tons of finished product and raw material inventory at its 7P Plant which is available to supply its customers as fracking activity resumes following spring break-up.

In the interim, the Company must strictly manage its liquidity. As a result, it has laid off all but a core of its 7P Plant operations staff and is reducing corporate costs. The Company's suppliers are also experiencing liquidity pressures and have been extremely patient while the Company, and industry wait for the market to settle down.

About Frac Sand

Frac sand is a proppant used in the oil and gas industry as a part of the hydraulic fracturing process - a means of increasing flow to the wellhead. Frac sand must have particular characteristics including achieving certain levels of mineralogy, crush resistance, roundness and sphericity, and it is therefore a relatively rare commodity.

About Victory Silica Ltd.

Victory Silica is a wholly-owned subsidiary of the Company with a phased plan to establish itself in the frac sand market. In Phase 1, Victory Silica began sales in 2014 of premium quality Midwestern White frac sand from the 7P Plant by shipping partially-processed sand purchased in Wisconsin to the 7P Plant for final processing and distribution. The 7P Plant is well located in an area populated with fracking companies, its potential customers, and is within only a few hours' trucking distance of major oil play well sites. Phase 2, which includes the construction of a concentrator in Wisconsin, expects to reduce costs and assure security of sand supply through the control of a frac sand mine in Wisconsin. In Phase 3, Victory Silica has identified a number of sites 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 as a co-product of development of a nickel mine at the Company's 100%-owned Minago project in Manitoba.

About Victory Nickel

Victory Nickel Inc. is a Canadian company with four sulphide nickel deposits containing significant NI 43-101-compliant nickel and frac sand 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 has established 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 cathy@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 annual information form dated March 31, 2014 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.

Contact Information

  • Victory Nickel Inc.
    Rene Galipeau or Sean Stokes
    416.363.8527
    416.626.0890 (FAX)
    admin@victorynickel.ca

    Victory Silica Ltd.
    Ken Murdock
    403.899.0141

    CHF Investor Relations
    Cathy Hume
    416.868.1079 x 231
    416.868.6198 (FAX)
    cathy@chfir.com