Victory Silica Ltd. The Right Product. The Right Place. January - PowerPoint PPT Presentation

Victory Silica Ltd. The Right Product. The Right Place. January 2014 The Right Time.

Company Profile –Victory Nickel ���� �� NI:TSX – Share Capital Structure Shares Outstanding ~567 million Victory Victory Fully Diluted Shares * ~712 million Nickel Inc. Silica Ltd. Market Capitalization $17.0 million (100%) Cash $4.1 million *~32 M options ($0.08 average exercise price); ~113 M warrants ($0.035 exercise price) Major Shareholders • Nuinsco Resources Ltd. 12.2% • Management & Directors 11.5%* • Prophecy Coal 5.7% • Sea Shell Limited 4.1% • Jien International 2.1% *Includes A&M 2

Why Victory Silica? ���� �� Very strong market fundamentals for frac sand � � Near-term cash flow � Minimal capex required A New Story with � Experienced management Extreme Value � Precedent IPO transactions � Large domestic resource Potential to become the ����������������� ����������������� ����������������� ����������������� of the ���������������� ���������������� frac sand for delivery in Canada ���������������� ���������������� 3

Experienced Management Victory Silica Limited ���� �� René R. Galipeau / Chairman 35+ years mining experience with Hudson Bay, Breakwater Resources, Lac Minerals, Rio Algom. Current Vice-Chairman and CEO of Victory Nickel. Ken Murdock / CEO & Director Engineer with over 25 years experience in the aggregate/construction & oilfield materials industries. President IM&M Consulting (raw materials acquisition, waste disposal and manufacturing consultant to industrial mineral, glass and oilfield industries). Formerly with Canfrac Sands Ltd. (operations), United Industrial Services Ltd. (design, permitting, construction, operation and marketing of a silica sand project in Peace River) and Lafarge Cement. M.Eng., McGill University D. Brent Lock / Vice-President, Marketing Extensive marketing experience in the frac sand industry. Formerly Vice-President, Operations / Marketing & General Manager with Canfrac Sands Ltd. Prior to that, held a variety of operations and marketing positions in the oil & gas sector over the course of 26 years for companies including Gulf Canada Resources Ltd., Amerada Hess Canada Ltd. and Apache Canada. Phillip Birmingham / General Manager, Seven Persons Frac Sand Facility Diverse background, including seven years with the British Army's Royal Mechanical and Electrical Engineers and operations and management positions with Crane Canada, Allwest Compressor Services and most recently as General Manager with 3R Sand Ltd. (the previous operator of the Seven Persons frac sand facility) and Clean Earth Environmental Ltd. Troy Bergen / Plant Manager, Seven Persons Frac Sand Facility Operated the Seven Persons frac sand facility between 2008 and 2010 with previous owner 3R Sand Ltd. Prior to that, he was Operations Manager with Clean Earth Environmental Ltd. 4

Victory Silica Objectives ���� �� � Establish immediate entry in frac sand market � Use resulting cash flow to support growth � Goal of becoming preferred supplier of highest quality import and domestic frac sand products to the Canadian market � Unlock the long-term value of the Minago premium frac sand resource � Create a non-dilutive structure to fund development Victory Silica will be a premier frac sand supplier with Minago as a high quality strategic asset 5

Shale Gas / Tight Oil Revolution Frac Sand Boom ���� �� � Unconventional ‘shale gas’ and ‘tight oil’ previously uneconomic to recover at a large scale � Efficiency gains in horizontal drilling and the introduction of ‘fracking’ helped unlock vast natural gas and oil resources � The rapid implementation of technology changed the North American energy landscape, with a “sand boom” being a resulting factor � “Unconventional gas production reached 15% of worldwide production in 2010, and is expected to rise to 80% by 2040.” (The Globe & Mail, August 21, 2013) � The Freedonia Group reports that frac sand consumption in North America increased by 323% between 2007 and 2012, and is expected to increase by 73% by 2017 Frac sand is an effective way to participate in ‘unconventional’ oil and gas production growth 6

What is ‘Fracking’? Frac Sand? Not all sand makes frac sand! ���� �� �������������������� or ‘fracking’ is a technique used in the development � of oil & gas formations ������������������������������������� ������������������������������������� ������������������������������������� ������������������������������������� . Proppant (such as frac sand) holds the formation open, increases porosity, and increases oil/gas flow to the wellhead ���� ����� must meet unique API specifications such as ���������� ���������� , ���������� ���������� � ��������� and �������� for use in the oil & gas industry as a proppant Victory Silica Frac Sand 7 30/50 20/40

Frac Sand Market Booming in North America ���� �� 8

Proppant / Frac Sand Market Historical & Projected Demand ���� �� North American Proppant Demand (billion pounds) % Annual Growth Item 2007 2012 2017 2007-2012 2012-2017 Proppant Demand 13.960 59.100 102.400 33.5 11.6 By Country: U.S. 12.270 53.260 89.950 34.1 11.1 Canada 1.690 5.840 12.450 28.1 16.3 Oh, Canada! By Type: Sand 12.276 53.550 93.900 34.3 11.9 Ceramic 1.639 5.272 8.040 26.3 8.8 Other 45 278 460 43.9 10.6 Source: The Freedonia Group, Inc. Double digit annual proppant demand growth expected with Canada leading the way 9

North American Shale Basins Initial Supply Opportunities for Victory Silica ���� �� Manitoba, Saskatchewan, Alberta, B.C., North Dakota Minago Medicine Hat Winnipeg (Seven Persons) Wisconsin Mine 10

Business Plan Phased Approach – Overview ���� �� � Phase 1: Seven Persons – processing infrastructure in Alberta � Phase 2: Wisconsin Mine – security of supply, higher margins � Phase 3: Winnipeg Facility – superior logistics, unlock value of Minago � On-going : Potential consolidation opportunities in a fragmented industry 11

Phase 1 Seven Persons – Medicine Hat, Alberta ���� �� � Initially process purchased import wet sand (concentrate) at $35/ton from existing mines in Wisconsin � Short lead time to production � Fully-functioning sand plant on 22.4 acres � 30,000 tons of frac sand storage capacity � ~$3.5 M capex to take dry plant sales capacity to 400,000 tpa � First shipment: 2013 Phase 1 Capex (financed) US$3.5 million Working Capital (Phases 1&2) US$4.3 million Annual Sales Capacity 400,000 tons Estimated Margin ~$25/ton 12

Phase 2 Wisconsin Mine Joint Venture ���� �� � Acquire and operate a Wisconsin Mine � Obtain access to highest quality sand � Provides security of supply and higher margins � Resource estimate: 4 million tons per parcel � Immediate sand production � Permitted properties available � Construct concentrator at Mine Source: Wisconsin Geological and Natural History Survey Phase 2 Capex US$4.4 million Annual Sales Capacity 400,000 tons Estimated Margin $>25/ton 13

Phase 3 Winnipeg Processing Site ���� �� � Build second processing facility in Winnipeg � Lease existing rail-supported industrial site � Construct new dry facility – 18 mos. from start � Consider logistics company participation � Supply from Wisconsin and area � Minago longer-term supply option Phase 3 Capex US$26.1 million Working Capital US$15.3 million Annual Sales Capacity 1,040,000 tons Estimated Margin $>25/ton 14

Victory Silica Future Growth / Consolidation Opportunities ���� �� � Minago Development – 100-year+ frac sand potential � Advanced custom processing discussions: � Potential to reach new markets � Fixed production cost, contract-based, no capital cost � US processing facility: � Reach active Pennsylvania market � 1,000,000 tons annual capacity; ideal location identified with available infrastructure, capital cost of ~ $32 million � Acquire and permit additional well located mines supplying high quality sand from Wisconsin/Minnesota � Potential future consolidation of industry 15

Phases 1-3 Total Production and Capital Requirement ���� �� Phase Production Capex Working Capital (tons) (US$) (US$) Phase 1: 400,000 $3,500,000 $4,300,000 (imminent production) Phase 2: $4,400,000 Nil (3 months from start) 400,000 $7,900,000 $ 4,300,000 Total: Seven Persons Phase 3: Winnipeg Facility 1,040,000 $26,100,000 $15,300,000 (18-month construction period) Total 1,440,000 $ 34,000,000 $19,600,000 16 16