TORONTO, ONTARIO -- (Marketwire) -- 01/09/13 -- Victory Nickel Inc. ("Victory Nickel" or the "Company") (TSX: NI) (www.victorynickel.ca) today announced that it has completed an Asset Purchase Agreement (the "Agreement") for the Seven Persons sand recycling facility ("the 7P Facility") located southwest of Medicine Hat, Alberta (see photos at http://media3.marketwire.com/docs/sevenpersonsplant.jpg).
"The acquisition of the 7P Facility presents Victory Silica with an avenue to generate cash flow for Victory Nickel from frac sand production and sales in the near term," said Rene Galipeau, Vice-Chairman and CEO of Victory Nickel.
At the meeting of shareholders held in June 2012, the Company announced the creation of Victory Silica Ltd. ("VSL"). VSL was created to establish Victory Nickel's presence in the frac sand market prior to commencing production of both nickel and frac sand at the 100%-owned Minago mine in Manitoba. The Minago feasibility study envisions production of up to 1.14 million tonnes per year of premium-quality frac sand from the Winnipeg Formation sandstone resource that overlies the Minago nickel deposit.
In order to establish Victory Nickel as a premier frac sand supplier today, VSL has planned a three-phase program. Phase 1 establishes production of 400,000 tons per annum ("tpa") of premium-quality Midwest frac sand from the 7P Facility by shipping partially-processed sand purchased in Wisconsin to the 7P Facility for final processing and distribution. The 7P Facility is well located in an area populated with fracking companies (see map at http://media3.marketwire.com/docs/sevenpersonsmap.jpg), its customers, and is within only a few hours' trucking distance of the well sites. Phase 2 will reduce costs and assure security of sand supply through the acquisition 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 at Minago.
The acquisition of the 7P Facility has now been completed subject to certain conditions and events. The terms of the agreement provide for payment in three stages:
1. An initial payment of $10,000 on signing the Agreement.2. A second payment of $300,000 on receipt of approval from Alberta's Energy Resources Conservation Board ("ERCB") of a reclamation plan to convert the 7P Facility site to a frac sand processing facility; it is currently licensed as a sand recycling facility.3. A final payment of $400,000 on recovery from ERCB of a reclamation deposit that was posted by the vendor of the 7P Facility or within 90 days of the submission of a reclamation report, the final step of the reclamation plan mentioned in 2) above, whichever comes first.
Once the reclamation plan is approved by ERCB, the Company will commence the reclamation work, currently estimated to take approximately three months. The engineering, equipment acquisition and construction of plant upgrades to convert the 7P Facility to a 400,000 tpa frac sand processing plant will occur simultaneously with reclamation.