TORONTO, ONTARIO--(Marketwire - Oct. 31, 2008) - Victory Nickel Inc. ("Victory Nickel" or the "Company")(TSX:
NI -
News; www.victorynickel.ca) today announced very positive results from a study completed by Outotec (USA) Inc. ("Outotec"), evaluating the hydraulic fracturing ("frac") sand plant design and capital and operating costs to produce 914,245 tonnes of frac sand annually as a by-product of nickel production at its 100%-owned Minago sulphide nickel deposit in Manitoba.
Key conclusions of the Outotec study include:
- Throughput of 1.2 million tonnes of sand per year produces 914,245 tonnes of frac sand annually over approximately nine years;
- Average life of mine operating costs of $10.37 per tonne of frac sand;
- Plant capital cost of $44.0 million; and,
- A processing plant designed to allow for production to increase should market conditions warrant.
Frac sand, which is used to improve recoveries in the oil and gas industry, forms part of the overburden that must be removed before mining nickel from the Minago open pit. Over and above processing plant capex of $44.0 million as outlined below, capital requirements include $8.8 million for construction of a rail siding and approximately $16.6 million for mining equipment. Detailed cost data and project economics will be incorporated into the Minago Feasibility study which is expected to be complete before year end.
"There is significant potential to generate substantial value from the sale of frac sand as a by-product of mining the sulphide nickel deposit at Minago," said Rene Galipeau, Chief Executive Officer. "The project is ideally located with respect to infrastructure and is in close proximity to potential markets in western Canada and the United States. Various studies completed to date indicate that the frac sand operation alone could cover the cost to pre-strip and equip the nickel open pit, and should enhance the ability to finance development of the nickel deposit."
The current plant design will allow operating hours to increase from 4,822 hours per year to 7,000 hours per year (for a throughput of 1.34 million tonnes of sand per annum producing 1,017,953 tonnes of frac sand per annum), if necessary, to meet additional market demand. Outotec estimates that the construction and commissioning of the frac sand processing plant will take approximately 16 months from the start of detailed engineering.
Capital CostsCapital costs for the processing plant are estimated to be $44.0 million,broken down as follows: ---------------------------------------------------------------- Plant equipment(i) and EPCM $26.3 million ---------------------------------------------------------------- Construction(i) $17.7 million ---------------------------------------------------------------- Total $44.0 million ---------------------------------------------------------------- (i)Includes 10% contingencyOperating CostsOperating costs based on a plant throughput of 1.2 million tonnes of sand per year are as follows: ---------------------------------------------------------------- Cost Category ($/tonne) ---------------------------------------------------------------- Labour 3.76 ---------------------------------------------------------------- Power 0.40 ---------------------------------------------------------------- Thermal Energy 2.57 ---------------------------------------------------------------- Maintenance 3.39 ---------------------------------------------------------------- Loader Fuel 0.20 ---------------------------------------------------------------- Flocculent 0.06 ---------------------------------------------------------------- Total Cost Per Tonne of Product 10.37 ----------------------------------------------------------------Operating costs based on a plant throughput of 1.34 million tonnes of sand per year are as follows: ---------------------------------------------------------------- Cost Category ($/tonne) ---------------------------------------------------------------- Labour 2.56 ---------------------------------------------------------------- Power 0.27 ---------------------------------------------------------------- Thermal Energy 2.57 ---------------------------------------------------------------- Maintenance 3.39 ---------------------------------------------------------------- Loader Fuel 0.14 ---------------------------------------------------------------- Flocculent 0.06 ---------------------------------------------------------------- Total Cost Per Tonne of Product 8.99 ----------------------------------------------------------------
An additional $1.2 million in plant capital would be required to increase annual throughput to 1.34 million tonnes. An exchange rate of US$1.00:CDN$1.13 has been used for conversion of US dollars.
As previously announced, Victory Nickel has engaged Raymond James Ltd. ("Raymond James") as its advisor to determine the most effective strategy to maximize the value of the frac sand by-product. The completion of this study will enable Raymond James to solicit expressions of interest from potential partners interested in participating in the development of this attractive by-product resource.
Paul Jones, Vice-President, Exploration, acts as a Qualified Person (QP) under National Instrument 43-101 for Victory Nickel, has reviewed and approved the contents of this news release.