The data below are from parts of the “Letter to Shareholders” on Victory View of June 22012, pages 1 and 8 and urge everyone to read it....


I will instead try to describe what is happening in the nickel market and why we continue to believe that Victory Nickel is on the right track when it explains that now is the time to develop the Minago project, a sulphide nickel mine.


Why do we emphasize “sulphide” nickel mines? One of the reasons is that recovery of nickel from sulphide ores is not new technology. Presently, nickel production from sulphide ores continues to represent the largest commercially-viable source of nickel.


We have heard much about the growth of production from laterite deposits over the last couple of decades. Laterite ore requires non-conventional treatment. One such process is the high pressure acid leach or “HPAL” as it is commonly referred. This process is expensive as it requires high heat which means high energy costs. In addition, the hot acid results in expensive wear and tear on equipment.


Some laterites can be treated by heap leaching which is cheaper than HPAL, but ore with specific characteristics is required.


Another laterite that we have heard much about lately is nickel pig iron or “NPI,” a low grade ferronickel ore. NPI contains 47-59% iron and 0.8-1.5% nickel. The Chinese have developed a process whereby they blend the ferronickel ore with conventional iron ore to produce stainless steel feed products. The majority of this material is mined in the Philippines and Indonesia and consumed in India and China.


The cost to produce the equivalent of one pound of nickel from NPI is said to be US$8.00 to US$9.00 per pound. However, the Indonesian government has announced that it will curtail the export of lateritic ore by 2014 and will soon be starting the process by adding a 20% export tax.This tax is said to add US
.50 to US
.70 to the cost of producing a pound of nickel and is a first step toward a total ban on exports. The tax is expected to increase to 50% in the very near future. Most of the growth in nickel in recent years has been taken up by NPI.
According to Australia’s Bureau of Resources and Energy, total world production of nickel in 2011 was 1,942,000 tons and is expected to grow to 1,984,000 tons in 2012.


Chinese ports are reported to have 2.9 million tons of laterite ores stored as producers increase exports in advance of the tax. This inventory alone represents almost all of the increase in nickel production forecast for 2012. So where’s the future for laterites? Only time will tell. Better yet, where’s the future for sulphide deposits.


So the large inventory is not the result of lack of demand, but the result of a tax on laterites.