ni presentation january 2016 - victory nickel · 2018-05-10 · tsx:ni 2 victory nickel company...
TRANSCRIPT
TSX:Ni
January 2016
World‐Class,Shovel‐Ready, Nickel Sulphide Project
Highest‐Quality Frac Sand Product Available in the Canadian Market
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One Company, Two Compelling Investment Opportunities
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Victory NickelCompany Profile
Ni:TSX – Share Capital StructureShares Outstanding ~57.6 million
Fully Diluted Shares* ~79.7 million
Market Capitalization (June 16, 2015) $3.2 million
Debt (incl. $5.15 M secured line of credit; $6 M unsecured convertible notes)
$11.15 million
Major Shareholders
• A&M International 9.5%• Jien International 9.2%• Management & Directors 2.0%
*~3.5 M options ($0.73 average exercise price); warrants ~14 M ($0.45 average exercise price).
Victory Silica Ltd.
(100%)
Victory Nickel Inc.
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Supplying Canada with Highest Quality Frac Sand
Multi‐Phased Business Plan Phase 1 complete Sales on‐going Phase 2 approved by board Ownership of Wisconsin and Manitoba
frac sand resources Permitting of Wisconsin property
underway Phase 3 Winnipeg site selection ongoing Development of domestic and additional
Wisconsin sand programs are in progress
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One CompanyTwo Compelling Investment Opportunities
Well Positioned for Resurgence in Nickel Market
Four Nickel Projects in Canada:
Over 1 billion lbs nickel in M&I resource
Flagship Minago Project in Manitoba:
Feasibility study complete, permitted for development
Frac sand co‐product at Minago
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Company HistoryFrom Nickel to Frac Sand
2007: Victory Nickel created
2009: Feasibility study for Minago: significant frac sand by‐product value identified
2011: Minago permitted for production
2011‐12: Meaningful decline in nickel prices
2012: Victory Silica created to help unlock value of frac sand at Minago
2013: A multi‐phased frac sand business created, independent of, yet complimentary to Minago
Q1 2014: Proof of concept: first frac sand sales
Q3 2014: 7 Persons plant commissioning completesales on‐going, operating cash flow
Q4 2014: Option signed to acquire WI frac sand resource
Q2 2015: Temporary suspension of operations at 7Persons Plant. Sales underway again in May
Frac Sand
Nickel
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Experienced ManagementVictory Silica Limited
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René R. Galipeau /Chairman35+ years mining experience with Hudson Bay, Breakwater Resources, Lac Minerals, Rio Algom. Current Vice‐Chair & CEO of Victory Nickel.
Ken Murdock /CEO & DirectorEngineer with over 25 years experience in the aggregate/construction & oilfield materials/frac sand industries. In addition to operating as an independent consultant in Canada and Wisconsin, frac sand industry experience includes Canfrac Sands (operations), United Industrial Services (design, permitting, construction, operation and marketing of a silica sand project in Peace River) and Lafarge Cement.
Troy Bergen /Plant Manager, Seven Persons Frac Sand FacilityOperated the Seven Persons frac sand facility between 2008 and 2010 with previous owner 3R Sand Ltd. Prior to that, he was Operations Manager with Clean Earth Environmental Ltd.
Jeff Bradley /Marketing & Logistics Representative10 years of operational and sales experience in Alberta’s oil &gas sector, including Cathedral Energy Services, Aaron Drilling, Colter Production Services and Opsco Energy Industries.
Sean Stokes /Corporate Secretary(See Victory Nickel Appendix)
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Shale Gas / Tight Oil Revolution Frac Sand Boom
Unconventional ‘shale gas’ and ‘tight oil’ previously uneconomic to recover at a large scale
Efficiency gains in horizontal drilling and the introduction of ‘fracking’ helped unlock vast natural gas and oil resources
The rapid implementation of technology changed the North American energy landscape, with a “sand boom” being a resulting factor
Frac sand is an effective way to participate in North America’s rampant ‘unconventional’ oil and gas production growth
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What is ‘Fracking’? Frac Sand?Not all sand makes frac sand!
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Hydraulic fracturing or ‘fracking’ is a technique used in the development of oil & gas formations to increase flow and extend well life. Proppant (such as frac sand) holds or ‘props’ the formation open, increases porosity, and increases oil/gas flow to the wellhead
Frac sand must meet unique API specifications such as mineralogy, roundness and strength for use in the oil & gas industry as a proppant
Victory Silica’s
Frac Sand
30/50 20/40
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Proppant / Frac Sand Market: USHistorical & Projected Demand
28,337
37,185
48,498
34,827
46,815
55,975
0
10,000
20,000
30,000
40,000
50,000
60,000
2012 2013 2014 2015E 2016E 2017E
US Raw and Resin‐Coated Frac Sand Demand ('000s tons)
Source: PacWest, Cowen and Company, June 2015
Avg. Onshore Rig Count 1,759 1,697 1,856 963 1,178 1,200
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Proppant / Frac Sand Market: CanadaHistorical & Projected Demand
6,554
4,944
7,109
8,6349,486
0
2,000
4,000
6,000
8,000
10,000
2014 2015 2016E 2017E 2018E
Canadian Raw and Resin‐Coated Frac Sand Demand ('000s tons)
Source: Fortress Proppants Limited, Canadian Frac Sand Logistics & Market Forecast Summit, April 2015
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10Source: PacWest, May 2015
Proppant Market: North America Historical & Projected Fracturing Activity
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Proppant / Frac Sand MarketDynamic Demand
Modified from Source: Raymond James “North American Sand Rush” August 19, 2014
Increasing Frac Intensity Increasing Sand IntensityProjected Demand Increases Due To
Other Factors
Increasing rig count Re‐fracking of wells Uncompleted wells inventory
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479
565
367
409
471
37.2
48.5
34.8
46.8
56.0
77.63 85.84
94.90
114.46 118.84
‐
100
200
300
400
500
600
‐
20.0
40.0
60.0
80.0
100.0
120.0
140.0
Frac Stage
s (#)
Total M
arke
t & Ton
s/Stage (‘0
00s T
ons)
Frac Stages Proppant Market Tons/Stage2013 2014 2015 2016 2017
Proppant Market: USGrowth in Market Size, Stages and Tons per Stage
Source: PacWest, Cowen and Company, 2015
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Manitoba, Saskatchewan, Alberta, B.C., North Dakota
North American Shale BasinsInitial Supply Opportunities
Winnipeg
Minago
Wisconsin Mine
Medicine Hat (Seven Persons)
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Victory Silica Business PlanPhasedApproach –Clear Path for Growth
Phase 1: Market Entry
Seven Persons (dry) Plant: processing infrastructure in Alberta (500 ktpa)
Ship contracted (wet) sand from Wisconsin
Wash plant capability
Strategic storage capacity
Phase 3: Growth
Winnipeg (dry) plant: processing infrastructure in Manitoba (1,040 ktpa)
Site identified with favourablelogistics (CN, CP,BNSF)
Initially supplied from Wisconsin
Minago Sand
Longer‐term upside
Currently looking at smaller pit configuration to target fracsand only
Phase 2: Vertical Integration
Wisconsin mine JV including wash plant ownership/frac sand property option
Security of sand supply/quality control
Margin enhancement
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Processing purchased import wet sand (concentrate) from Wisconsin
Seven Persons Plant Fully‐functioning sand plant on 22.4 acres
22,000 tons product storage capacity
$6.0 M capex to take dry plant capacity to 500,000 tpa (complete)
120,000 tpa wash plant capability
Phase 1: Market EntrySeven Persons Plant – Medicine Hat, Alberta
Phase 1
Annual Sales Capacity 500,000 tons
Estimated Margin $25/ton
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22,519
39,121
47,515
13,721
0
20,000
40,000
60,000
To June 30, 2014 Q3 2014 Q4 2014 Q1 2015
Victory Silica7 Persons Plant Production (Tons)
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Frac Sand Price IndexFrac Sand Measured as a Component of PPI
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Dry Sand Program
Ship dry, finished Wisconsin northern white frac sand by rail to Fort Saskatchewan transload
Enhanced pricing and margin due to closer proximity to customers in Grande Prairie and other plays where frac sand is currently in demand
7 Persons Plant available as back‐up in the event of rail/other supply disruptions
Domestic Sand Program
Supplying domestic and imported sand was always a part of initial Phase 1 plan; high demand for Wisconsin sand in 2014 put domestic sand sales on hold
Today’s market realities makes domestic sand more attractive for cost savings
7 Persons Plant has 120,000 tpa wet sand processing facility already on site; ~$150,000 capex to get wet plant up and running, when necessary
Victory SilicaOngoing Supplemental Programs
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Phase 2: Vertical IntegrationWisconsin Property / Wash Plant
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Secure sand supply, enhance margins Entered into option agreement to acquire
Wisconsin frac sand property Approval from Board or Directors to proceed
with Phase 2, including construction of a 1,000,000 tpy frac sand wash plant in WI
Oil price crash put this on hold Provides significant flexibility to adapt to
market conditions
Phase 2
Capex ~US$5.0 million
Annual Sales Capacity 500,000 tons
Estimated Additional Margin
$2.5 million/year
Source: Wisconsin Geological and Natural History Survey
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Phase 3: GrowthWinnipeg Processing Site
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Build processing facility in Winnipeg Lease existing rail‐supported industrial
site
Construct new dry plant – 18 mos. from start
Supply from Wisconsin and area (Minago longer‐term supply option)
Target Western Canada (CN) and US Bakken (CP, BNSF) markets
Phase 3
Capex ~US$30 million
Working Capital ~US$15 million
Annual Sales Capacity 1,040,000 tons
Estimated Margin $>25/ton
Winnipeg
Wisconsin
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Victory Silica Relative and Implied Valuation
Calendar Year 2014($US)
Emerge EnergyServices
(NYSE: EMES)
Hi‐CrushPartners
(NYSE: HCLP)
US SilicaHoldings
(NYSE: SLCA)
FMSA Holdings
(NYSE: FMSA)
Victory Silica (Forecast)
Phase 1,2 Phase 3 Phase 1,2,3
Cash Raised on IPO (For Peer Group) $140,000,000 $225,000,000 $200,000,000 $400,000,000 $11,000,0005 $30,000,000 $41,000,000
2014 Frac Sand (FS) Tons Sold 4,306,000 4,584,811 6,736,000 7,188,469 500,0005 1,040,000 1,540,000
Adjusted EBITDA (2014A) $131,866,000 $148,015,000 $246,213,000 $397,291,000 $14,500,0004, 5 $26,000,000 $40,500,0004
Adjusted EBITDA FS Segment (2014A) $121,893,000 $148,015,000 $198,791,000 $367,854,000 $14,500,0005 $26,000,000 $40,500,000
EBITDA / 2014 Frac Sand Ton Sold1 $28.31 $32.28 $29.51 $51.17 $29.005 $25.00 $26.30
Market Cap (Jun 19, 2015) $950,000,000 $1,197,000,000 $1,601,000,000 $1,467,000,000 $3,170,000 ‐ ‐
Enterprise Value $1,186,000,000 $1,407,000,000 $1,774,000,000 $2,602,000,000 $13,000,000 ‐ ‐
EBITDA (2015E)2 $84,030,000 $113,080,000 $137,890,000 $216,590,000 $4,500,0005
EV/EBITDA3 14.1x 12.4x 12.9x 12.0x 2.9x5
Average EV / EBITDA 2015E 12.9x 12.9x 12.9x 12.9x
EBITDA (2016E)2 $108,770,000 $165,200,000 $179,680,000 $266,200,000 $14,500,0005
EV/EBITDA3 10.9x 8.5x 9.9x 9.8x 0.9xAverage EV / EBITDA 2016E 9.8x 9.8x 9.8x 9.8xPeak EV / EBITDA 18.9x 18.0x 14.1x n/aNet Debt 2015E $229,000,000 $414,000,000 $257,000,000 $1,033,000,000 $11,500,000
Net Debt / EBITDA 2.7x 3.7x 1.9x 4.8x 2.6x ‐
1 ‐ Average of Emerge, Hi‐Crush, US Silica = $30.03/ton Implied Enterprise Value2 ‐ Consensus Estimates June 19, 2015 Thomson Reuters Assuming Victory EBITDA 2015E/ton estimates $57,860,000 $520,780,0003 ‐ Average of Emerge, Hi‐Crush, US Silica, FMSA = 8.1x Assuming $30.03/ton avg EBITDA: $193,100,000 $594,760,0004 ‐ Includes Phase 2 margin improvement; before Nuinsco debt repayment5 – Assumes full production from existing facility
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Victory Silica Select Canadian Frac Sand Companies
Modified from Source: Raymond James “North American Sand Rush” August 19, 2014
Phase 1,2
Phase 3MB/WI 16/30 -100
16/30 -100
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Minago ProjectNickel / Frac Sand Co‐Production
One of Canada’s largest undeveloped sulphide nickel resources
Positive feasibility study completed; permitted for production
Frac sand a significant value driver: US$2.90/lb Ni in co‐product value based on feasibility study
Superb location: Manitoba; road, rail, power access
11.2 million tonne frac sand resource, 2 billion tonne potential
Potential for smaller, less capital intensive pit configuration to target frac sand only
Valuable “CALL OPTION ” on nickel at $10.00/lb+
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Minago ProjectNickel / Frac Sand Co‐Production
One of Canada’s largest undeveloped sulphide nickel resources
Positive feasibility study completed; permitted for production
Frac sand a significant value driver: US$2.90/lb Ni in co‐product value based on feasibility study
Superb location: Manitoba; road, rail, power access
11.2 million tonne frac sand resource, 2 billion tonne potential
Potential for smaller, less capital intensive pit configuration to target frac sand only
Valuable “CALL OPTION ” on nickel
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Minago ProjectCo‐Product: Frac Sand
Feasibility Study Highlights
11.2 million tonnes marketable fracsand in pit footprint alone
Mined over first three years
Sales over 10 years
Co‐product value per pound of nickel = $4.04 (US$3.68); optimized: $3.18 (US$2.90)
Full details in feasibility study available on SEDAR
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Frac Sand
Nickel
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Minago ProjectFrac Sand Potential
Existing resource within current pit shell: 15 Mt
Existing & proposed quarry leases: 75 Mt potential*
Proposed quarry exploration permits: 475 Mt potential*
Entire land package (mineral leases + mining claims): 2 Bt potential*
26*Company estimates, non-compliant
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Cash flow and robust cash flow growth: Initial sales made March 2014, plant commissioning complete, improved market understanding, clear path forward
Meaningful discount to peer group: U.S. peers U.S. Silica, Hi‐Crush, Emerge Energy Services, FMSA Holdings
Large domestic frac sand resource: Minago a longer‐term strategic asset; potential for smaller, less capital intensive pit configuration to target frac sand only
Large property position in Wisconsin: Frac sand property option agreement provides security of supply
A sustained resurgence in nickel prices could have a meaningful impact on Victory Nickel’s valuation: currently investors have a ‘free call option’ on Minago’s advanced nickel sulphide project
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Victory SilicaInvestment Summary
The“Call Option”
Victory Nickel Inc.
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Company ProfileNickel Projects
Four Advanced Sulphide Nickel Projects
Over 1 billion pounds of nickel in Measured and Indicated resources and 300 million pounds of Inferred resources, NI 43‐101 compliant
Lynn Lake optioned to Corazon Mining
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Minago ProjectThe Property
Well‐located
Sulphide nickel deposit
Exceptional metallurgy
Open pit and underground mining potential
Bankable feasibility study on open pit only
Exceptional exploration upside
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Minago ProjectReserves and Production Upside
Nose Deposit open pit:8.6‐year mine life
Feasibility study does not include:
Nose Deposit U/G (inferred resource)
North Limb: Exploration target
Mineralization open to west, north and at depth
Combined resources projected mine life of >20 years
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Minago ProjectNickel Concentrate Assay
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Assay Component Unit ValueNi % 22.3Cu % 1.4Co % 0.46Pt g/t 2.47Pd g/t 6.31Au g/t 0.63Ag g/t 4.3Rh g/t 0.59S % 24.4Fe % 17.0
MgO % 10.4SiO2 % 12.7Al % 0.11As g/t 61.0Ba g/t 61.0Be g/t 0.10Bi g/t <20Ca % 2.0Cd g/t <4Cr g/t 410
Assay Component Unit ValueHg g/t <0.3K g/t 410Li g/t <5Mn g/t 270Mo g/t 22Na g/t 240P g/t 131Pb % 0.097Sb g/t <30Se g/t <40Sn g/t <20Sr g/t 40Ti g/t 200Tl g/t <30U g/t <60V g/t <20Y g/t <10Zn % 0.18Cl % 0.044F % 0.066
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Minago ProjectFeasibility Study Optimization
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Minago Sulphide Nickel Project: Economic Summary Comparison
Base CaseDec. 14, 20091
($million except % & yrs)
Base CaseJuly 19, 20111,2
($million except % & yrs)At Today’s Metal Prices
Undiscounted cash flow 917.7 1,418.4 951.3
NPV @ 8% 293.8 513.0 278.0
NPV @ 6% 402.6 669.3 392.6
IRR 17.7% 22.4% 16.5%
Pre‐Production Capital 593.0 585.1 558.0
1. Three‐year trailing average US$ metal prices and exchange rate as of market close December 10, 2009: Ni: $11.19/lb; Cu: $2.91/lb; Pd: $322.4/oz; Pt: $1,353.98/oz; Au: $836.25/oz; Co: $27.73/lb; Ag: $14.25/oz; $Can/$US exchange rate: 1.097
2. Updated resource
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Minago ProjectCost Summary
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C1Cash Cost Per lb Ni Feasibility Study AfterOptimization
Net of Credits * US $1.94 (C$2.12) US $2.20 (C$2.41)
Metal By‐Product Credits
US $0.72 (C$0.79) US $0.77 (C$0.85)
Frac Sand By‐ProductValue
US $3.68 (C$4.04) US $2.90 (C$3.18)
Cash Cost per lb Nickel Before Credits
US $6.34 (C$6.95) US $5.87 (C$6.44)
*Net C1 costs increase when metal production increases without corresponding frac sand increase (same size pit)
TSX:NiMel ProjectOverview
100% owned25 km north of ThompsonNear‐surface, ramp/pit‐accessible resource
Direct ship potentialMilling agreement with Vale at cash cost +5%*
Ongoing economic evaluationMetallurgical testing
Classification Tonnes(millions)
Grade(% Ni)
In‐Situ Nickel(millions lb)
Mel**
Indicated 4.3 0.875 83
Inferred 1.0 0.839 19*Provided the product meets Vale specifications and that Vale has sufficient mill capacity**At 0.5% nickel cut-off
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TSX:NiLac Rocher ProjectOverview
Near‐surface deposit, high‐grade component, direct‐ship potential
PEA indicates break‐even ~C$10 Ni/lb and C$3.84/lb Cu
EIS submitted, access road complete
On‐site upgrading: DMS, optical sorting being evaluatedClassification Tonnes
(millions)Grade(% Ni)
In‐Situ Nickel(millions lb)
Lac Rocher**
Measured 0.29 1.23 8
Indicated 0.51 1.05 12
Total M&I 0.80 1.12 20
Inferred 0.44 0.65 6**At 0.5% nickel cut‐off36
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René R. Galipeau /CEO & Director –Victory Nickel Inc.30+ years mining experience with Hudson Bay, Breakwater Resources, Lac Minerals, Rio Algom
Steve Harapiak /President & COO –Victory Nickel Inc.Engineer with 30+ years experience, including Hudson Bay, Noranda, Denison and CEO of Potash Corp. (Crown Corp.)
Sean Stokes /VP Corporate Affairs & Corporate Secretary –Victory Nickel Inc.20+ years finance, business development, communications experience, incl. Tiberon Minerals, Liberty Minerals, Scandinavian Minerals, Nuinsco Resources
David Mchaina /VP Environment & Sustainable Development –Victory Nickel Inc.Ph.D. with 20+ years experience, including Boliden, Westmin, Goldcorp
Victory NickelManagement Team
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Victory NickelQualified Independent Board
Cynthia Thomas /ChairMBA, 20+ years international mining and project finance, former Director Mining Investment Banking – ScotiaMcLeod
René R. Galipeau /CEO & Director
Peter R. JonesEngineer, former CEO of Hudbay Minerals, 40+ years mining experience with Hudbay, Cominco, Cape Breton Development, Granduc Operating Co. and Adanac Molybdenum
Michael AndersonLawyer, nine years as General Counsel and Secretary with Denison Mines, previously a partner with Gowling Lafleur Henderson LLP, in‐house counsel with John Labatt, General Counsel for Swift Canadian
Roland Horst35 years mining experience as a CEO, banker, investment banker and geologist
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TSX:NiDisclaimer
Some of the statements contained in the following material may be "forward‐looking statements." All statements, other than statements ofhistorical fact, that address activities, events or developments that Victory Nickel believes, expects or anticipates will or may occur in the futureare forward‐looking statements. Forward‐looking statements are often, but not always, identified by the use of words such as "seek,""anticipate," "believe," "plan," "estimate," "expect," and "intend" and statements that an event or result "may," "will," "can," "should,""could," or "might" occur or be achieved and other similar expressions. These forward‐looking statements reflect the current expectations orbeliefs of Victory Nickel based on information currently available to Victory Nickel. Forward‐looking statements are subject to a number of risksand uncertainties that may cause the actual results of Victory Nickel 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. Factors that could cause actual results or events to differ materially from current expectations include, among otherthings, failure to successfully complete intended financings, capital and other costs varying significantly from estimates, production rates varyingfrom estimates, changes in world copper and/or gold markets, changes in equity markets, uncertainties relating to the availability and costs offinancing needed in the future, equipment failure, unexpected geological conditions, imprecision in resource estimates, success of futuredevelopment initiatives, competition, operating performance of facilities, environmental and safety risks, delays in obtaining or failure to obtainnecessary permits and approvals from government authorities, and other development and operating risks. Any forward‐looking statementspeaks 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 orobligation to update any forward‐looking statement, whether as a result of new information, future events or results or otherwise. AlthoughVictory Nickel believes that the assumptions inherent in the forward‐looking statements are reasonable, forward‐looking statements are notguarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.
Victory Nickel resources are as follows: Minago: Measured: 11.1 million tonnes grading 0.56% Ni, Indicated: 43.1 million tonnes grading 0.51%Ni, Inferred: 14.6 million tonnes grading 0.53% Ni; Lynn Lake: Measured: 1.0 million tonnes grading 0.76% Ni, Indicated: 21.9 million tonnesgrading 0.56% Ni, Inferred: 8.1 million tonnes grading 0.51% Ni; Mel: Indicated: 4.3 million tonnes grading 0.88% Ni, Inferred: 1.0 million tonnesgrading 0.84% Ni; Lac Rocher: 0.29 million tonnes grading 1.23% Ni, Indicated: 0.51 million tonnes grading 1.05% Ni, inferred: 0.44 million tonnesgrading 0.65% Ni.
The mineral resources were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on MineralResources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIMCouncil December 11, 2005.
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