Victory to build Minago nickel mine

After spending years proving up one of Canada’s largest undeveloped nickel-sulphide deposits, Victory Nickel (NI-T) has cleared the final regulatory hurdle to build a mine at its Minago project in northern Manitoba’s Thompson nickel belt.

Development should begin this winter, the junior says, now that it has received an Environment Act Licence from the provincial government to build and run its wholly owned project. 

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

Victory Nickel started its journey at Minago in 2007, after Nuinsco Resources (NWI-T) created the company to house its three nickel assets. Since then, it has completed a feasibility study, boosted the study’s economics and resources and identified more nickel-bearing targets.

Although the company will need other permits down the road, Paul Jones, Victory’s vice-president of exploration, explains that the company was anxious to get its hands on the licence because “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 will start pre-stripping the open pit, which sits 225 km south of the city of Thompson and 465 km north of Winnipeg. Minago is also near existing infrastructure, including provincial Highway 6, a power and railway line and the town of Grand Rapids.

The company says it has several things remaining to check off its to-do list in preparation for construction, such as tendering contracts for power installation and site engineering, and most 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.

But because of all the optimization work the company has been doing since then, the cost may now differ.

“Obviously, things have changed and we would have to revisit that,” Stokes says, noting that Victory aims to revise the feasibility study soon. 

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

Once in production, Minago could produce 26 million lbs. nickel a year for nine years from the Nose deposit. An updated pit-constrained resource estimate released in May shows Nose hosts 31 million measured and indicated 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 feasibility study.

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

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 study or economics at all. We now know 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 cut-off, 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 existing Nose deposit’s resource. 

The deposit 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 envisions potential buyers for both products, and is currently negotiating offtake agreements.

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

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