Prophecy to Acquire Advanced Gibellini Vanadium Project in Nevada
Prophecy to Acquire Advanced Gibellini
Vanadium Project in Nevada
Vancouver, British Columbia, May 8, 2017 – Prophecy Development Corp.
(“Prophecy” or the “Company”) (TSX:PCY, OTCPK:PRPCF, Frankfurt:1P2N) has entered
into a binding letter agreement (the “Letter Agreement”) with arm’s-length, private parties
(the “Lessor”) to acquire through lease, the Gibellini vanadium project in Nevada, USA (the
“Gibellini Project”) with the intent to carry-out mining operations there.
Proposed Transaction Summary
Under the Letter Agreement, Prophecy will lease the Gibellini mining claims which
constitute the Gibellini Project by paying to the Lessor, annual advance royalty payments
which will be tied, based on an agreed formula (not to exceed US$120,000 per year), to the
average vanadium pentoxide price of the prior year.
Upon commencement of production, Prophecy will maintain its acquisition through lease of
the Gibellini mining claims by paying to the Lessor, a 2.5% net smelter return (“NSR”) until a
total of US$3 million is paid. Thereafter, the NSR will be reduced to 2% over the remaining
life of the mine (and referred to thereafter, as “production royalty payments”).
All advance royalty payments made, will be deducted as credits against future production
royalty payments.
The lease will be for a term of 10 years, which can be extended for an additional 10 years at
Prophecy's option.
By combining the advanced -stage Gibellini Project in Nevada , USA, with the Company's
100%-owned, Titan titanium -vanadium project in Ontario , Canada, Prophecy is well -
positioned with these two quality vanadium projects , to be the leading North American
vanadium exploration company. The Company's objectives for these two projects are to:
1. Provide exposure and leverage to rising vanadium prices by defining and adding
attributable vanadium resources in the ground in politically safe jurisdictions.
2. Build th e first vanadium mine in North America by steadily advancing mine
permitting, project financing and construction.
Prophecy is very encouraged by recent news regarding vanadium car battery development,
the growing adoption of vanadium redox flow batteries to increase power availability from
renewable energy in the utilit ies industry, and the doubling of vanadium prices in the last
twelve months.
Gibellini Project Summary
Based on the Company's research, the Gibellini open pit, heap leach project has
the pot ential to become the first primary vanadium mine in the U nited States .
The Gibellini Project is located in Eureka County, Nevada, about 25 miles south of
the town of Eureka.
The property is situated on the east flank of the Fish Creek Range in the Fish Creek
Mining District, and is easily accessed by a graded gravel road extending south
from US Highway 50.
The project is comprised of 40 unpatented lode claims totaling approximately 771
acres in the state of Nevada , which is ranked among the world's top 10 mining
jurisdictions according to the Fraser Institute . Opportunities also exist to further
expand the project beyond its current definition.
AMEC E&C Services, Inc. (“ AMEC E&C ”) prepared the Gibellini Project resource
estimate and feasibility study titled “American Vanadium, Gibellini Vanadium
Project” having an effective date of August 31, 2011 for American Vanadium Corp .
(“AVC”) following the guidelines of the CIM Definition Standards for Mineral
Resources and Mineral Reserves. The report which was prepared according to the
disclosure requirements of National Instrument 43 -101 – Standards of Disclosure
for Mineral Projects (“ NI 43 -101”) outlined 7.9 million tons at a weighted average
grade of 0.32% vanadium pentoxide (V 2O5) in the measured category and 15.16
million tons at a weighted average grade of 0.28% V 2O5 in the indicated category
making for a total resource of 23.05 million tons at a weighted average grade of
0.29% V 2O5.* Total metal content of the measured and indicated category
resources i s 131.37 million pounds V 2O5. The inferred category resource is 14.23
million tons at a weighted average grade of 0.17% V 2O5. The total metal content of
the inferred category resource is 49.42 million pounds V 2O5 (more resource details
in table below).
Gibellini Hill Mineral Resource Estimate
Resource
Category Domain (1) Cut -off V 2O5
(%)
Tons (2)
(M)
Grade (3)
(%V 2O5)
Metal Content
(M lbs V 2O5)
Measured Oxide 0.08 3.95 0.25 19.83
Transition 0.07 3.95 0.38 29.88
Indicated Oxide 0.08 8.01 0.22 35.05
Transition 0.07 7.15 0.33 46.62
Total Measured and Indicated various 23.05 0.29 131.37
Inferred Oxide 0.08 0.16 0.20 0.98
Transition 0.07 0.01 0.22 0.07
Reduced 0.09 14.05 0.17 48.37
Total Inferred various 14.23 0.17 49.42
Notes:
(1) Mineral resources are reported by mineralization domain. Domains are laterally continuous portions of
the ore body having a grade determined by oxidation state that is relatively consistent and distinct from
adjacent domains.
(2) Specific gravity measurements used are specific to the domain. Mineral resources are reported within a
conceptual Lerchs -Grossman pit shell using a long -term V 2O5 price of US$12.59/lb, estimated mining and
processing costs, and processing recoveries that a re based on the oxidation state of the deposit.
(3) No capping of assays but three composites were capped at 1.5%. Dilution is not included.
Other notes: Categories are referred to as classes in the AMEC E&C resource estimate and feasibility study.
Rounding of numbers required by reporting guidelines may result in summation differences. Abbreviations:
M=million, lbs=pounds
Based on the feasibility study base case, the Company projects mine production to
average 11.4 million pounds of vanadium pentoxide per y ear at 66% recovery.* This
could enable Gibellini to potentially supply up to 3% of current global vanadium
demand .
As estimated by the Company based on the feasibility study , the Gibellini Project
could potentially become a low -cost primary vanadium producer because of the low
strip ratio of 0.22 and a unit operating cost of US$4.10/lb of vanadium product. The
study's base case scenario places the Gibellini Project's after tax IRR at 43%, and
after tax NPV at US$170.1M at a 7% discount based on capital cost of US$95.5
million and US$10.95/lb vanadium pentoxide price.
*The historic Gibellini mineral resource estimate that was prepared by AMEC E&C for AVC
has an effective date of July 31, 2011. Results of the stud y were disclosed previously by
AVC in accordance with NI 43 -101 and are considered historic in nature by the Company.
Mineral resources are reported inclusive of mineral reserves. This historical estimate was
prepared using currently accepted methods and assumptions but the costs and prices
assumed are not current. It is considered relevant in that the estimate was prepared for the
resource area the Company intends to lease and acquire and open pit mining was
assumed. It is considered reliable since the geologic model developed by AVC geologists
was used. This historical estimate assumed open pit mining, on -site processing by heap
leach followed by solvent extraction and precipitation, and all services provided by a
contract miner. The key parameters f or resource estimation included ten foot composites
that hono ured the domain, grade was interpolated to a distance of 110 ft from the
composites, composite grades greater than 1% V2O5 were capped to 1% V2O5 beyond 110
ft, the domain boundaries and a minimum grade of 0.05% V2O5 were used to limit grade
interpolation, and a long-term V2O5 price of US$12.59/lb was used. The key methods used
include consideration of lithology, alteration and assay results to establish oxidat ion
domains, capping assays and composites as described previously, variography, ordinary
kriging, and validations to assess potential bias. The historical estimate uses the same
resource classes described in Section 1.2 of NI 43 -101. The historical esti mate does not
include any more recent data or estimates available to the Company. The work needed to
upgrade the historical estimate as current mineral resources is to use current costs and
metal prices. A qualified person has not done sufficient work to classify the historical
estimate as current mineral resources. The Company is not treating the historical estimate
as current mineral resources. Mineral resources that are not mineral reserves do not have
demonstrated economic viability.
With the onsit e production process designed to yield vanadium pentoxide , the
project is expected to create opportunities for direct off -take agreements with the
steel industry. Furthermore, since the process already yields vanadium in sulfuric
acid in an intermediary step to producing vanadium pentoxide, it is expected that
this intermediary product can be pulled from the process and used directly as an
electrolyte for grid -scale energy storage batteries.
Further Details Regarding the Proposed Transaction
The proposed transaction is subject to Prophecy being satisfied with the results of its due
diligence inquiries into the Gibellini Project.
The parties have agreed to replace the Letter Agreement by entering into a more
comprehensive definitive agreement by May 17, 2017.
The Letter Agreement includes a commitment by the Lessor to not solicit, pursue or
negotiate alternative offers with other parties for the Gibellini Project.
Upon completion of the proposed transaction, Prophecy wil l evaluate the Gibellini Project
economics in relation to prevailing vanadium metal prices prior to making any project
development plans. At the appropriate time, joint venture partners may be sought to
develop the Gibellini Project.
Prophecy maintains ded icated staff at its regional offices in Bolivia and Mongolia , to bring
the Pulacayo silver -zinc-lead project in Bolivia to production and continue advancement of
the Chandgana mine-mouth power plant in Mongolia through a concession agreement and
power purchase agreement.
Qualified Persons
The technical contents of t his news release have been prepared under the supervision of
Christopher M. Kravits, CPG, LPG, General Mining Manager of Prophecy. Mr. Kravits is a
Qualified Person as defined in NI 43-101. Mr. Kravits is a consultant to the Company and is
not independent of the Company since most of his income is derived from the Company.
About Prophecy
Prophecy Development Corp. is a Canadian public company listed on the Toronto Stock
Exchange that is engaged in worldwide mineral and energy exploration and development.
Further information on Prophecy can be found at www.prophecydev.com.
PROPHECY DEVELOPMENT CORP.
ON BEHALF OF THE BOARD
“JOHN LEE”
Executive Chairman
For more information about Prophecy, please contact Investor Relations:
+1.888.513.6286
www.prophecydev.com
Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the Toronto Stock Exchange) accepts responsibility for the
adequacy or accuracy of this release.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this news release, including statements which may contain
words such as “expects”, “antic ipates”, “intends”, “plans”, “believes”, “estimates”, or similar
expressions, and statements related to matters which are not historical facts, are forward -
looking information within the meaning of applicable securities laws. Such forward -looking
statements, which reflect management’s expectations regarding Prophecy’s future growth,
results of operations, performance, business prospects and opportunities, are based on
certain factors and assumptions and involve known and unknown risks and uncertainties
which may cause the actual results, performance, or achievements to be materially different
from future results, performance, or achievements expressed or implied by such forward -
looking statements. These estimates and assumptions are inherently subject to sig nificant
business, economic, competitive and other uncertainties and contingencies, many of which,
with respect to future events, are subject to change and could cause actual results to differ
materially from those expressed or implied in any forward -looking statements made by
Prophecy. In making forward -looking statements as may be included in this news release,
Prophecy has made several assumptions that it believes are appropriate, including, but not
limited to assumptions that: there being no significant disruptions affecting operations, such
as due to labour disruptions; currency exchange rates being approximately consistent with
current levels; certain price assumptions for coal, silver and other metals; prices for and
availability of fuel, parts and equipment and other key supplies remain consistent with
current levels; production forecasts meeting expectations; the accuracy of Prophecy’s
current mineral resource estimates; labour and materials costs increasing on a basis
consistent with Prophecy’s cu rrent expectations; that any additional required financing will
be available on reasonable terms ; and market developments and trends in global supply
and demand for coal, energy, silver and other metals meeting expectations . Prophecy
cannot assure you that any of these assumptions will prove to be correct.
Numerous factors could cause Prophecy’s actual results to differ materially from those
expressed or implied in the forward -looking statements, including the following risks and
uncertainties, which are discussed in greater detail under the heading “Risk Factors” in
Prophecy’s most recent Management Discussion and Analysis and Annual Information
Form as filed on SEDAR and posted on Prophecy’s website: Prophecy’s history of net
losses and lack of foreseeab le positive cash flow; exploration, development and production
risks, including risks related to the development of Prophecy’s mineral properties; Prophecy
not having a history of profitable mineral production; commencing mine development
without a feasibi lity study; the uncertainty of mineral resource and mineral reserve
estimates; the capital and operating costs required to bring Prophecy’s projects into
production and the resulting economic returns from its projects; foreign operations and
political cond itions, including the legal and political risks of operating in Mongolia and
Bolivia, which are developing countries and being subject to their local laws ; the availability
and timeliness of various government approvals, permits and licenses; the feasibili ty,
funding and development of Prophecy’s projects ; protecting title to Prophecy’s mineral
properties; environmental risks; the competitive nature of the mining business; lack of
infrastructure; Prophecy’s reliance on key personnel; uninsured risks; commod ity price
fluctuations; reliance on contractors; Prophecy’s need for substantial additional funding and
the risk of not securing such funding on reasonable terms or at all; foreign exchange risk;
anti-corruption legislation; recent global financial conditi ons; the payment of dividends; the
inability of insurance to cover all potential risks associated with mning operations; and
conflicts of interest.
These factors should be considered carefully, and readers should not place undue reliance
on Prophecy’s fo rward-looking statements. Prophecy believes that the expectations
reflected in the forward -looking statements contained in this news release and the
documents incorporated by reference herein are reasonable, but no assurance can be
given that these expecta tions will prove to be correct. In addition, although Prophecy has
attempted to identify important factors that could cause actual actions, events or results to
differ materially from those described in forward -looking statements, there may be other
factors that cause actions, events or results not to be as anticipated, estimated or intended.
Prophecy undertakes no obligation to release publicly any future revisions to forward -
looking statements to reflect events or circumstances after the date of this news or to reflect
the occurrence of unanticipated events, except as expressly required by law.