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Victory Nickel Suspended Production in Q1

Victory Nickel Inc. reported financial results for the three- and six-month periods ended June 30, 2015. Effective Oct. 1, 2014, the company changed its functional currency and presentation currency to the United States dollar from the Canadian dollar.

The company reported a consolidated net loss of $906,000, or $0.02 per share, on sales revenue of $631,000 for the three months ended June 30, 2015. During the six-month period ended June 30, 2015, the company recorded a net loss of $1,177,000, or $0.02 per share on revenues of $2,153,000.

This compares with a net loss of $693,000, or $0.01 per share and a net loss of $2,139,000, or $0.04 per share, on revenues of $1,310,000 in the first three and six month periods respectively of the prior year during which the company was in the pre-operating stage at the 500,000 tpy-capacity rated frac sand plant in Alberta (the 7P Plant).

Due to the sudden decline in the price of oil combined with the protracted spring break-up period when road restrictions are in place and therefore drilling activity is limited, demand for frac sand in the company's target markets basically came to a full stop in the first quarter of 2015. The company accumulated inventory in excess of 40,000 tons of frac sand at various stages of processing and temporarily suspended production in order to draw down inventories. Sales resumed in May 2015. During the second quarter, sales totaled 4,344 tons of frac sand.

Revenue per ton in the second quarter was $133.74, resulting in a gross margin of $76,000. During the three-month period ending June 30, 2014, the 7P plant was in the process of being commissioned and produced 19,408 tons of various grades of frac sand, 9,470 tons of which was sold generating revenue of $1,310,000.

“The first six months of the year have been extremely challenging on a number of fronts due to the current state of affairs in the oil and gas industry and the resulting negative pressure on frac sand demand and pricing," said Rene Galipeau, Victory Nickel's CEO. "We are now in August and the reduced demand for sand continues, however we are seeing signs of returning demand as oil service companies are looking for pricing and availability of frac sand in preparation for any increased activity. The price of oil necessary to create a resurgence of demand is yet to be understood. Major suppliers of frac sand have said that the long-term fundamental trends for sand demand remain favorable and that the price discounts are temporary."

With a significant inventory of premium-quality Northern White Wisconsin frac sand at various stages of completion at the 7P Plant, Victory Nickel is well-positioned to meet customers' needs when frac sand demand returns. The slowdown is also presenting opportunities and Victory Silica's management is actively pursuing these opportunities which should make the Company more competitive in the future.

A significant portion of staff and management salaries and director's fees currently due are being deferred or eliminated until the demand for frac sand returns. In addition, there will be no discretionary expenditures.