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AceofKY

Victory Nickel

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Xstrata has announced a friendly takeover offer for Jubilee Mines.

Subtracting out Jubilee's cash position, the offer amounts to about US$2.47/lb of in situ nickel resource.

 

Using this metric applied to Victory Nickel's resource, and subtracting out about $300MM necessary for construction costs, yields a share price of $7.70.

 

Victory can be purchased right now for about Cdn$0.64/share.

 

The comparison is not apples-to-apples as Jubilee probably has better exploration potential and lower cash costs. I think, however, it demonstrates that Victory is significantly undervalued.

 

I also like Crowflight Minerals.

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(below is a description of Victory Nickel I wrote a while back on a different forum. I thought I had posted this on GEI but couldn't find the thread - Ace)

 

 

Msg: 2805 of 3950 9/10/2007 11:56:26 PM

Author: AceofKY send pm · add member to favs · ignore

 

 

Recs: 0 The Case for Victory Nickel

 

 

Introduction

 

Victory Nickel (symbol NI on the TSX) is a nickel exploration and development company created earlier this year from a spinoff of the nickel assets of Nuinsco Resouces. They currently have 3 Canadian properties with NI-43101 compliant nickel deposits, none of which are in production yet.

 

Minago Deposit

 

The Minago property is Victory’s flagship asset. The latest NI-43101 compliant resource is 49M tonnes of 0.516% measured & indicated nickel and 44.1M tonnes of 0.528% inferred nickel (exploration is on-going). An independent consultant, Wardrop Engineering, is preparing a bankable feasibility study which is scheduled for completion in mid-2008. The pre-feasibility study for Minago indicated a project NPV (8%) of $334M (pre-tax) and 23.1% IRR assuming $7.43/lb nickel. Initial capital costs of $286M are required to bring the project into production.

 

The grades on this deposit are not high and much of the nickel is locked up in silicates (recovery won’t be very good), but the large tonnage compensates for this. The deposit is slightly lower in grade than Rio Narcea’s Aguablanca deposit, and it does not have the large percentage of copper byproducts that Aguablanca enjoys. Minago is substantially larger in tonnage than Aguablanca, however, and will be designed for at least twice the production rate. Minago also has a significant amount of frac sand that must be mined to access the nickel deposit using the open pit method. The frac sand carries a $46M NPV as a stand-alone operation. Furthermore, preliminary indications are that the Minago concentrate will be of higher quality than Aguablanca’s metallurgically challenged bulk nickel-copper concentrate.

 

The latest drill results on the Minago deposit have confirmed much of the inferred resource. Thus, much of the inferred resource will be moved into the M&I category with the next NI-43101 report. Also, the assays indicate that the grade of the deposit increases as it gets deeper.

 

 

 

Lac Rocher & Mel Properties

 

These are much smaller, higher grade deposits. Their main value at this point would be to provide near-term production and cash flow to help offset the capital requirements for Minago. Inco is obligated to mill the Mel ore at their nearby facility ~25km away. My understanding is that Victory is currently waiting on Inco to decide whether or not to exercise a back-in option on Mel which would give 51% project ownership to Inco but would also required Inco to kick in the next $6M in project expenditures. Both properties need permitting before mining can commence.

 

Financing

 

The biggest problem for Victory right now is: How to finance Minago? Victory’s market cap is about C$90M right now. I discussed financing with one of the company officers, but he wouldn’t discuss too many details. When asked if they could debt finance at least 50% of the project, he said “yes” very quickly. For purposes of valuation below, I’m going to say that a conservative scenario would be an equity financing for the other 50% of the project which would likely mean doubling the number of current shares.

 

Current Capitalization

 

173.1M common shares, 12.7M options, 3.1M warrants = 188.9M fully diluted shares

 

Management Ownership

 

Management and the Board currently own about 8% of the outstanding shares. Management is shared with Nuinsco Resources. It should be noted that Nuinsco’s share performance over the past 5 years or so has been underwhelming. Also note that Nuinsco itself owns a significant quantity of Victory’s shares. This could be a negative if Nuinsco decides to cash in that investment.

 

Conservative Valuation (in US$)

 

Working Cap, FD: ~$20M

 

Longterm debt: none (yet)

 

Minago NPV(8%): $200M (this figure has approx 35% subtracted out for taxes, which should be conservative)

 

Mel & Lac Rocher: No value assigned

 

Estimated (hopefully worst case) number of shares after financing: 380M

 

Value: ($20M + 200M)/380M = $0.6/share

 

Victory’s current share price stands at ~$0.5/share, so this is not a very exciting valuation. But this valuation should be worst case. Let’s consider the upsides:

 

1. Nickel prices: Minago is highly leveraged to nickel prices. $10 nickel bumps the NPV up to ~$490M or about $1.3/share. Current nickel price of about $12, if it could be relied upon for long term, bumps NPV up to about $1000M or about $1.7/share (this would be a 340% gain from current share price).

 

2. Debt financing: If they can debt finance 75% of the project rather than 50%, this would yield a share count somewhere around 275M shares which takes the valuation from $0.6 to $0.8/share.

 

3. Exploration upside - It appears that more resource may be brought into the bankable feasibility reserve category which will bump NPV up.

 

4. Mel & Lac Rocher: Both have the potential to significantly reduce the amount of financing required for the project.

 

5. Takeover prospects: This deposit is screaming for a mid-tier with free cash to take it over from Victory. Nickel sulphide deposits are in high demand. Consider Lionore, Rio Narcea, Inco, Falconbridge - all bought out within the last couple of years.

 

 

 

Technicals

 

I am not a technician but Victory’s share price has been falling significantly on nothing but good news and good exploration results. The drivers of this have been the popping of the nickel bubble and the thrashing given to all juniors in August. Some are concerned about a US economic recession. It looks like selling pressure is drying up, however, in the weekly chart judging by the falling volume (sorry I do not know how to paste in a chart).

 

 

 

Conclusion

Victory looks like an interesting investment. Production of any sort is over a year away, so it remains exposed to further downside. Management’s ability to finance the deposit without excessive dilution will likely determine how high the share price will go in the future. One good thing is that the equity financing will not be needed for another year so it is likely that the share price will recover between now and then, thus significantly reducing the dilution. Victory is one of the better looking options if one is looking to invest in a junior Canadian nickel miner.

 

Good Luck and Do your own DD,

Ace

 

 

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Thanks, Ace.

 

Certainly looks cheap.

 

I have my nickel already. But I may buy more.

 

I met Crowflight last year and like the story a lot, but I didn't buy as it had already moved up a lot. I will tale another look as maybe it will have pulled back.

 

notice mroe and more good news from GORO?

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I met Crowflight last year and like the story a lot, but I didn't buy as it had already moved up a lot. I will tale another look as maybe it will have pulled back.

 

notice mroe and more good news from GORO?

 

Crowflight sold off hard this past summer. Luckily I had lots of nickel cash (from Rio Narcea stake) ready to put to work at the right time. Their share price was pretty high during the nickel bubble, and then they got hit by the falling nickel price, credit crisis in August, and lots of el cheapo warrant expirations. I figure CML is worth somewhere around $1.4 - $1.5/share with current resource figures. They had a management change also within the past couple months, and it appeared to be for the better. Former Goldcorp executives, if I recall correctly. I never did really hear why the former CEO left; apparently he wasn't getting along with the Board?

 

Yes, good news from GORO. I will post the PR on that thread.

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This one is a sleeper...I think NI is going to be a big winner over the next couple of years. But then, what do I know? - all my base metal juniors have been castrated since November.

 

Victory Nickel Announces Continued Progress at Lac Rocher Project

Tuesday February 19, 12:53 pm ET

Plans call for first nickel production in 2008

 

 

TORONTO, ONTARIO--(Marketwire - Feb. 19, 2008) - Victory Nickel Inc. ("Victory Nickel" or the "Company") (TSX:NI - News; www.victorynickel.ca) is pleased to announce further positive results from metallurgical testing at its 100%-owned Lac Rocher nickel deposit in northwestern Quebec. A total of 15 flotation tests were completed by Corem in Quebec on material from the disseminated sulphide zone, yielding nickel recovery of 79.9% and copper recovery of 94.2% to a nickel/copper concentrate.

"These positive findings from the disseminated material are in-line with the excellent results announced late last year from the massive sulphide zone," said President Brian Robertson. "We expect to complete an updated resource estimate shortly and receive the preliminary economic assessment before the end of March. Our goal remains to be mining at Lac Rocher before the end of 2008.".....

 

Project Updates

 

The updated Lac Rocher resource estimate will incorporate drilling done in 2007 and include both nickel and copper resources. Along with these metallurgical results, the resource estimate will be incorporated into the preliminary economic assessment being prepared by Roche Engineering and expected to be completed this quarter. Discussions are moving forward with respect to permitting at Lac Rocher in line with the Company's target of commencement of production in 2008.

 

In addition to ongoing work at Lac Rocher, three diamond drills continue to turn at the Minago project on the Thompson Nickel Belt in Manitoba. The 2008 drilling is designed to expand and upgrade higher-grade mineralization at depth in the Nose Deposit, where the entire current resource is located, as well as to test the North Limb, a zone of mineralization with a known strike length of 1.5 kilometres located to the north of the Nose Deposit. The results of this winter drill program will be incorporated into a revised resource estimate that will form part of the definitive feasibility study. Metallurgical testing and evaluation of milling and other equipment is ongoing.

 

Also at Minago, Wardrop Engineering Inc. ("Wardrop") is completing a definitive feasibility study on the fracturing or hydraulic "frac" sand, a high-value by-product used to enhance recoveries in the oil and gas industry. The frac sand marketing study is expected to be completed this quarter.

 

At the Mel project, near Thompson, Manitoba, the Company is finalizing the work program for 2008 in conjunction with Vale Inco, details of which will be announced shortly, and metallurgical testing is planned to complete a preliminary assessment for mining.

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Victory was down today on heavy volume. Possible trouble with the natives? Hopefully we will get some better guidance this weekend.

http://biz.yahoo.com/ccn/080225/200802250444207001.html?.v=1

 

On the other hand, Allegiance mining has agreed to be taken over by Zinifex. The cost is about US$2.37/lb M&I&I nickel.

 

Victory is currently trading for less than $0.05/lb M&I&I nickel.

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Victory was down today on heavy volume. Possible trouble with the natives? Hopefully we will get some better guidance this weekend.

http://biz.yahoo.com/ccn/080225/200802250444207001.html?.v=1

 

On the other hand, Allegiance mining has agreed to be taken over by Zinifex. The cost is about US$2.37/lb M&I&I nickel.

 

Victory is currently trading for less than $0.05/lb M&I&I nickel.

 

 

What would you say about the fundamental, supply:demand picture for nickel? It seems that supply is FAR exceeding demand at the moment? I'm no expert in industrial metals; but......

 

lme-warehouse-nickel-6m-Large.gif

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What would you say about the fundamental, supply:demand picture for nickel? It seems that supply is FAR exceeding demand at the moment? I'm no expert in industrial metals; but......

 

Looks ugly, doesn't it? One thing is that much of the supply coming online now is high cost laterite deposits. This will set a floor (I hope) on nickel price around $10/lb as below that it is not economical to operate many of these mines.

 

I'm not worried about the supply/demand for nickel as much as I am the supply/demand for my nickel mining equites. And that demand is still very high as evidenced by all of the takeovers in the past couple of years.

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What would you say about the fundamental, supply:demand picture for nickel? It seems that supply is FAR exceeding demand at the moment? I'm no expert in industrial metals; but......

 

Nickel Rises to 3-Month High as BHP Billiton Mine Halts Output - Bloomberg, Feb 28 2008 9:31AM

 

Crowflight is busting a move here, but Victory is still stagnant presumably because they're about a year away from production. Victory, however, seems much more amenable to a takeover, by my analysis.

Got nickel?

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yup, independant nickel ini.to, western areas has taken all the land around ini's property (basically the old sherrat gordon mine)! also ini owns a royalty on one of ni's properties as i recall!

i suspect the strong moves in cml is maybe due to this perhaps - a leak maybe?

http://ca.us.biz.yahoo.com/ccn/080229/2008...66001.html?.v=1

Crowflight Drilling at Halfway Lake Intersects 13 Metres Grading 1.6% Nickel February 29

results for two of the four holes completed on its Halfway Lake project, located in close proximity to the Bucko Project south of Thompson, Manitoba. The most notable result is Hole HW08-02 that intersected 13.03 metres (42.8 feet) grading 1.58% nickel.

Nine holes totalling 4,800 metres have been completed since the commencement of the 2008 winter exploration activities on Crowflight's Xstrata Nickel joint venture (JV) properties in the Thompson Nickel Belt in January. Assay results are currently available for two of the nine completed holes. ..................................

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Victory is now busting a move also, and on very good volume.

Their deposit reminds me of Aguablanca - which Lundin lusted over. The grades keep looking better the deeper they drill.

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some good news for ini, i think

http://biz.yahoo.com/ccn/080731/200807310477136001.html?.v=1

Hunter Dickinson to Make Strategic Investment in Independent Nickel Thurs July 31,2008

 

Independent Nickel (TSX:INI ) announced today that it has agreed to terms of a $14 million financing with a private company in the Hunter Dickinson group ...Hunter Dickinson will subscribe for 40,000,000 Units of Independent Nickel at $0.35 per Unit, ..................the financing will be used to advance feasibility and other studies on Lynn Lake Nickel property.......Following the private placement, Hunter Dickinson will own approximately 40% of Independent Nickel's outstanding shares. If the warrants are fully exercised, Hunter Dickinson's ownership will increase to 57%......

http://ichart.finance.yahoo.com/z?s=CML.V&...amp;a=v&p=s

price graph shows that the market thinks these are all a much of a muchness!

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some good news for ini, i think

http://biz.yahoo.com/ccn/080731/200807310477136001.html?.v=1

Hunter Dickinson to Make Strategic Investment in Independent Nickel Thurs July 31,2008

 

Independent Nickel (TSX:INI ) announced today that it has agreed to terms of a $14 million financing with a private company in the Hunter Dickinson group ...Hunter Dickinson will subscribe for 40,000,000 Units of Independent Nickel at $0.35 per Unit, ..................the financing will be used to advance feasibility and other studies on Lynn Lake Nickel property.......Following the private placement, Hunter Dickinson will own approximately 40% of Independent Nickel's outstanding shares. If the warrants are fully exercised, Hunter Dickinson's ownership will increase to 57%......

http://ichart.finance.yahoo.com/z?s=CML.V&...amp;a=v&p=s

price graph shows that the market thinks these are all a much of a muchness!

 

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Crowflight is showing some interesting insider buying activity, including the CEO for almost $100k. Even the new CFO lady is buying:

 

Aug 01/08 Aug 01/08 Ladd, Anna Man-Yue Indirect Ownership Common Shares 10 - Acquisition in the public market 4,000 $0.345

Aug 01/08 Aug 01/08 Ladd, Anna Man-Yue Indirect Ownership Common Shares 10 - Acquisition in the public market 16,000 $0.340

Aug 01/08 Aug 01/08 Hoffman, Michael Indirect Ownership Common Shares 10 - Acquisition in the public market 300,000 $0.330

Jul 03/08 Jul 03/08 Collins, Gregory Direct Ownership Common Shares 10 - Acquisition in the public market 40,000 $0.480

Jun 05/08 Jun 03/08 Wilson, Bernard Direct Ownership Common Shares 10 - Acquisition in the public market 19,000 $0.640

 

 

Hopefully this means the startup is going well. Or maybe a potential acquisition in the works? Both FNX and Xstrata have publicly announced that they're looking for acquisitions in nickel. Crowflight seems rather small to me to be of interest to these operators, but they are on the edge of production and their equity has been obliterated so who knows?

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well,ace it looks like victory is acting as the white knight

i am thinking of accepting their offer mainly because if HD took a 40% stake in ini i doubt there would be any possibility of a takeover by western areas

the combined entity must surely be more attractive?

i wonder what pinetree's view is?

http://biz.yahoo.com/ccn/080903/200809030483435001.html?.v=1

Independent Nickel Board of Directors Supports Increase in Victory Nickel Takeover Offer

Wednesday September 3

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well,ace it looks like victory is acting as the white knight

 

It's a no-brainer for INI shareholders. For NI shareholders, we just get diluted for a 4th asset when the first 3 aren't even close to being developed yet.

 

All junior shares are worthless now anyway, so I guess it doesn't even matter anymore.

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Better volume for NI also. Is this due to RTP's statement that they are looking to acquire nickel assets? I would think NI is too small for RTP.

 

VICTORY NICKEL INC COM NPV(Toronto: NI.TO)

Last Trade: 0.17

Trade Time: 3:59PM ET

Change: 0.01 (6.25%)

Volume: 600,500

Avg Vol (3m): 143,047

 

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