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Executive Summary - Minago
Feasibility Study

Minago Feasibility Study (32 MB)

Video of Minago Nickel Mine
Video of Minago Road

February 20, 2009
43-101 Resource Report

August 20, 2009
43-101 Frac Sand Resource

Description: /_resources/minago/image009.jpg
Diamond drilling at Minago

Location: Manitoba, Canada
Ownership: 100%
Commodity: Nickel / Frac Sand
Project Type: Open-pit / underground potential
Project Status: Feasibility

Minago, one of Canada's largest undeveloped sulphide nickel deposits, is located 225 kilometres south of Thompson, Manitoba and 100% owned by Victory Nickel Inc. ("Victory Nickel" or the "Company"). Minago is a robust deposit with substantial upside, has a tremendously valuable by-product in hydraulic fracturing ("frac") sand, has excellent infrastructure and is located in one of the world's most favourable mining districts. In August 2011, the Company achieved a major milestone when it received the Minago Environment Act Licence from the province of Manitoba, paving the way for mine development to begin.

  • Permitted for mine development
  • 100% owned, royalty-free
  • Large resource, and growing
  • Well-located, superior infrastructure
  • Sulphide nickel: conventional processing
  • Significant exploration upside: At depth and in North Limb
  • Open pit and underground mining potential

A feasibility study (“Feasibility Study”) on the 100%-owned Minago sulphide nickel deposit in Manitoba, announced in December 2009, confirmed that the development of an open pit mine and concentrator at Minago is technically and commercially feasible. The Feasibility Study is based on mining open pit reserves only and does not incorporate the potential for underground mining that was included in the Preliminary Economic Assessment ("PEA") completed by Wardrop, a Tetra Tech Company ("Wardrop"), in November 2006.

Highlights of the Minago Feasibility Study (open pit only) (all figures in Canadian dollars, except as indicated) are:

  • Undiscounted cash flow (pre-tax) of $1,053.7 million.
  • Net present value ("NPV"), using a discount rate of 8%, of $367.1 million.
  • Internal rate of return ("IRR") of 19.8%
  • Breakeven price of nickel is US$4.65/lb
  • Payback period of four years from start of nickel production.
  • Measured and Indicated resource of sulphidic nickel ("Ni(S)") of 44.1 million tonnes grading 0.43% nickel for open pit only.
  • Strip ratio of 11.7:1 to mine the nickel including frac sand as overburden/waste.
  • Proven ability to produce the world's highest grade nickel concentrate at 35% (22.3% Ni with 10.4% magnesium oxide ("MgO") used for the Feasibility Study).
  • Seven-year nickel production life (open pit only).
  • Capital cost forecast of $592.9 million, including a contingency of $50 million.
  • Average annual ore production of 3.6 million tonnes.
  • Average annual nickel production in concentrate of approximately 11,000 tonnes.
  • C1 cash cost per pound of nickel, net of credits of US$1.89 ($2.08).
  • Average annual frac sand sales revenue, net of freight, of $70 million.
  • Processing cost for frac sand of $6.50 per tonne.

Post Feasibility Study Optimization

Pit-Constrained Resource

Subsequent to the completion of the Feasibility Study, the Company has completed significant optimization work that has indicated improved project economics over those envisioned in the Feasibility Study. In 2011, an updated pit-constrained resource was announced incorporating all drilling up to and including that done as part of the winter 2010 drill program. The revised pit-constrained resource and its impacts are as follows (see press release dated May 2, 2011):

  April 2011 Pit-Constrained Resource1 Feasibility Study Pit-Constrained Resource2 Increase (Decrease) in Contained Metal
  Tonnes Grade Ni Content Tonnes Grade Ni Content Ni Content Change
Category Millions NiS % M Lb NiS Millions NiS % M Lb NiS M Lb NiS %
Measured 8.2 0.473 85.0 6.6 0.488 71.4 13.7 19.2
Indicated 22.8 0.432 217.2 19.1 0.410 172.6 44.6 25.9
M&I 31.0 0.443 302.3 25.7 0.430 243.9 58.3 23.9
Inferred 0.2 0.380 1.4 1.4 0.402 12.2 (10.8) (88.4)

Rounding of tonnes as required by reporting guidelines may result in apparent differences between tonnes, grade and contained metal.
1 Lerch-Grossman pit optimization shell
2 Whittle pit optimization shell

Updated Economics

Victory Nickel has twice updated the base case economics as a result of optimization work done to date. The first update resulted from the purchase of refurbished electrical equipment and revisions to the financial model (see press release dated June 21, 2010). Most recently, the incorporation of the updated pit-constrained resource shown above into the Feasibility Study financial model added two years of mine life to the open pit portion of the deposit and had the following impact on project economics (see news release dated August 10, 2011):

Base Case Economic Summary Comparison:
 August 9, 2011 - June 21, 2010 - December 14, 2009 
($millions, except %) August 9 20111 Increase
June 21, 20101 Increase
Dec. 14, 20091
Undiscounted Cash Flow 1,525.0 44.7 1,053.7 14.8 917.7
NPV@8% 553.5 50.8 367.1 24.9 293.8
NPV@6% 720.5 47.8 487.6 21.1 402.6
NPV@4% 929.7 46.0 636.8 18.4 538.0
IRR 22.9% 15.7 19.8% 11.9 17.7%

1Three-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; Rh: $2,254.56/oz; $Can/$US exchange rate: 1.097

Community Relations

Victory Nickel understands the importance of working with all stakeholders, and devotes a great deal of time and effort to working with First Nations and Aboriginal communities. Ongoing consultation has led to positive relations with Aboriginal groups in the region. In fact, the construction contract for a 4.3 km access road constructed in 2010 was awarded to a First Nations Contractor who employed three First Nations sub-contractors and one non-First Nations contractor.

Minago is expected to provide approximately 600 jobs during the construction period and 400 full-time jobs once production begins. In addition, the Minago mine will make a significant contribution to the local economy and the tax base in the province of Manitoba.


The Minago mineralization has been previously tested by Outokumpu, Lakefield Research Ltd. (now SGS Lakefield), and Process Research Associates. SGS Lakefield was contracted, on Wardrop's recommendation, to undertake a full metallurgical feasibility test program of the proposed open pit ore. The key objectives of the testing program were to obtain enough reliable information to develop the design criteria of the mining and mill operations and to estimate project economics and conduct risk assessments.

The Feasibility Study metallurgical test program began in early 2007 and was completed in 2008 at SGS Lakefield (see News Release dated July 3, 2008).  The program developed a Ni(S) head grade-recovery curve for the pit optimization and economic assessment of the open pit portion of the Minago deposit.  To obtain mill design data, flotation development tests and locked cycle tests (LCTs) were conducted on a master composite of the open pit ore samples based on the Ni(S) block model developed in the early stage of the Feasibility Study.

For the average head grade of 0.43% Ni(S), a recovery of 71.3% is obtained with a concentrate containing 22.3% nickel and 10.4% MgO. 

Wardrop developed a mill flowsheet based on data from the open pit metallurgical testing program and from an engineering exercise to optimize mill throughput. The proposed 10,000 tonne per day mill will consist of a gyratory crusher, a SAG mill/ball mill grinding circuit, a rougher/scavenger/cleaner flotation circuit, a high-rate tailings thickener, a conventional concentrate thickener and concentrate pressure filtration.  The design uses only conventional and proven technologies that are common in the North American mineral processing industry.

Minago will produce a single concentrate containing a high percentage of nickel and other elements as follows:

Component Analysis Component Analysis
Ni (%) 22.3 SiO2 (%) 12.70
Cu (%) 1.40 Pt (g/t) 2.47
Co (%) 0.46 Pd (g/t) 6.31
Zn (%) 0.18 Au (g/t) 0.63
Pb (%) 0.10 Ag (g/t) 4.30
Al (%) 0.11 Rh (g/t) 0.59
S (%) 24.40 Cr (g/t) 410.00
Fe (%) 17.00 As (g/t) 61.00
MgO (%) 10.40 Se (g/t) <40.00
    Sn (g/t) <20.00

The high MgO and zinc content in the concentrate may result in smelter penalties, which have been incorporated into the Feasibility Study economics.

Frac Sand

In addition to the metal by-products, a layer of silica sand averaging approximately 9 metres thick overlies the nickel mineralization within the open pit. With the optimum grading splits, the majority of this 15 million tonne National Instrument 43-101 ("NI 43-101")-compliant Indicated sand resource, effective as of September 9, 2009 (see the technical report of Wardrop dated August 20, 2009 and entitled "Minago Frac Sand Ni 43-101 Compliant Technical Report") is marketable frac sand used to improve recoveries in the oil and gas industry. The frac sand forms part of the overburden that must be removed prior to mining the nickel ore. According to the Feasibility Study, production of frac sand could begin 20 months after the start of mine development.

As part of the Feasibility Study, Outotec produced a feasibility-level design for a frac sand plant complete with capital and operating costs to produce 1,140,000 tonnes of frac sand annually.

Key figures regarding frac sand production are:

  • 11.2 million tonnes marketable frac sand resource in pit footprint
  • Mining occurs over three years; sales over 10 years
  • Selling price per tonne, net of freight = $63.02
  • Projected annual net revenue = $70 million
  • Processing cost per tonne of frac sand = $6.50
  • Frac sand by-product value per pound of nickel = $4.02 (US$3.67)

For More Information on Frac Sand, please Click Here

Exploration Upside at Minago Project

Despite the large known resource, tremendous potential still exits to find much more nickel mineralization at Minago. As demonstrated by past drilling, the deposit remains open to depth, and the Company is confident that an underground mine beneath the pit can be delineated to NI 43-101 standards with additional drilling.

The 2011 drilling was very successful at delineating additional near-surface mineralization. Not only did drilling identify a previously unknown western extension of nickel mineralization in the Nose Deposit (see news release dated August 8, 2011 - the Nose Deposit is the area which contains the entire NI 43-101 nickel resource at this time), but it also demonstrated significant additional potential extending to the north of the Nose deposit in what is called the North Limb. As announced in a news release of August 16, 2011, AGP Mining Consultants Inc. defined an exploration target (“ET”)1 on the North Limb demonstrating the potential for expansion of the nickel resource exploitable by open pit over and above current known resource in the Nose Deposit.

The ET incorporates all the drilling done to date on the North Limb and establishes the target estimate at between 21 million and 34 million tonnes grading 0.49% to 0.59% total nickel, based on a 0.30% total nickel cutoff and 2.43 tonne/m3 bulk density. This mineralization identified in the North Limb is not included in the current Minago resource.

The ET compares favourably in terms of grade with the current resource and the nickel mineralization and host rock at the North Limb are identical to that of the Nose Deposit. The Company expects, subject to further diamond drilling, that the North Limb will support additional nickel resources on the property that will extend the mine life at Minago.

In addition, a Magnetic Inversion study identified the Nose Deposit (resource area) and the North Limb (ET area) and indicates the potential for a "district-sized" deposit through continuity between the Nose Deposit and the North Limb to a depth of 1.5 kilometers.

1 The potential quantity and grade of the exploration target is conceptual in nature and there has been insufficient exploration to define a mineral resource. It is uncertain if further exploration will result in the discovery of a mineral resource.


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