���� �� ���� �� Victory Nickel Inc. The Right Product. The Right Place. April 2014 The Right Time.
Company Profile –Victory Nickel ���� �� NI:TSX – Share Capital Structure Shares Outstanding ~572 million Victory Victory Fully Diluted Shares * ~742 million Nickel Inc. Silica Ltd. Market Capitalization (Apr. 11, 2014) $34.3 million (100%) Cash (as at Dec. 31, 2013) $1.4 million *~32 M options ($0.08 average exercise price); ~113 M warrants ($0.035 exercise price); ~$4 M convertible note ($0.10 conversion price) Major Shareholders • Nuinsco Resources Ltd. 10.5% • A&M International 9.7% • Jien International 9.3% • Sea Shell Limited 8.5% • Management & Directors 2.0% 2
Company History From Nickel to Frac Sand ���� �� � 2007 : Victory Nickel created with 3 nickel projects, including Minago in Manitoba � 2009 : Feasibility study for Minago � Significant frac sand by-product value identified � 2011 : Minago permitted for production � 2011-2012 : Meaningful decline in nickel prices � 2012 : Victory Silica created to help unlock value of frac sand at Minago � 2013 : A viable, multi-phased frac sand business emerged, independent of, yet complimentary to Minago 3
Why Victory Silica? ���� �� � Very strong market fundamentals for frac sand � Over 16% annual demand growth forecast for Canada � New frac sand story with extreme value � Near-term cash flow: plant commissioning well underway � Experienced management: frac sand development, operating and marketing expertise � Strong peer group valuation & market performance � Large domestic resource: Minago a strategic asset Potential to become the largest supplier of the highest quality frac sand for delivery in Canada 4
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. 5
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 6
What is ‘Fracking’? Frac Sand? Not all sand makes frac sand! ���� �� �������������������� or ‘fracking’ is a technique used in the development of oil � & gas formations ������������������������������������� ������������������������������������� ������������������������������������� ������������������������������������� . Proppant (such as frac sand) holds or ‘props’ the formation open, increases porosity, and increases oil/gas flow to the wellhead ���������� must meet unique API specifications such as ���������� ���������� ���������� , ���������� � ��������� and �������� for use in the oil & gas industry as a proppant 30/50 20/40 Victory Silica’s Frac Sand 7
Proppant / Frac Sand Market Historical & Projected Demand ���� �� North American Proppant Demand (million tons) % Annual Growth Item 2007 2012 2017 2007-2012 2012-2017 Proppant Demand 6.98 29.55 51.20 33.5 11.6 By Country: U.S. 6.13 26.63 44.97 34.1 11.1 Canada 0.85 2.92 6.23 28.1 16.3 Oh, Canada! By Type: Sand 6.14 26.78 46.95 34.3 11.9 Ceramic 0.82 2.64 4.02 26.3 8.8 Other 0.02 0.14 0.23 43.9 10.6 Source: The Freedonia Group, Inc. Double digit annual proppant demand growth expected with Canada leading the way 8
Cowen & Co. Frac Sand Price Index ���� �� Frac sand pricing up 4% in March 2014 9
North American Shale Basins Initial Supply Opportunities for Victory Silica ���� �� Manitoba, Saskatchewan, Alberta, B.C., North Dakota Minago Medicine Hat Winnipeg (Seven Persons) Wisconsin Mine 10
Canadian Market Opportunity ���� �� � Double digit demand growth for frac sand in Canada � Robust natural gas production growth driven by West Coast Liquified Natural Gas (LNG) terminal build-out over the coming years � Development of the Duvernay resource play as well as other ‘liquids-rich’ shale plays � Barriers to Entry � Established business relationships with energy service companies (i.e. pressure pumpers) and exploration & production (E&P) companies � Securing supply of or holding rights to high-quality, permitted sand resources � Logistics agreements � Victory Silica Competitive Advantages � First mover advantage in processing highest quality Wisconsin sand in Canada � Minimizing handling of finished sand maintains product quality � Vertical integration to ensure supply of Wisconsin sand for end-users through the cycle � Superior location close to customers with significant finished product storage capacity 11
Victory Silica Business Plan Phased Approach – Clear Path for Growth ���� �� Minago Phase 3: Growth � Longer-term upside � Winnipeg (dry) Plant: processing infrastructure in � Potential to process at Manitoba (1,040 ktpa) Winnipeg Plant � Site identified with favourable � Currently looking at smaller logistics pit configuration to target frac � Initially supplied from sand only Wisconsin Phase 1: Market Entry � Seven Persons (dry) Plant: processing infrastructure in Alberta (500 ktpa) � Ship contracted (wet) sand from Wisconsin Phase 2: Vertical Integration � Rapid payback on modest � Wisconsin mine Joint Venture capital investment � Security of highest quality sand � Strategic storage capacity supply � Margin enhancement 12
Phase 1: Market Entry Seven Persons Plant – Medicine Hat, Alberta ���� �� � 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 � $4.0 M capex to take dry plant capacity to 500,000 tpa ( complete ) � First sales made: March, 2014 � Commissioning of plant underway Phase 1 (Q1/2014) Working Capital US$4.3 million Annual Sales Capacity 500,000 tons Estimated Margin $25/ton 13
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 unloaded � Plant commissioning in progress � Product sales ongoing 14
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