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TSX:Ni
March 2015
NICKEL
World-Class, Shovel-Ready,
Sulphide Nickel Project
FRAC SAND
Highest-Quality Frac Sand Product,
Large Resource, Cash Flow
TSX:Ni
One Company, Two Compelling Investment Opportunities
TSX:Ni
2
Victory Nickel Company Profile
Ni:TSX – Share Capital Structure
Shares Outstanding (10:1 consolidation 17/09/14) ~57.6 million
Fully Diluted Shares* ~79.7 million
Market Capitalization (04/02/15) $10.7 million
Debt (incl. $4 M secured line of credit; $6 M unsecured
convertible notes); $1 .5 M receivables line)
$11.5 million
Major Shareholders
• A&M International 9.5%
• Jien International 9.2%
• Sea Shell Limited 8.4%
• Nuinsco Resources Ltd. 5.8%
• Management & Directors 2.0%
*~2.8 M options ($0.70 average exercise price); warrants ~11.3 M ($0.35 exercise price); ~2 M ($1.00
exercise price); ~6.5 M from convertible note ($1.00 conversion price).
Victory
Silica Ltd. (100%)
Victory
Nickel Inc.
TSX:Ni
Supplying Canada with Highest Quality Frac Sand
Multi-Phased Business Plan
Phase 1 complete Phase 2 approved by board Ownership of Wisconsin and significant
Manitoba frac sand resources Permitting of Wisconsin property Phase 3 Winnipeg site selection progressing
Extreme valuation discount
Strong stock performance for US peers More advanced than Canadian peers
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One Company Two 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
NICKEL FRAC
SAND
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Company History From Nickel to Frac Sand
2007: Victory Nickel created
2009: Feasibility study for Minago: significant frac sand by-product value identified (12.6 million tonne NI-43-101 frac sand resource)
2011-12: Minago permitted for production, 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: Plant commissioning complete, sales on-going, operating cash flow
Q4 2014: Optioned Wisconsin frac sand property
Q1 2015: NI-43-101 indicated frac sand resource of 10.9 million tons in Wisconsin
Frac Sand
Nickel
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Company Profile Nickel Projects
Four Advanced Sulphide Nickel Projects
Approximately 1 billion pounds of nickel in Measured and Indicated resources and 300 million pounds of Inferred resources, NI 43-101
Lynn Lake optioned to Corazon Mining
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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
Minago PropertyMinago
Property
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Minago Project Reserves and Production Upside
Nose Deposit open pit: 8.6-year mine life
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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TSX:Ni
Minago Project Nickel Concentrate Assay
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Assay Component Unit Value
Ni % 22.3
Cu % 1.4
Co % 0.46
Pt g/t 2.47
Pd g/t 6.31
Au g/t 0.63
Ag g/t 4.3
Rh g/t 0.59
S % 24.4
Fe % 17.0
MgO % 10.4
SiO2 % 12.7
Al % 0.11
As g/t 61.0
Ba g/t 61.0
Be g/t 0.10
Bi g/t <20
Ca % 2.0
Cd g/t <4
Cr g/t 410
Assay Component Unit Value
Hg g/t <0.3
K g/t 410
Li g/t <5
Mn g/t 270
Mo g/t 22
Na g/t 240
P g/t 131
Pb % 0.097
Sb g/t <30
Se g/t <40
Sn g/t <20
Sr g/t 40
Ti g/t 200
Tl g/t <30
U g/t <60
V g/t <20
Y g/t <10
Zn % 0.18
Cl % 0.044
F % 0.066
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Minago Project Feasibility Study Optimization
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Minago Sulphide Nickel Project: Economic Summary Comparison
Base Case Dec. 14, 20091
($million except % & yrs)
Base Case July 19, 20111,2
($million except % & yrs)
At Today’s Metal Prices Feb. 26, 2015
Undiscounted cash flow 917.7 1,418.4 634.6
NPV @ 8% 293.8 513.0 118.7
NPV @ 6% 402.6 669.3 205.1
IRR 17.7% 22.4% 11.9%
Pre-Production Capital 593.0 585.1 558.4
1. Three-year trailing average US$ 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 Project Cost Summary
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C1 Cash Cost Per lb Ni 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)
NICKEL The Free
“Call Option”
Victory Nickel Inc.
TSX:Ni
Large domestic resource at Minago
Frac sand boom continuing
Very strong market fundamentals for frac sand
Experienced frac sand industry management
Low cost of entry/early cash flow
Strong peer group valuation
First ever public information from recent IPOs
New frac sand producer with extreme value
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Why Victory Silica? Building a Business Independent of Minago
On the way to becoming the largest supplier of the highest quality imported and domestic frac sand for delivery in Canada
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Minago Project Frac 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*
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*Company estimates, non-NI 43-101
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Minago 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)
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Frac Sand
Nickel
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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
The Freedonia Group reports that frac sand consumption in North America increased by 323% between 2007 and 2012
Impact of recent oil price decrease yet to be determined
Frac sand is an effective way to participate in North America’s ‘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 Dynamic Demand
Modified from Source: Raymond James “North American Sand Rush” August 19, 2014
Increasing Frac Intensity
North American
Proppant
Demand Model
2017 Freedonia
Report Estimate,
August 2013
Increasing Sand Intensity
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Proppant / Frac Sand Market Positive Demand Trends
Drilling
Rig Count
%
Horizontal
Rigs
Wells
Per Rig
Lateral
Length
Per Well
Frac Stages
Per Lateral
Proppant
Per Stage
Not to scale, for illustrative purposes only
Recent decline in
overall drilling
activity largely
due to pull back in
oil price
North American oil
and gas
production
increasingly from
unconventional
resource plays
Pad drilling and
fit-for-purpose rigs
driving efficiency
gains
Longer wells
typically equate to
more proppant
use
Trend towards
tighter spacing
between fracks
equates to more
proppant use
Trend towards
more proppant
per frack driven
by increasing
evidence of
resulting
increased flow
rates and
extended well
lives
Commodity Price
Dependant
Positive Structural Demand
Trends for Proppant
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Frac sand prices have declined as knee jerk reaction with WTI oil price, though at a lesser rate and market fundamentals
exist to help mitigate continued downward pressure
Frac Sand Price Index Frac Sand Measured as a Component of PPI
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Experienced Management Victory Silica Limited
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René R. Galipeau /Chairman 35+ years mining experience with Hudson Bay, Breakwater Resources, Lac Minerals, Rio Algom. Current Vice-Chair & CEO of Victory Nickel.
Ken Murdock /CEO & Director Engineer 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.
David Frey /Vice-President, Logistics Extensive experience in the logistic industry in Alberta. Held numerous operations, sales and management roles with several companies including Narum Carriers, Tri-Line Carriers and Kleysen Transport.
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.
Jeff Bradley /Marketing & Logistics Representative 10 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.
Alison Sutcliffe /Chief Financial Officer, Sean Stokes /Corporate Secretary (See Victory Nickel Appendix)
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Victory Silica Business Plan Phased Approach – Clear Path for Growth
Phase 1: Market Entry
Cost of $6 million
Seven Persons (dry) Plant: processing infrastructure in Alberta (500 ktpa)
Ship contracted (wet) sand from Wisconsin
Strategic storage capacity
Phase 3: Growth
Winnipeg (dry) plant: processing infrastructure in Manitoba (1,040 ktpa)
Site selection with favourable logistics (CN, CP,BNSF)
Initially supplied from Wisconsin
Minago Sand
Longer-term upside
Currently looking at smaller pit configuration to target frac sand only
Phase 2: Vertical Integration
Wisconsin mine JV including wash plant ownership/frac sand property option
Security of sand supply/quality control
Margin enhancement
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($US) Emerge Energy
Services (NYSE: EMES)
Hi-Crush Partners
(NYSE: HCLP)
US Silica Holdings
(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 $ 11 M
$ 30 M
$ 40 M
2013 Frac Sand Tons Sold 2,651,000 1,849,075 2,960,800 500,000 1,040,000 1,540,000
Adj. EBITDA Adj. EBITDA Frac Sand Only
$85 M $69 M
$69 M $69 M
$161 M $116 M
$14.5 M2,4
$26 M
$40.5 M2,4
Forecast EBITDA / Ton Sold Actual EBITDA / Ton Sold
$26.21
$29.44
$39.03
$29.002
$34.221
$25.00 $34.221
$26.302
$34.221
Market Cap (Feb., 2015)
Enterprise Value (EV) $1,280 M $1,500 M
$1,350 M $1,600 M
$1,650 M $1,790 M
$8.1 M $19.3 M4
- -
- -
2015E EBITDA $200 M3 $217 M3 $324 M3 $14.5 M2,4 - -
EV/2015E EBITDA 7.5x 7.4x 5.5x 1.3x2,4
Implied Enterprise Value at 6.8x1 EV/2015E EBITDA @ EBITDA/ton estimated by Victory Silica (Does not include Phase 3 or margin enhancement – for illustration purposes only)
$ 99 M
1 - average of Emerge, Hi-Crush, and US Silica 2- includes Phase 2 margin improvement, assumes full sales capacity 3- consensus estimates, source: Cowen & Company January 11th 2015 4 - before Nuinsco debt repayment
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Victory Silica Relative and Implied Valuation
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Manitoba, Saskatchewan, Alberta, B.C., North Dakota
North American Shale Basins Current Market Focus
Formations Sold Into
• Alberta Bakken
• Cardium
• Deep Basin
• Duvernay
• Lower Shaunavon
• Montney
• Viking
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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)
Commissioning complete
Production increasing each quarter
Reported Q3 EBITDA $597,000 from frac sand operations
Full production expected during 2015
Phase 1: Market Entry Seven Persons Plant – Medicine Hat, Alberta
Phase 1
Annual Sales Capacity 500,000 tons
Estimated Margin $25/ton
Selected Victory Silica Customers
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Phase 1: Milestones
Wisconsin 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
First frac sand product sale
Plant commissioning completed
Spot sales on-going
Acquisition of frac sand resource in Wisconsin
Secured second transload in Minnesota
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Phase 1: Production Reconciliation
22,519
39,121
47,515
0
20,000
40,000
60,000
To June 30,2014
Q3 2014 Q4 2014
47,515
23,368
12,966
9,677
9,464 6,848
4,546 114,384
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
ACTUALPRODUCTION
RAIL SERVICEFAILURE
WEATHERRELATED
DRYERAVAILABILITY
PLANTAVAILABILITY
TRAINING OTHER POTENTIALPRODUCTION
TON
S
Q4 2014
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Phase 2: Vertical Integration Wisconsin Property / Wash Plant
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Secure sand supply, enhance margins
Entered into option agreement to acquire Bear Coulee frac sand property in Wisconsin
Recently announced NI 43-101 Indicated Resource of 10.9 million tons of Northern White sand on Bear Coulee property
Construct a 1,000,000 tpy ‘moveable’ frac sand wash plant in Wisconsin / Minnesota
Phase 2
Capex ~US$5.0 million
Annual Sales Capacity 500,000 tons
Estimated Margin $>25/ton
Source: Wisconsin Geological and Natural History Survey
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Phase 3: Growth Winnipeg Processing Site
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Build processing facility in Winnipeg
Identifying suitable site serviced by multiple railroads
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 Peer Group Performance
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Preferred Sands/Winn Bay $200 M acquisition Jan. 2012 (private)
US Silica Holdings IPO: Raised $200 M Feb. 2012 ($1.7 B market cap)
Hi-Crush Partners IPO: Raised $225 M Aug. 2012 ($1.4 B market cap)
Emerge Energy Services IPO: Raised $140 M May 2013 ($1.3 B market cap)
FMSA Holdings (Fairmount Minerals) IPO: Raised $400 M Oct. 2014 ($1.0 B market cap)
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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 3 MB/WI 16/30 -100
16/30 -100
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Minago Project Investment Sumarry
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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Cash flow and robust cash flow growth: Initial sales made March 2014, plant commissioning complete, 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
Resource and large property position in Wisconsin: 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 Silica Investment Summary
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René R. Galipeau /CEO & Director – Victory Nickel Inc. Accountant with 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. MBA with 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 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
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
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TSX:Ni Disclaimer
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.
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