Victory Nickel Announces Fourth Quarter and Fiscal 2014 Financial and Operating Results
Marketwired
TORONTO, ONTARIO--(Marketwired - Apr 1, 2015) - Victory Nickel Inc. ("Victory Nickel" or the "Company") (NI.TO)(www.victorynickel.ca) today reported financial results for the year ended December 31, 2014. Effective October 1, 2014, the Company changed its functional currency and presentation currency to the United States dollar ("US$" or "US dollar") from the Canadian dollar ("C$"). All dollar amounts in this news release are in US$, unless otherwise noted.
Highlights
Frac Sand and Victory Silica Fourth Quarter Ended December 31, 2014
Gross margin of $580,000 or $13.03 per ton
Produced 47,515 tons of frac sand.
Sold 44,529 tons of frac sand at an average price of $161.78.
Completed the upgrade and construction of the 500,000 ton per year ("tpy") 7P Plant.
Completed the start-up and commissioning stage of the 7P Plant.
Optioned the Bear Coulee frac sand property in Wisconsin.
Year Ended December 31, 2014, and Subsequent
Gross margin of $1,122,000 or $12.62 per ton
Produced 109,155 tons of frac sand at the 7P Plant.
Sold 88,891 tons of frac sand at an average price of $157.23 per ton.
Cost of goods sold of $12,854,000 or $144.60 per ton.
Secured a second Wisconsin-based supplier of washed concentrated Northern White frac sand.
In early 2015, completed a 43-101 report outlining a frac sand resource of approximately 11 million tons of Wisconsin Northern White frac sand on the Bear Coulee property.
Contracted a second transload facility in St. Paul, Minnesota in early 2015.
Consolidated
The Company reported consolidated net income of $96,000, or $0.00 per share, on sales revenue of $7,203,000 for the three months ended December 31, 2014 and a net loss of $2,416,000, or $0.04 per share, on sales revenue of $13,976,000 for the year ended December 31, 2014.
"As previously reported, the start-up of the 7P Plant was somewhat disappointing and highlighted several weaknesses which are being addressed," said Ken Murdock, CEO of Victory Silica. "Our attempts to meet demand showed that it was premature to force production prior to having properly-trained staff in place, having fully-tested our service suppliers and having understood the performance limits of our equipment. Following the end of the year we not only entered the typically slow period during spring break-up but also felt the effect of the drop in the price of oil. We are using this slow period to complete maintenance and implement small improvements."
Commissioning of the Company's dry frac sand processing plant in Seven Persons Alberta, located approximately 18 km southwest of Medicine Hat (the "7P Plant"), was completed in August, 2014. The 7P Plant operated at less than its 500,000 tpy nameplate capacity throughout the period.
2015 Outlook
As previously discussed, the Company has experienced a decline in product demand, and downward pressure on product pricing since the start of 2015. This is due to the combined impact of lower crude oil prices on the market and the annual slowdown due to spring break-up in Alberta (the period when road bans restrict the movement of heavy equipment on to well pads resulting in less drilling and therefore lower frac sand demand). While this has impacted sales in the first quarter, it has allowed the Company the opportunity to build-up finished frac sand inventories at the 7P Plant. By having significant frac sand inventory on hand at the 7P Plant, the Company is better positioned to take advantage of opportunities to meet customer needs when demand returns.
"We cannot change the market. All we can do is work with it and within it," said Victory Nickel CEO René Galipeau. "The rig count in western Canada has declined due to the drop in oil price, however the trend toward re-fracking of wells, increasing frac sand mass per stage, more stages per horizontal well and a rising inventory of wells that have been drilled by not yet fracked point to pent-up demand for proppant that will hasten a frac sand market recovery with any significant oil or gas price improvement. We are working with our customers to help them lower their costs and improve our sales. The Company focus is now on managing its liquidity until markets improve. We are faced with customers trying to extend their credit terms while suppliers are requiring near prompt payment. This increases the working capital requirement. In the near term, the Company will only incur costs associated with buying and delivering sand to its 7P Plant when existing inventories get below working levels."
For further information please see the Company's Consolidated Financial Statements and MD&A for the years ended December 31, 2014 and 2013 filed at sedar.com.
About Frac Sand
Frac sand is a proppant used in the oil and gas business as a part of the hydraulic fracturing process - a means of increasing flow to the wellhead. Frac sand must have particular characteristics including achieving certain levels of crush resistance, sphericity and roundness, and it is therefore a relatively rare commodity. Vast quantities of frac sand are consumed, and more is needed all the time, as shale gas and oil plays in Canada and the US rise to prominence.
About Victory Nickel
Victory Nickel Inc. is a Canadian company with four sulphide nickel deposits containing significant NI 43-101- compliant nickel resources and a significant frac sand resource at its Minago project. Victory Nickel is focused on becoming a mid-tier nickel producer by developing its existing properties, Minago, Mel and Lynn Lake in Manitoba, and Lac Rocher in northwestern Québec, and by evaluating opportunities to expand its nickel asset base. Through a wholly-owned subsidiary, Victory Silica Ltd., Victory Nickel is establishing a presence in the frac sand market prior to commencing frac sand production and sales from Minago.
About Victory Silica
Victory Silica is a wholly-owned subsidiary of Victory Nickel and is charged with a phased plan to establish the Company in the frac sand market. In Phase One, the Company constructed a 500,000 tpy dry processing plant and has begun processing and selling sand imported from Wisconsin. The 7P Plant is well located in an area populated with fracking companies, its potential customers, and is within only a few hours' trucking distance of major oil or gas play well sites. Phase Two, which includes the construction of a concentrator, also known as a "wet plant", in Wisconsin, is expected to reduce costs and ensure security of sand supply through the control of a frac sand mine in Wisconsin. In Phase Three, the Company intends to construct a larger frac sand plant to process and distribute both imported and domestic sand, which may potentially, but not necessarily, include sand mined as a co-product of development at the Company's Minago project. The Company has already identified a site in Manitoba for this purpose.
EBITDA
EBITDA is non-GAAP financial measure. Victory Nickel supplements its financial information prepared in accordance with GAAP with EBITDA because we believe investors commonly use EBITDA as a component of valuing companies engaged in frac sand sales. Victory Nickel defines EBITDA in accordance with the table below. Victory Nickel's EBITDA is not necessarily comparable to the EBITDA measures of other companies due to the potential for differences in methods of calculation.
Year ended December 31, 2014
Corporate
Development
Frac Sand
Total
Net Loss for the Period
$(2,188)
$
(94
)
$
(134
)
$
(2,416
)
Income tax recovery
(513)
-
-
(513
)
Net finance costs
442
-
18
460
Writedown of E and E projects
-
60
-
60
Amortization of property, plant and equipment
1
4
548
553
Share-based payments
344
-
-
344
EBITDA
(1,914)
(30
)
432
(1,512
)
Consolidated Segmented Statement of Operations
Year ended December 31, 2014
Exploration and CorporateDevelopment
Frac Sand
Intersegment Reclassification
Total
2013 Total
Revenues
$-
$-
$
13,976
$
-
$
13,976
$
-
Cost of goods sold
-
-
(12,854
)
-
(12,854
)
-
Gross margin
-
-
1,122
-
1,122
-
Operating expenses
General and administrative
(1,914)
(26)
(496
)
-
(2,436
)
(1,582
)
Share-based payments:
Options
(344)
-
-
-
(344
)
(197
)
Share Bonus plan
-
-
-
-
(42
)
Amortization of property, plant and equipment
(1)
(4)
(548
)
-
(553
)
(26
)
Writedown of E and E projects
-
(60)
-
-
(60
)
383
Pre-exploration costs
-
(4)
-
-
(4
)
-
Net frac sand pre-operating costs
-
-
(194
)
-
(194
)
(585
)
Operating loss
(2,259)
(94)
(116
)
-
(2,469
)
(2,049
)
Finance income
2,169
-
11
(11
)
2,169
14
Finance costs
(2,611)
-
(29
)
11
(2,629
)
(3,633
)
Net finance costs
(442)
-
(18
)
-
(460
)
(3,619
)
Loss before income taxes
(2,701)
(94)
(134
)
-
(2,929
)
(5,668
)
Income tax recovery
513
-
-
-
513
778
Net Loss for the Year
$(2,188)
$(94)
$
(134
)
$
-
$
(2,416
)
$
(4,890
)
Please visit the Company's website at www.victorynickel.ca. Should you wish to receive Company news via email, please email cathy@chfir.com and specify "Victory Nickel" in the subject line.
Forward-Looking Information: This news release contains certain forward-looking information. All information, other than information regarding historic fact that addresses activities, events or developments that the Company believes, expects or anticipates will or may occur in the future is forward-looking information. Forward-looking information contained in this news release includes, but may not be limited to the progress and success of the Company's projects, including the Company's goals and business plan with respect to the frac sand business and the future demand for frac sand. The forward-looking information contained in this news release reflects the current expectations, assumptions and/or beliefs of the Company based on information currently available to the Company. With respect to the forward-looking information contained in this news release, the Company has made assumptions regarding, among other things, the Company's future working capital requirements, the Company's ability to generate sufficient cash flow from operations and access existing credit facilities and capital markets to meet its future obligations, goals and business plan, future prices for frac sand and by-products and future demand for processed frac sand. The forward-looking information contained in this news release is subject to a number of risks and uncertainties that may cause actual results or events to differ materially from current expectations, including the need to obtain required approvals and permits from regulatory authorities, the volatility of frac sand and by-product prices and demand and geological, technical, drilling and processing problems. Any forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable law, the Company disclaims any obligation to update or modify such forward-looking information, either because of new information, future events or for any other reason. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.
