Victory Nickel Announces Entry into Booming Frac Sand Market with

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Victory Nickel Announces Entry into Booming Frac Sand Market with
VICTORY VIEW
www.victorynickel.ca
www.victorysilica.ca
VICTORY NICKEL INC.
ANNUAL REPORT EDITION, MAY 2014, VOL.5 ISSUE.1
TSX: NI
BECOMING A MID-TIER NICKEL COMPANY and A LEADING FRAC SAND PRODUCER
LET TER TO SHAREHOLDERS
VICTORY SILICA
Victory Nickel Announces Milestones Reached,
Entry into Booming Frac Sand Frac Sand Creates
and Generates Value
Market with First Sales
Frac Sand Provides Opportunities
for Today and Tomorrow
Frac sand transloading at rail
siding, Seven Persons, Alberta
Seven Persons, Alberta – With Victory Nickel Inc.’s (“Victory Nickel”
or the “Company”) announcement in March 2014 that it has begun sales
of hydraulic fracturing (“frac”) sand from its Seven Persons facility
(the “7P Plant”), the Company officially made the leap from developer
to producer and has no intention of stopping there.
In the first phase of a long-term plan to generate cash flow, prove the value of the substantial
frac sand resource at its Minago project and become a significant presence in the frac sand
industry, the Company financed and built the 7P Plant, a 500,000 ton-per-annum (“tpa”)
dry frac sand processing facility.
Situated in an ideal location near Medicine Hat, Alberta with the ability to consistently
supply the highest quality Midwestern white frac sand to customers in Alberta, BC, Manitoba,
Saskatchewan and North Dakota, the 7P Plant has 22,000 tons of dry sand storage capacity. The
7P Plant’s capacity, inventory storage and location will ensure timely availability of commercial
quantities of 16/30, 20/40, 30/50 and 40/70 frac sand when and where customers need it.
“We’re very pleased to announce that the 7P Plant construction is now complete,” said
Ken Murdock, CEO of the Company’s wholly-owned subsidiary Victory Silica Limited
(“Victory Silica”) in March. “Our marketing team is actively engaging potential customers
throughout western Canada and in North Dakota and the outlook is very optimistic as we
build the required frac sand inventories.”
“This is a very exciting time for Victory Nickel and Victory Silica,” said René Galipeau,
Victory Nickel’s CEO. “It is important to remember, though, that this is only the first step
in our three-phased plan to enter the frac sand market. With Phase 1 now complete, the
immediate goals are to optimize 7P Plant performance, expand sales and marketing activities
and continue to implement Phases 2 and 3.”
Under Phase 1 the Company is purchasing, under contract, washed sand (“Concentrate”)
mined from Wisconsin’s Jordan Formation which produces the highest quality frac sand.
As part of the sand purchase contract, the Company has the option to enter into a 50:50
joint venture with its current sand supplier. The joint venture would be created by Victory
Silica constructing a wet plant/sand concentrator at or near the mine location and the mine/
land owner vending in multiple permitted Wisconsin sand mines. This is Phase 2 - vertical
integration to enhance margins, increase quality control and improve security of sand supply.
continued on p.3
Please see BOOMING FRAC SAND MARKET
Focused on Becoming a Mid-Tier Nickel Company and a Leading Frac Sand Producer
My Fellow Shareholders:
It is my pleasure to once again write to you at a very exciting
point in our Company’s development. Victory Nickel’s many
assets have made it a unique company from its beginnings in
2007 and the achievements over the past year have reinforced
and augmented the Company’s fundamental strengths.
Many milestones have been reached, but none is more
exciting or a bigger game changer than is the Company’s
entry into the production and sale of frac sand to the oil and
gas industry. With the construction and start-up of the 7P
Plant, Victory Nickel has created a new business that we are
confident will generate shareholder value on its own and also
enhance the value of its nickel assets, Minago in particular.
At the heart of Victory Nickel are its four Canadian
sulphide nickel projects: three in Manitoba and one in Quebec.
Minago, the most significant and advanced of the four, has
shown its value on completion of a feasibility study (“FS”) in
late 2009 and was subsequently permitted for production in
2011, at a time when the price of nickel was in the US$11US$13 per pound range and projections were for long term
nickel pricing of US$10-US$12 per pound. With an FSprojected IRR exceeding 22%, the Company set off to finance
the development of Minago. A significant part of Minago’s
value comes from frac sand. The frac sand overlies the nickel
deposit and will be removed from the open pit during the first
three years of development and production. The FS assumes
that the frac sand will be sold over a ten-year period at a rate
of approximately 1,000,000 tonnes per year, however the
recent growth in the frac sand market suggests this assumption
is conservative. Remember, though, that Minago frac sand is
not factored into Phases 1 and 2 of Victory Silica’s strategy.
“…the achievements over the past year
have reinforced and augmented the
Company’s fundamental strengths.…”
Initially frac sand was considered a by-product of nickel
mining at Minago, but it is actually a co-product based on its
value to the project. The credit from frac sand sales lowers the
cost to produce a pound of nickel at Minago by a projected
US$2.90 per pound. With a projected cash cost to produce a
pound of nickel, net of metal and frac sand credits, potentially
at around US$2.20, Minago has the potential to be one of
the lowest cost nickel producers in the world.
continued on p.8
Please see Generating VALUE
Contents
Victory Nickel Announces Entry into Frac Sand Market
CEO’s Letter to Shareholders
Victory Nickel at a Glance
2014 Objectives
Significant Events 2013-2014
Minago Project (Manitoba)
In Conversation …with Mark Lackey on Nickel Making Frac Sand Lac Rocher Project (Quebec)
Lynn Lake Project (Manitoba)
Mel Project (Manitoba)
Corporate Information
May 2014 Annual Report Edition
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