Victory pushes Minago closer to development

After spending four years proving up one of Canada’s largest undeveloped sulphide nickel deposits, Victory Nickel (NI-T) has received a licence to start building a mine at its Minago project in Manitoba.

Development should begin this winter, the junior says after announcing that the provincial government gave it the Environment Act Licence to build, operate and eventually decommission its wholly owned project.

“We covered a lot of ground since we started working at Minago,” says Sean Stokes, Victory’s corporate affairs and corporate secretary, “and from all the good things we’ve done this is the most significant milestone achieved to date.”   

Although the company will still need other permits, Victory’s vice-president of exploration, Paul Jones, explains why the company was anxiously waiting to get its hands on the licence.   

“This particular permit unpins the project, it allows construction to begin. It allows the process of building the infrastructure that will lead to exploitation.”

In a few months, Victory plans to start pre-stripping the open pit, which sits 225 km south of Thompson, Man., and 465 km north of Winnipeg. Minago also sits adjacent to a 230-kilovolt power line.

The company says it has several things to check off its to-do list in preparation for building and infrastructure development, such as tendering contracts for power installation and site engineering, and more importantly securing financing.

According to a December 2009 feasibility study, it would cost a little under $600 million to get the project off the ground.

However, due to all the optimization work the company has been doing since then, the cost may now differ.  “Obviously, things have changed,” comments Stokes. “And we would have to revisit that.” Victory plans to soon revise the feasibility study.

If all goes well the construction phase at Minago should last about two years, says Jones.

Once in production, Minago is estimated to produce 26 million lbs. nickel a year for nine years from the Nose deposit.

An updated pit-constrained resource released in early May shows Nose has measured and indicated resources of 31 million tonnes grading 0.44% nickel sulphide for 302.1 million lbs. nickel sulphide.

Due to the improved resources, the company recently reported better economics for Minago. This is the second improvement Victory has made to the project’s economics since releasing the 2009 feasibility study.

Currently, Minago has a net present value (NPV) of $720.5 million and an internal rate of return (IRR) of 22.9%. The project originally had a NPV of $402.6 million, with an IRR of 17.7%. Both estimates were calculated using a 6% discount.

Jones notes that the Nose deposit contains only a portion of the mine’s resource. “There is mineralization below the pit which is not incorporated in the [feasibility] study or economics at all. We now known there is a substantial nickel target on the North Limb that we announced in August something in the order of 30 million tonnes that need to be delineated going forward.”

Based on a 0.30% total nickel cutoff, the project’s North Limb target is estimated to have between 21 million and 34 million tonnes grading 0.49% to 0.59% nickel. The company plans to develop North Limb as a second pit and says any resources found there will add to the Nose deposit’s resource.

The deposit currently hosts 54.2 million measured and indicated tonnes of 0.52% nickel for 620 million lbs. nickel, plus 14.6 million inferred tonnes of 0.53% nickel for 170 million lbs.

Along with producing high-grade nickel concentrate, Minago will also generate 11.2 million tonnes of frac sand, a high-demand product used in the oil and gas industry.

Stokes says the company is currently in talks with offtake buyers for both products.

Victory estimates the frac sand, net of freight, will generate $70 million a year in revenue.

On news of the licence, the company shares moved up 22% to 11¢ on 1.8 million shares traded.