Victory Nickel Inc. TSX: NI, March 2014
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Victory Nickel Inc. TSX: NI, March 2014



Victory Nickel Inc. (TSX: NI) is a Canadian company with four sulphide nickel deposits containing significant 43-101-compliant nickel resources, and wholly-owned frac sand subsidiary Victory Silica ...

Victory Nickel Inc. (TSX: NI) is a Canadian company with four sulphide nickel deposits containing significant 43-101-compliant nickel resources, and wholly-owned frac sand subsidiary Victory Silica Ltd. (VSL). VSL is quickly moving towards production of valuable frac sand to North American oil & gas operators. Victory Nickel is focused on becoming a mid-tier nickel producer by developing its existing properties, Minago, Lynn Lake (currently under option to Prophecy Resource Corp. (TSXV-PCY)) and Mel in Manitoba, and Lac Rocher in northwestern Quebec, and by evaluating opportunities to expand its nickel asset base.



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Victory Nickel Inc. TSX: NI, March 2014 Victory Nickel Inc. TSX: NI, March 2014 Presentation Transcript

  • TSX:Ni March, 2014 Victory Nickel Inc. The Right Product.  The Right Place. The Right Time.
  • TSX:Ni 2 Company Profile –Victory Nickel NI:TSX – Share Capital Structure Shares Outstanding ~572 million Fully Diluted Shares* ~742 million Market Capitalization (Feb. 13, 2014) $36.9 million Cash (as at Sep.30, 2013 plus $3 M convertible note) $5.1 million Major Shareholders • Nuinsco Resources Ltd. 10.5% • A&M International 9.7% • Jien International 9.3% • Sea Shell Limited 8.5% • Prophecy Coal 5.5% • Management & Directors 2.0% *~28 M options ($0.07 average exercise price); ~113 M warrants ($0.035 exercise price); $3 M convertible note ($0.10 conversion price) Victory Silica Ltd. (100%) Victory Nickel Inc.
  • TSX:Ni  Victory Nickel created in 2007 with three nickel projects  Largest, most advanced is Minago in central Manitoba  Feasibility study completed 2009  Minago is Permitted for production 2011  Significant by product value identified during feasibility  process‐Frac Sand  Precedent IPO transactions 3 History
  • TSX:NiTSX:Ni Minago Mining Project Co‐Product: Frac Sand Feasibility Study Highlights  11.2 million tonnes marketable frac  sand in pit footprint alone  Mined over first three years  Sales over 10 years  Mine gate margin per tonne ~$63  Annual net revenue ~$70 M   Processing cost/tonne = $6.50  Co‐product value per pound of nickel  = $4.04 (US$3.68); optimized: $3.18  (US$2.90) 4
  • TSX:Ni Minago Project Frac Sand Potential Existing resource within current pit shell:  15 Mt Existing & proposed quarry leases:  75 Mt Proposed quarry exploration permits:  475 Mt Entire land package (mineral leases +  mining claims):  2 Bt 5
  • TSX:Ni 66 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  “Unconventional gas production reached 15% of worldwide production in 2010, and is  expected to rise to 80% by 2040.” (The Globe & Mail, August 21, 2013)  The Freedonia Group reports that frac sand consumption in North America increased  by 323% between 2007 and 2012, and is expected to increase by 73% by 2017 Frac sand is an effective way to participate in  ‘unconventional’ oil and gas production growth
  • TSX:Ni  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 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 What is ‘Fracking’? Frac Sand? Not all sand makes frac sand!  7 Victory  Silica’s  Frac Sand 30/50 20/40
  • TSX:Ni 88 Frac Sand Market Booming in North America
  • TSX:Ni North American Proppant Demand (tons) % Annual Growth Item 2007 2012 2017 2007‐2012 2012‐2017 Proppant Demand 6.98M 29.55M 51.20M 33.5 11.6 By Country: U.S. 6.13M 26.63M 44.97M 34.1 11.1 Canada 0.85M 2.92M 6.23M 28.1 16.3 By Type: Sand 6.14M 26.78M 46.95M 34.3 11.9 Ceramic 0.82M 2.64M 4.02M 26.3 8.8 Other* 0.02M 0.14M 0.23M 43.9 10.6 Source: The Freedonia Group, Inc. 9 Proppant / Frac Sand Market Historical & Projected Demand Double digit annual proppant demand growth expected with Canada leading the way Oh, Canada!
  • TSX:Ni 10 Cowen & Co. Frac Sand Price Index
  • TSX:Ni  Very strong market fundamentals for frac sand  Near‐term cash flow   Minimal capex required  Experienced frac sand management  Precedent IPO transactions  Large domestic resource A New Story with Extreme Value 11 Why Victory Silica? Potential to become the largest supplier of the  highest quality frac sand for delivery in Canada
  • TSX:Ni Experienced Management Victory Silica Limited René R. Galipeau /Chairman 35+ years mining experience with Hudson Bay, Breakwater Resources, Lac Minerals, Rio Algom. Current Vice‐Chairman and CEO of  Victory Nickel. Ken Murdock /CEO & Director Engineer with over 25 years experience in the aggregate/construction & oilfield materials industries.  President IM&M Consulting (raw  materials acquisition, waste disposal and manufacturing consultant to industrial mineral, glass and oilfield industries).  Formerly with  Canfrac Sands Ltd. (operations), United Industrial Services Ltd. (design, permitting, construction, operation and marketing of a silica  sand project in Peace River) and Lafarge Cement.  M.Eng., McGill University D. Brent Lock /Vice‐President, Marketing Extensive marketing experience in the frac sand industry. Formerly Vice‐President, Operations / Marketing & General Manager with  Canfrac Sands Ltd.  Prior to that, held a variety of operations and marketing positions in the oil & gas sector over the course of 26 years  for companies including Gulf Canada Resources Ltd., Amerada Hess Canada Ltd. and Apache Canada. Phillip Birmingham /General Manager, Seven Persons Frac Sand Facility Diverse background, including seven years with the British Army's Royal Mechanical and Electrical Engineers and operations and  management positions with Crane Canada, Allwest Compressor Services and most recently as General Manager with 3R Sand Ltd. (the  previous operator of the Seven Persons frac sand facility) and Clean Earth Environmental Ltd. Troy Bergen /Plant Manager, Seven Persons Frac Sand Facility Operated 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. 12
  • TSX:Ni 13 Victory Silica Objectives  Establish immediate entry in frac sand market  Rapid payback on modest capital investment  Use resulting cash flow to support growth   Goal of becoming preferred supplier of highest quality import and  domestic frac sand products to the Canadian market  Unlock the long‐term value of the Minago premium frac  sand resource   Create a non‐dilutive structure to fund developmentVictory Silica will be a premier frac sand supplier with  Minago as a high quality strategic asset
  • TSX:Ni 14 Business Plan Phased Approach – Overview  Phase 1:      Seven Persons – processing plant in Alberta, being commissioned  Phase 2:  Wisconsin Mine – vertical integration, margin enhancement  Phase 3:  Winnipeg Facility – superior logistics, unlock value of Minago  On‐going:   Potential consolidation opportunities in a fragmented industry
  • TSX:Ni 15 North American Shale Basins Initial Supply Opportunities for Victory Silica Manitoba, Saskatchewan, Alberta, B.C., North Dakota Winnipeg Minago Wisconsin Mine Medicine Hat (Seven Persons)
  • TSX:Ni 16  Initially process purchased import wet  sand (concentrate) from Wisconsin  Seven Persons Plant  Fully‐functioning sand plant on 22.4 acres  22,000 tons product storage capacity  $4.0 M capex to take dry plant capacity to  500,000 tpa  First production: Q1/2014 Phase 1 Seven Persons – Medicine Hat, Alberta Phase 1 Capex (fully funded) US$4.0 million Working Capital US$4.3 million Annual Sales Capacity 500,000 tons Estimated Margin $25/ton
  • TSX:Ni 17 Phase 1‐Status Milestones Achieved  Sand purchase agreement  Sand washing agreement  Wisconsin transload agreement  Rail agreement  Rail siding agreement  Railcar leasing agreement  Seven Persons trucking  agreement  Equipment leasing agreements  Plant construction completed  First sand deliveries from  Wisconsin unloaded  Plant commissioning in process
  • TSX:Ni 18  Acquire (50%) and operate Wisconsin Mine  Obtain access to highest quality sand  Provides security of supply and higher margins  Resource estimate: 4 million tons per parcel  Immediate sand production  Permitted properties available  Construct concentrator/wet plant at Mine  Finance 100% of cost to earn‐in to 50/50 JV Phase 2 Wisconsin Mine Joint Venture Phase 2 Capex US$4.4 million Annual Sales Capacity 500,000 tons Estimated Margin $>25/ton Source: Wisconsin Geological and Natural History Survey
  • TSX:Ni Phase 3  Winnipeg Processing Site  Build second processing facility in Winnipeg  Lease existing rail‐supported industrial site  Construct new dry facility – 18 mos. from start  Consider logistics company participation  Supply from Wisconsin and area  Minago longer‐term supply option 19 Phase 3 Capex US$26.1 million Working Capital US$15.3 million Annual Sales Capacity 1,040,000 tons Estimated Margin $>25/ton
  • TSX:Ni 20  Minago Development – 100‐year+ frac sand potential  Advanced custom processing discussions:  Potential to reach new markets  Fixed production cost, contract‐based, no capital cost  US processing facility:  Reach active Pennsylvania market  1,000,000 tons annual capacity; ideal location identified with available  infrastructure, capital cost of ~ $32 million  Acquire and permit additional well located mines supplying high  quality sand from Wisconsin/Minnesota  Potential future consolidation of industry Victory Silica Future Growth / Consolidation Opportunities
  • TSX:Ni 21 Victory Silica Frac Sand Market Developments  Preferred Sands/Winn Bay                $200 M acquisition Jan. 2012                 (private)  US Silica                               IPO: Raised $200 M Feb. 2012                                           ($1.6 B market cap)  Hi‐Crush  IPO: Raised $225 M Aug. 2012                                               ($1.2 B market cap)  Emerge Energy Services                          IPO: Raised $140 M May 2013                                                       ($1.0 B market cap)
  • TSX:Ni 22 Nine Months Annualized  Sept 30‐13 ($US) Emerge Energy (NYSE: EMES) Hi‐Crush (NYSE: HCLP) US Silica (NYSE: SLCA) Victory Silica (Forecast) Phase 1,2 Phase 3 Phase 1,2,3 Cash Raised on IPO Capex Requirements $140 M $225 M $200 M $ 8.5 M $ 26.1 M $ 34.6 M Frac Sand Tons Sold 2,510,000 1,430,000 3,950,000 500,000 1,040,000 1,540,000 Adj. EBITDA Adj. EBITDA Frac Sand Only $81 M $59 M $63 M $63 M $166 M  $120 M $14.5 M** $26 M $40.5 M** Forecast EBITDA / Ton Sold Actual EBITDA / Ton Sold $23.41 $43.85 $30.39 $30.00** $32.55* $25.00 $32.55* $26.39** $32.55* Market Cap (Dec 31, 2013) Enterprise Value (EV) $1,029 M $1,120 M $1,239 M $1,357 M $1,821 M $ 2,044 M $28 M ‐ ‐ ‐ ‐ ‐ EV/EBITDA 13.9x 21.6x 12.3x 15.9x* 15.9x* 15.9x* Implied Enterprise Value at full production @ $25/ton EBITDA based on conservative estimate for Phase 1     @ known industry average EBITDA/ton ($32.55) @ Average Market Cap per ton sold‐$518.00 $ 230 M $ 259 M $ 259 M $ 414 M $ 539 M $ 539 M $ 644 M $ 798 M $ 798 M Implied Price/Share @ $25/ton EBITDA based on conservative estimate for Phase 1  @ known industry average EBITDA/ton ($32.55)  *average of Emerge, Hi‐Crush, and US Silica **includes Phase 2 margin improvement $ 0.40 $ 0.45  $ 0.73 $ 0.95 $ 1.13 $ 1.40 Victory Silica  Relative and Implied Valuation
  • TSX:Ni 23  Location: storage capacity in proximity to potential customers/  wellheads  Highest quality imported and domestic sand  Low-cost, rapid entry, quick payback  Long-term supply  Clear path for growth: Phases 1,2,3…and beyond 23 Victory Silica Competitive Advantages
  • TSX:Ni 24 Minago Nickel/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  Valuable “call option ” on nickel at $10.00/lb+
  • TSX:Ni 25  FRAC SAND:  Current Valuation yet to recognize imminent cash flow potential  Cash flow will get recognized  NICKEL:  Nickel market not valuing nickel assets  Nickel market expected to turn around in 2015  THEREFORE:  Soon to be recognized cash flow valuation plus:  Call Option on Nickel, Equals:  Significant Market Valuation Correction Imminent 25 Victory Silica Investment Summary
  • TSX:Ni Building  Canada’s Next  Nickel Producer Victory Nickel Inc.
  • TSX:Ni Company Profile Nickel Projects Four Advanced Sulphide Nickel Projects Over one billion pounds of nickel in Measured and Indicated resources  and 300 million pounds of Inferred resources, NI 43‐101 compliant 27
  • TSX:Ni Minago Project The Property  Well‐located  Sulphide nickel deposit  Exceptional metallurgy  Open pit and underground mining  potential  Bankable feasibility study on open  pit only  Exceptional exploration upside 28
  • TSX:Ni Minago Project Reserves and Production Upside  Nose Deposit open pit: 8.6‐year mine life  Nose Deposit U/G (inferred  resource)  North Limb: NI‐43‐101‐ compliant ETMI  Mineralization open to west,  north and at depth  Combined resources projected  mine life of <20 years 29
  • TSX:Ni Minago Project Feasibility Study Optimization Minago Sulphide Nickel Project: Economic Summary Comparison Base Case Dec. 14, 20091 ($million except % & yrs) Base Case July 19, 20111,2 ($million except % & yrs) Undiscounted cash flow 917.7 1,418.4 NPV @ 8% 293.8 513.0 NPV @ 6% 402.6 669.3 NPV @ 4% 538.0 864.6 IRR 17.66% 22.4% Pre‐Production Capital 593.0 585.1 Breakeven price $5.06 $4.28 Open Pit mine life 7 years 8.6 years 30 1. Three‐year trailing average US$ 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
  • TSX:Ni Minago Project Cost Summary C1 Cash Cost Per lb Nickel  Feasibility Study After Optimization 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‐Product Value 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) 31
  • TSX:Ni 32 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.) Alison Sutcliffe /VP Finance & CFO –Victory Nickel Inc. CA with 20+ years experience, most recently with Dundee Corp. Paul L. Jones /VP Exploration –Victory Nickel Inc. Geologist and QP with 25+ years experience with more than 20 juniors Sean Stokes /VP Corporate Affairs & Corporate Secretary –Victory Nickel Inc. 20+ years communications/business development/finance experience, incl. Tiberon Minerals, Liberty Minerals, Scandinavian Minerals David Mchaina /VP Environment & Sustainable Development –Victory Nickel Inc. Ph.D. with 20+ years experience, including Boliden, Westmin, Goldcorp Victory Nickel Management Team
  • TSX:Ni Victory Nickel Qualified Independent Board Cynthia Thomas /Chair MBA, 20+ years international mining and project finance, former Director Mining Investment Banking – ScotiaMcLeod René R. Galipeau /CEO & Director  Peter R. Jones Engineer, former CEO of Hudbay Minerals, 40+ years mining experience with Hudbay, Cominco, Cape Breton Development, Granduc  Operating Co. and Adanac Molybdenum Alireza Moghadam International investor and businessman, Chairman of the AMIDT Group, a privately‐held company focused on the physical production,  engineering and trading of ferrous and non‐ferrous metals, minerals, chemicals, alloys and scraps.  Michael Anderson Lawyer, 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 Horst 35 years mining experience as a CEO, banker, investment banker and geologist, current CEO of CBay Minerals 33
  • TSX:NiTSX:NiDisclaimer Some of the statements contained in the following material may be "forward‐looking statements." All statements, other than statements of historical fact, that address activities, events or developments that Victory Nickel believes, expects or anticipates will or may occur in the future are 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 or beliefs of Victory Nickel based on information currently available to Victory Nickel. Forward‐looking statements are subject to a number of risks and 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 other things, failure to successfully complete intended financings, capital and other costs varying significantly from estimates, production rates varying from estimates, changes in world copper and/or gold markets, changes in equity markets, uncertainties relating to the availability and costs of financing needed in the future, equipment failure, unexpected geological conditions, imprecision in resource estimates, success of future development initiatives, competition, operating performance of facilities, environmental and safety risks, delays in obtaining or failure to obtain necessary permits and approvals from government authorities, and other development and operating risks. Any forward‐looking statement speaks 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 or obligation to update any forward‐looking statement, whether as a result of new information, future events or results or otherwise. Although Victory Nickel believes that the assumptions inherent in the forward‐looking statements are reasonable, forward‐looking statements are not guarantees 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 tonnes grading 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 tonnes grading 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 tonnes grading 0.65% Ni. The mineral resources were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council December 11, 2005. 34