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Victory Nickel announces frac sand loss for Q2 as insider Nuinsco sells stock
Pinnacle Digest's picture
Written by Pinnacle Digest
Pinnacle Professor
August 27, 2014
Categories: Commodities, frac sand operation, junior resource stock, Mining, Nuinsco Resources, Silica sand, Victory Nickel
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Victory Nickel (NI:TSXV) has experienced a surge in insider selling by Nuinsco Resources, despite recently moving its Alberta-based frac sand facility into production.

Nuinsco Resources, a fellow junior resource stock, has been the big seller in Victory’s market of late.

In an April 22, 2014 press release, Paul Jones, Nuinsco’s CEO commented that,

"Nuinsco's shareholdings of Victory Nickel, which increased significantly last year when the Company backstopped Victory Nickel's rights offering to an amount of $1,207,584 at a cost of $0.024 per unit."

Click here for full quote.

While he went on to discuss the potential of Victory Nickel's frac sand operation and other nickel properties. The shares acquired by Nuinsco during a very weak market have led to heavy insider selling by the company in Victory's market, including large blocks in the month of August.

Nuinsco acquired more than 50 million shares in Victory Nickel during that transaction.

Nuinsco bet right in 2013, when it ponied up $1.2 million and bought stock in Victory. A year later, Victory has completed the construction of a frac sand processing facility in Seven Persons, Alberta and is producing high quality frac sand.

The rush for high quality frac sand emerged earlier this decade as a new method of oil and gas extraction, known as fracking, spread throughout various oil and gas shales in the United States.

Silica sand, which is processed into frac sand, is incredibly strong. It has proven to be an ideal material to blast down drilling wells to open bedrock and release oil and gas. An exceptional amount of water is also needed for this process.

Studies have shown that a single well can use up to 10,000 tons of frac sand during its lifespan.

Victory sacrificed a lot to achieve its goal of production and now has roughly 571 million shares outstanding.

Victory's share price tripled towards the end of 2013 and into early 2014; this has put the shares purchased in 2013 by struggling Nuinsco well into the money.

According to insidertracking.com, Nuinsco has sold 4,885,000 million shares in Victory since July 22, 2014.

While Victory had a market cap of roughly $34.3 million Wednesday morning, Nuinsco had a market cap of only about $4.4 million.

Nuinsco is uniquely tied to Victory; on April 22nd Nuinsco agreed to convert its outstanding loan to Victory Nickel into a participating interest in net cash flows from Victory Nickel's frac sand business. Aside from announcing that it had begun processing its Prairie Lake Bulk Sample targeting REEs, the company has been relatively quiet for some time. Its 52-week high is $0.035 and low is $0.01.

Victory Nickel announced its Q2 financial results on August 14th. Like many newly commissioned facilities there were some speed bumps. The company reported a net loss of $2,349,000 for the six months ended June 30, 2014. And that, "Of this loss, $1,012,000 was net finance costs to fund the construction of the 7P Plant; many such costs are non-cash items."

Keep in mind, the company had only produced 22,519 tons of various grades of finished frac sand through to the end of June 2014.

The subtitle of Victory's most recent press release from August 14th's read:

Company expects to exit Q3 at 500,000 tpa annualized frac sand production rate

Click here to read the entire press release from August 14th.


It is obvious Victory Nickel remains in the early stages of processing frac sand and has a long way to go to reach profitability. Nevertheless, the payout could be substantial for both companies; Victory and Nuinsco are hoping the company can achieve its stated goal of 500,000 tons of annualized frac sand production and subsequently become profitable.

While Nuinsco showed its confidence Victory will deliver by opting to convert its outstanding loan to Victory Nickel into a participating interest in net cash flows from Victory Nickel's frac sand business, its actions in Victory’s market tell a different story.

Nuinsco reported:

Under the terms of the loan agreement (see news release of March 26, 2013), Nuinsco has the right to convert the outstanding balance of the Loan into a participating interest (the "Conversion") whereby Nuinsco is entitled to receive a share of net cash flows earned from Victory Nickel's frac sand business. Nuinsco's participation is capped at $7,667,124 provided Victory Nickel completes Phase 2 of its three- phase business plan, otherwise Nuinsco is entitled to a maximum of $10,222,831. Victory Nickel will recover its capital investment in the 7P Plant and working capital prior to being required to share cash flow with Nuinsco.

Click here to read the entire press release from April 22, 2014.


The cost incurred to complete the construction of the 7P Plant totalled $5,364,000 including leased equipment of $703,000. With the financing costs to complete construction behind Victory Nickel and a dramatic increase in production expected at its plant in Q3 and Q4, the company has achieved much in a short period of time. The next few quarters will be everything for Victory Nickel as it moves towards sustainability and potential profitability at its 7P frac sand processing plant in Seven Persons, Alberta. Whether or not insider selling will hold the share price in check despite the company’s accomplishments to date is yet to be seen.