TORONTO, ONTARIO--(Marketwired - Feb. 25, 2015) - Victory Nickel Inc. ("Victory Nickel" or the "Company") (TSX:NI) today provided an update on operations and developments for its 100%-owned subsidiary, Victory Silica Ltd. ("Victory Silica").

• Fourth quarter frac sand production was 47,515 tons, an increase of 21% over third quarter 2014 production, though still short of the potential of the Company's Seven Persons facility (the "7P Plant") near Medicine Hat, AB, estimated at 114,384 tons for the quarter.
• Production shortfall is largely a result of delayed rail deliveries of sand feedstock from Wisconsin, unseasonably cold weather that affected unloading activities at the Company's rail siding near the 7P Plant, operating inefficiencies related to plant availability and on-going staff training as production ramped up. The Company has already implemented measures to mitigate the effect of these issues on a go-forward basis.
• The industry trend toward increasing proppant intensity (more fracking stages per well using more proppant per stage) is expected to somewhat offset the potential impact on frac sand demand of the decreasing North American rig count due to the lower oil price.

Frac Sand Production

Throughput at the 7P Plant during the fourth quarter of 2014 was 55,588 tons, resulting in production of 47,515 tons of saleable frac sand product. As depicted in Figure 1, this compares with third quarter production of 39,121 tons of frac sand and 22,519 tons from the start of commissioning to June 30, 2014 bringing annual production to 109,155. Although an improvement over the prior quarters, production fell short of the 7P Plant's potential for several reasons. Importantly, none of these reasons were related to product demand.

At the end of October, 2014, the Company announced the hiring of a fourth crew necessary to operate the 7P Plant at a 24 hour-per-day seven day-per-week basis. At the rated capacity, the potential throughput for the fourth quarter was 114,384 tons; actual throughput represents 49% efficiency. The waterfall chart shown in Figure 2 highlights the primary reasons for the production shortfall. All of these issues are expected to be temporary and have already been or are currently being addressed.

During the fourth quarter, production was impacted by inefficiencies experienced while training new operators and by excessive staff turnover as the Company builds a dependable workforce. Dryer and other equipment breakdowns were more frequent than expected. Unseasonably cold weather in Wisconsin early in the winter season hampered delivery and unloading activities at the Seven Persons rail siding resulting in a reduction of concentrate feed to the 7P Plant. Most significantly, delivery delays on the part of the railroad contracted to ship sand from Wisconsin to the 7P Plant resulted in sand concentrate being delivered at a slower than anticipated rate. These delays in rail car movements caused rail car cycle times to increase and the 7P plant to run out of sand concentrate feed on several occasions. The rail car cycle time for movements from Winona, MN to the 7P Plant and back increased from an average of 34 days in the third quarter to an unacceptable average of 48 days in December. Rail cycle times have recently improved with the use of a second transload point in St. Paul, Minnesota (see news release dated January 9, 2015) and the Company's work with its rail provider to rectify this situation at its original transload in Winona. The Company also intends to expand its fleet of rail cars to increase sand haulage capacity to feed the 7P Plant. The Company plans to build sand concentrate inventory at the 7P Plant to ensure consistent availability for customers when rail and/or operational delays occur that are beyond the Company's control.

"It is unfortunate that these teething problems slowed the expected production growth rate at the 7P Plant as we were able to sell every ton of frac sand produced," said Ken Murdock, Victory Silica's CEO. "The Company has established itself as a provider of a superior product and must now prove itself as a reliable supplier. By focusing on product quality and customer service, we are confident in our ability to grow market share throughout the cycle and will take every opportunity to do so."

Market Trends

Investors are well aware that oil and natural gas prices have dropped significantly since the beginning of October, 2014. This dramatic and unexpected change has led to significant uncertainty and reduced visibility with regard to the outlook for the energy sector and associated industries, including oilfield services, in 2015.

Not surprisingly, the Company is seeing a decline in demand, and downward pressure on pricing, for its frac sand products. In line with lower commodity price expectations, many industry analysts are forecasting a reduction in capital expenditures by oil and gas exploration and production ("E&P") companies in 2015. At the same time, many in the industry are calling for the trend toward higher proppant intensity as a means of optimizing well production to have a positive impact on frac sand demand. Proppant intensity is measured by the number of stages fracked per well and the amount of proppant, principally frac sand, that is used per stage. The amount of proppant used is on the rise as E&P companies see significant well productivity increases driven by the use of higher proppant volumes, up to 10,000 tons per well in some cases. In the currently challenging oil price environment, E&P companies are doing whatever possible to optimize well production, including using more frac sand.

Victory Nickel will continue to focus on providing the highest quality frac sand products to its customers and expects the 7P Plant to be producing at the 500,000 ton-per-year ("tpy") rate before the end of 2015.

Business Strategy

Victory Nickel was able to sell all of the frac sand it produced at the 7P Plant in 2014, but as a result was not able to amass a significant finished product. This situation is expected to change when drilling and well-completion activity slows during the annual spring break-up season. A build-up of inventory will provide flexibility to mitigate the impact of future sand supply disruptions or operating issues leading to plant downtime.

In late 2014, Victory Nickel's board of directors authorized the Company to proceed with Phase 2 of its three-phase frac sand business plan (see full description below), including construction of a frac sand wash plant in Wisconsin. In light of the macro-economic issues and related uncertainty that are currently impacting the oil and gas sector, management has deferred the decision to order construction of the Phase 2 wash plant. Phase 1 of the business plan was designed to enable the Company to enter the frac sand market with minimal capital expenditure and low fixed costs to allow it to adapt to frac sand demand fluctuations. Although building the wash plant is highly desirable, in the current uncertain market environment it would not be prudent to add fixed costs. This decision will be re-evaluated at the appropriate time, or in the event that non-dilutive financing for construction of the Phase 2 plant is secured.

"During 2014, Victory Nickel achieved a great many goals as it completed construction of the 7P Plant and entered the frac sand market. By focusing on quality, the Company has built a solid base of approximately a dozen oilfield services customers selling our frac sand products to numerous E&Ps operating in a variety of basins in Saskatchewan, Alberta and North Dakota," said René Galipeau, Victory Nickel's CEO. "While there are a great many headwinds in the frac sand industry today, we remain confident in our business plan and in the continued demand for frac sand in our target markets. We will continue to focus on providing quality products and on optimizing our frac sand operations in a financially prudent manner and fully expect to be well positioned when the energy price cycle rebounds."

About Frac Sand

Frac sand is a proppant used in the oil and gas business as a part of the hydraulic fracturing process - a means of increasing flow to the wellhead. Frac sand must have particular characteristics including achieving certain levels of crush resistance, sphericity and roundness, and it is therefore a relatively rare commodity. With up to 10,000 tons of proppant now being used per well, frac sand has become an increasingly important factor in maximizing recovery from oil and gas drilling in Canada and the US.

About Victory Silica Ltd.

Victory Silica is a wholly-owned subsidiary, with a phased plan to establish Victory Nickel in the frac sand market. In Phase 1, the Company began sales in 2014 of premium quality Midwestern White frac sand from the 7P Plant by shipping partially-processed sand purchased in Wisconsin to the 7P Plant for final processing and distribution. The 7P Plant is well located in an area populated with fracking companies, its potential customers, and is within only a few hours' trucking distance of major oil and gas play well sites. Phase 2, which includes the construction of a concentrator in Wisconsin, will reduce costs and assure security of sand supply through the control of a frac sand mine in Wisconsin. In Phase 3, Victory Silica has identified a site in Winnipeg, Manitoba, where it plans to build a larger frac sand plant to process and distribute both imported and domestic sands, including sand mined as a co-product of development of a nickel mine at the Company's 100%-owned Minago project in Manitoba.

About Victory Nickel Inc.

Victory Nickel Inc. is a Canadian company with four sulphide nickel deposits containing significant NI 43-101-compliant nickel resources. Victory Nickel is focused on becoming a mid-tier nickel producer by developing its existing properties, Minago, Mel and Lynn Lake in Manitoba, and Lac Rocher in northwestern Québec, and by evaluating opportunities to expand its nickel asset base. Through a wholly-owned subsidiary, Victory Silica Ltd., Victory Nickel has established a presence in the frac sand market prior to commencing frac sand production and sales from Minago.

Please visit the Company's website at www.victorynickel.ca. Should you wish to receive Company news via email, please email [email protected] and specify "Victory Nickel" in the subject line.

Forward-Looking Information: This news release contains forward-looking information. All statements, other than statements of historic fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future constitute forward-looking information. This forward-looking information reflects the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: uncertainty of estimates of capital and operating costs, production estimates and estimated economic return; the possibility that actual circumstances will differ from estimates and assumptions; uncertainties relating to the availability and costs of financing needed in the future; failure to establish estimated mineral resources; fluctuations in commodity prices and currency exchange rates; inflation; recoveries being less than those indicated by the testwork carried out to date (there can be no assurance that recoveries in small scale laboratory tests will be duplicated in large tests under on-site conditions or during production); changes in equity markets; operating performance of facilities; environmental and safety risks; delays in obtaining or failure to obtain necessary permits and approvals from government authorities; unavailability of plant, equipment or labour; inability to retain key management and personnel; changes to regulations or policies affecting the Company's activities; the uncertainties involved in interpreting geological data; and the other risks disclosed under the heading "Risk Factors" and elsewhere in the Company's annual information form dated March 31,2014 filed on SEDAR at www.sedar.com. Forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking information, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking information are reasonable, forward-looking information is not a guarantee of future performance and accordingly undue reliance should not be put on such information due to the inherent uncertainty therein.

To view Figures 1 and 2 please click on the following link: http://media3.marketwire.com/docs/0225NI.pdf