Victory Nickel Inc. reported financial results for the three- and nine-month periods ended Sept. 30, 2015. Effective Oct. 1, 2014, the company changed its functional currency and presentation currency to the United States dollar from the Canadian dollar.
The company reported a consolidated net loss of $1,599,000, or $0.03 per share, on sales revenue of $325,000 for the three months ended Sept. 30, 2015. The selling price of frac sand dropped during the third quarter of 2015 necessitating a write-down of inventory, to the lower of cost or net realizable value, in the amount of $378,000 plus an amount of $116,000 for obsolete inventory which is included in cost of sales.
During the nine-month period ended Sept. 30, 2015, the company recorded a net loss of $2,776,000, or $0.05 per share, on revenues of $2,478,000. This compares with a net loss of $373,000, or $0.01 per share, and a net loss of $2,512,000, or $0.04 per share, on revenues of $5,463,000 and $6,773,000 in the first three and nine month periods respectively of 2014 during which the company was in the pre-operating stage at the 500,000 tpy-capacity frac sand plant in Alberta, Canada.
“The material drop in the price of oil over the past year has resulted in oil and gas exploration and production companies significantly decreasing their activities in our market area,” the company said. “After coming to a full stop in the first quarter of 2015, frac sales resumed in May 2015. During the third quarter of 2015 sales totaled 2,829 tons of frac sand, compared with 34,892 tons for the same period of 2014.”
Revenue per ton of frac sand in the third quarter of 2015 was 24 percent lower than in the corresponding period during 2014 at $114.88, resulting in a negative gross margin of $563,000 after an inventory writedown of $494,000. This compares with revenue per ton of frac sand of $149.98 in the third quarter of 2014.
“With a significant inventory of premium-quality Northern White Wisconsin frac sand at various stages of completion at the 7P Plant, Victory Nickel is well-positioned to meet customers' needs when frac sand demand returns,” the company said. “The slowdown is also presenting opportunities and Victory Silica's management is actively pursuing these opportunities that should make the company more competitive in the future, it noted.”