Winnipeg Free Press - PRINT EDITION

Manitoba mine looks to financing from frac sands

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VICTORY NICKEL is continuing its efforts to develop a massive nickel sulphide deposit north of Grand Rapids, MB., but in the absence of equally massive financing needed to get the project going, the Toronto-based junior mining company is happy to embark on a side project processing frac sand in Alberta.

The company just received regulatory clearance to operate a frac-sand processing plant near Medicine Hat, Alta.

Sean Stokes, the company's vice-president of corporate affairs, said since it's so hard for mining companies to raise capital to start projects, the development of the 400,000-tonne-per-annum Seven Persons frac-sand processing facility in Alberta will at least help the company start developing a revenue stream.

"It's tough for all juniors," Stokes said. "We have to look at finding opportunities to create value for our shareholders and that's what we think we are doing with the initiative in Alberta. Hopefully, we can leverage some of the revenue coming out of the frac-sand operation in Alberta to begin that site development and get things moving up there (at the Minago site)."

The Minago Sulphide Nickel Project is about 90 kilometres north of Grand Rapids and a little over three kilometres into the bush off the west side of Highway 6.

A feasibility study has been completed -- a key piece of work before any new project can proceed. The project has received the environmental permits it needs and also concluded a memorandum of understanding with three First Nations in the region.

Another attractive feature of the project is the presence of as much as 11 million tonnes of frac sand, an industrial mineral in huge demand from the oil and gas sector, especially in the Bakken formation in the northern Great Plains and Saskatchewan.

Without incurring any additional cost in extracting it because it has to be removed to access the nickel-rich ore, it has the potential to generate average annual revenue of about $70 million.

In the meantime, Victory will start processing frac sand in Alberta.

The company has formed a subsidiary called Victory Silica Ltd. and the Medicine Hat project is the first of a three-phase development of the frac-sands business that includes construction of a concentrator in Wisconsin and eventually construction of a larger frac-sand plant at the Minago site. It will process and distribute both imported and domestic sands, including sand mined as a co-product of development of a nickel mine there.

Stokes said the company continues to improve the numbers of a feasibility study for Minago done in 2009. Company officials believe it is one of the largest nickel deposits in the country, but it is going to take at least $500 million to build the mine.

"It's a big financing, but we certainly think it is doable," Stokes said. "There are opportunities out there and we certainly have not given up. We have been improving the returns since we did the feasibility. It's just a question of finding the right group, ideally to joint-venture the project."

martin.cash@freepress.mb.ca

Republished from the Winnipeg Free Press print edition July 12, 2013 B4

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