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Nuinsco Enters Into Loan Agreement with Victory Nickel

Nuinsco Resources has entered into a loan agreement to provide Victory Nickel Inc. with a secured loan facility of up to $3 million. The loan bears interest at 12 percent per annum, payable quarterly in arrears, and matures on Jan. 31, 2015.

Nuinsco has advanced $1 million of the loan to be used for general corporate purposes by Victory Nickel. The balance of available funds are to be used to fund capital expenditures relating to the Seven Persons frac sand plant located southwest of Medicine Hat, Alberta which Victory Nickel has agreed to purchase subject to certain conditions

At Nuinsco’s option and under certain circumstances, Nuinsco can elect to receive prepayment of $1 million of the loan from the proceeds of an option payment due from a prior sale of a property and payable in periodic installments through August 2014.

Prior to June 1, 2014, Nuinsco has the right to convert the outstanding balance of the Loan into a participating interest whereby Nuinsco is entitled to receive a share of cash flows earned from the sale of frac sand from the 7P Plant.

Nuinsco’s participation is capped at $10 million, with a minimum of $7.5 million, and is subject to adjustment under certain circumstances. On conversion, the loan would be considered paid in full. Nuinsco has also agreed to backstop an equity issue, if any is undertaken by Victory Nickel, with cash or by converting a portion of the Loan into shares, at Nuinsco’s option to an amount up to $1.5 million under certain circumstances. In addition to the cash interest payments, Victory Nickel will pay to Nuinsco an arrangement fee of up to $300,000, depending on the amount of drawdown, plus a commitment fee of 1.5 percent per annum on unadvanced balances, both payable in shares.

“We see a tremendous opportunity to earn exceptional returns in the very near-term for Nuinsco shareholders from Phase 1 of Victory Nickel’s three-phased entry into the frac sand business through its subsidiary Victory Silica Ltd.,” said vice-chairman and CEO René Galipeau. “Nuinsco’s investment is well secured by Victory Nickel’s assets and VSL is being led by a frac sand industry veteran, Ken Murdock. The conversion privilege means Nuinsco has the potential to benefit directly and quickly from the success of the frac sand business which is forecast to continue to grow in Canada and the United States. Victory Nickel expects to begin generating cash flow before the end of 2013. We all know the importance of generating cash in this equity market environment.