TORONTO, ONTARIO–(Marketwired – July 11, 2013) – Victory Nickel Inc. (“Victory Nickel” or the “Company”) (TSX:NI) (www.victorynickel.ca) today announced that the required approval from the Alberta Energy Regulator (“AER,” the successor to the Energy Resources Conservation Board) – has been received. The AER approval allows development of the 400,000 ton per annum (“tpa”) Seven Persons frac sand processing facility just southwest of Medicine Hat, Alberta (the “7P Facility”).
AER approval was granted to BG Solutions Inc., the company selling the 7P Facility to Victory Nickel. As announced in the Company’s news release of January 9, 2013, a payment of $300,000 toward the purchase of the 7P Facility has now been made as AER approval was a condition of the purchase.
“The AER approval has huge implications for Victory Silica Ltd.’s plan to begin marketing frac sand in 2013,” said René Galipeau, Vice-Chairman and CEO of Victory Nickel. “We will now begin the reclamation work and the upgrades at the 7P Plant, which are already fully funded, with the goal of generating cash flow before the end of the year.”
Victory Silica Ltd. (“VSL”) is a wholly-owned subsidiary of the Company; Ken Murdock is VSL’s CEO.
“Producing frac sand from the 7P Facility is the first step in VSL’s three-phased plan to establish Victory Nickel as a premier frac sand supplier to northern markets, and this will be a very busy summer at the 7P Facility and on the marketing side. Our goal is to complete all work in time to begin processing frac sand before the end of the season,” said Mr. Murdock.
Establishing production of premium-quality Midwest frac sand by shipping partially-processed sand purchased in Wisconsin to the 7P Facility (see photos attached) for final processing and distribution is the first phase of VSL’s strategy. The 7P Facility is well located in an area populated with fracking companies (see map attached), its 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, will 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 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 as a co-product of development of a nickel mine at its 100%-owned Minago project in Manitoba. With margins expected to be in excess of $25 per ton of frac sand sold, VSL should generate sufficient cash flow in Phases 1 and 2 to provide the financial flexibility to begin mine development at Minago when appropriate.
“The 7P Facility provides VSL with several competitive advantages,” added Mr. Murdock. “First, the lack of well-located, large-volume, manufacturer-controlled dry product storage is a huge issue in the frac sand industry, and the 7P Facility already has over 20,000 tons of dry storage capacity. Second, by locating our dry processing and storage facilities close to the wellhead – at the 7P Facility and, ultimately, Winnipeg – VSL is able to avoid product degradation from the over-handling that is common in the traditional frac sand supply chain, thereby maximizing the quality of our frac sand products while at the same time minimizing the logistics challenges for our oilfield service company clients involved in the delivery of frac sand to the well.”
The AER approval includes authorization to close the existing Seven Persons sand recycling facility to make way for the new 7P Facility. The approved closure application describes the incorporation of existing infrastructure and equipment within the 7P Facility and presents the reclamation strategy outlined in the Reclamation Action Plan filed with the AER. With the AER approval, VSL will immediately begin the detailed engineering, equipment acquisition and incorporation of the plant upgrades required to convert the Seven Persons sand recycling facility to the 400,000 tpa 7P Facility.
About Frac Sand
Frac sand is a proppant used in the oil and gas business 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 crush resistance, sphericity and roundness, and is therefore a relatively rare commodity. Vast quantities of frac sand are consumed, and more is needed all the time in North America as shale gas plays in Canada and the US rise to prominence.
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.
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 28, 2013 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.
To view accompanying map and photos, visit the following link: http://media3.marketwire.com/docs/7PFacility.jpg