Prophecy to Acquire Fourth Vanadium Project – Targets Production in 2017
Prophecy to Acquire Fourth Vanadium Project –
Targets Production in 2017
Vancouver, British Columbia, July 21, 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 Fairmont Resources Inc.
(“Fairmont”) to acquire the fully-permitted Buttercup Iron-Titanium-Vanadium (Fe-Ti-V)
project in Quebec, Canada (the “Buttercup Project”). Prophecy is initiating discussions
with several potential dense aggregate buyers and has targeted for production to
commence by the end of 2017, should commercial terms be reached with an off taker.*
*A positive production decision would not be based on a feasibility study of mineral reserves
demonstrating economic and technical viability so would carry increased uncertainty and
the risk of failure as to the mining method and profitability.
Proposed Transaction Summary
Under the terms of the Letter Agreement, Prophecy will acquire the claims and a lease
which constitute the Buttercup Project by paying to Fairmont:
(a) At closing, the equivalent of $1,000,000, up to half of which (i.e. $500,000), may at
Prophecy's sole discretion, be paid in Prophecy Common shares, calculated based
on the 5-day volume-weighted average trading price of such shares as of the closing
date; and
(b) On the 1-year anniversary date of the closing date, a further $500,000, up to half of
which (i.e. $250,000), may at Prophecy's sole discretion, be paid in Prophecy
Common shares, calculated based on the 5-day volume-weighted average price of
such shares as of the 1-year anniversary date of the closing date.
In December 2014, a Certificate of Authorization was issued for the Buttercup Project by the
Ministère du Développement durable, de l’Environnement et des Parcs (“MDDEP”), which
allowed aggregate production from the property of 300,000 tonnes annually. Fairmont
completed site clearing and commenced first blast at the Buttercup Project in April 2015.
Further mining activities were curtailed due to declining prices in certain metals and
aggregates, all of which, have since rebounded from lows during the 2015-2016 period.
2015-2016 Low Price 2017 Current Price
1Iron ore (>62% Fe) US$40.88/t US$64.92/t
2TiO2 Concentrate (>50% TiO2) US$80-US$100/t US$200-US$250/t
3Vanadium Pentoxide (>98% V2O5) US$2.38/lb US$5.80-US$6.10/lb
1http:// www.marketindex.com.au/iron-ore
2http://www.ferroalloynet.com/titaniumore/
3https://www.metalbulletin.com/non-ferrous/ores-and-alloys/noble-ores-and-alloys/vanadium.html
Buttercup Project Summary
The 15 claims and one exclusive lease to mine surface mineral substances that comprise
the Buttercup Project, are located 30km north of Saguenay, Quebec, which is ranked
among the world’s top 10 mining jurisdictions according to the Fraser Institute in 2016. The
property has access to water and power, and connects to a two-lane highway, which leads
to the all-weather Grand Anse Sea Terminal at the Port of Saguenay, which is located 33km
south of the property.
The Port of Saguenay is 250km south-west of the Port of Sept-Îles, which is used by major
iron mines operated by: Tata Steel, RioTinto, Sojitz Corporation, POSCO, China Steel
Corporation, Wuhan Iron and Steel (Group) Corp., ArcelorMittal S.A. and Cliffs Natural
Resources Inc. Both ports are located on the St. Lawrence River on the eastern Canadian
seaboard, which provides easy access for trade to world markets.
The Fe-Ti-V mineralization appears to start from surface at some locations making for a
possible low mining strip ratio. In 1964, the Bersimis Mining Company, calculated a
historical “drilled tonnage” on lense “A” and lense “B” located within the property (Table 1).
Both lenses, where drill-tested, were found at relatively shallow depth between 5 and 154m
depth below surface.
Table 1. Historic “drill indicated tonnage” and corresponding grade
Lense Tons Fe (%) TiO2 (%) V2O5 (%) Number of Holes
A 2,779,285 48.40 18.90 0.67 8
B 758,828 49.39 19.07 0.64 12
Source: P.J. Goldsmith 1964 Report on: The Bersimis Mining Company, Report on Diamond Drilling
Program Lake Kanekatshonanuts Tintaniferous Megnetite Deposits
The historical "drill indicated tonnage” cited above is mentioned for historical purposes only,
and uses terminology not compliant with current National Instrument 43-101, Standards of
Disclosure for Mineral Projects (“NI 43-101”) reporting standards. The reliability of these
historical estimates is unknown but considered relevant by Prophecy as it represents
significant targets for future exploitation. The key assumption was that the mineralization is
found in two nearly flat-lying lenses. The key factor was use of a 7 cubic feet per ton relative
density. The method used to prepare the historical estimate was use of length, width and
thickness of the lenses to determine volume followed by conversion of volume to mass by
use of a relative density factor. No consideration was made for weathered zones or grade.
The historical estimate was not reported using measured, indicated or inferred confidence
categories. There are no more recent resource estimates availably to Prophecy. In order to
verify this historical estimate as a current estimate, a qualified person would need to
conduct additional exploration work in the form of diamond drilling to verify the historic data.
A qualified person has not done sufficient work to classify the historical estimate as a
current mineral resource, and Prophecy is not treating this historical estimate as a current
mineral resource.
Fairmont conducted surface channel sampling in October 2014 (refer to Fairmont’s October
23, 2014 news release filed on the System for Electronic Document Analysis and Retrieval
(“SEDAR”) for sampling, assay and QAQC details) at the Buttercup Project, with 361
meters of sampling, 184 samples were collected whereby 182 samples contained massive
titano-magnetite. The massive titano-magnetite averaged more than 70% Fe2O3 (49% Fe),
19% TiO2, and 0.56% V2O5, consistent with the drill intercept grades reported in the
Goldsmith report.
From (m) To (m) Width (m) Rock* Fe2O3 (%) TiO2 (%) V2O5 (%)
Lense A Channel 1
0.0 40.5 40.5 T.M. 70.7 18.9 0.56
40.5 50.5 10.0 obdn
50.5 60.5 10.0 T.M. 73.2 19.6 0.57
60.5 64.0 3.5 obdn
64.0 76.0 12.0 T.M. 73.7 19.5 0.58
76.0 84.0 8.0 obdn
84.0 146.0 62.0 T.M. 72.7 19.8 0.58
146.0 171.0 25.0 obdn
171.0 184.0 13.0 T.M. 72.9 19.5 0.59
185.0 212.5 27.5 T.M. 72.8 19.7 0.58
Channel 2
0.0 11.5 11.5 T.M. 72.6 20.1 0.56
11.5 17.5 6.0 obdn
17.5 79.0 61.5 T.M. 72.5 19.7 0.57
Channel 3
0.0 1.5 1.5 T.M. 73.1 19.7 0.59
1.5 4.0 2.5 obdn
4.0 28.0 24.0 T.M. 71.8 19.7 0.56
28.0 30.0 2.0 obdn
30.0 58.0 28.0 T.M. 72.3 19.7 0.57
58.0 59.0 1.0 obdn
59.0 70.5 11.5 T.M. 72.3 19.7 0.57
Lense C Channel 4
0.0 26.5 26.5 T.M. 72.1 19.9 0.56
Channel 5
0.0 29.0 29.0 T.M. 71.7 20.1 0.55
*T.M. = titano-magnetite, obdn = overburden
Markets
Materials mined from the Buttercup Project may be amenable to the following three
markets. A feasibility study has not been completed and there is no certainty mined
materials can be produced economically from the Buttercup Project. The Buttercup Project
extraction permit only applies to aggregate sales, additional permitting is required to sell
mined materials as direct shipment ore (“DSO”) furnace feed.
1. Dense Aggregate for Nuclear Construction and Offshore Drilling:
Buttercup mined materials having a high density of approximately 4 tonne/m3 can be sold
as aggregate for manufacture of high-weight concrete or as loose ballast. Specific
applications include nuclear reactor construction, nuclear spent fuel storage, foundations for
high-rise structures, and offshore drilling platforms. Dense aggregate cement is a premium
product to cement which currently trades at about US$100/tonne.*
*https://www.statista.com/statistics/219339/us-prices-of-cement/
2. DSO Lump Titano-Magnetite for Hearth Protection:
Titanium-bearing minerals like the DSO lump titano-magnetite from the Buttercup Project,
are used in steel blast furnaces to protect the hearth wall, which is comprised primarily of
graphite (carbon), against erosion.
Buttercup DSO lump titano-magnetite has a low sulphur (<0.1%), low phosphorus (<0.1%)
and low insoluble (<10%) content that is desired by iron makers to increase blast furnace
life.
A sample assay of DSO lump titano-magnetite from the Buttercup Project provided
previously by Fairmont in their February 25, 2014 news release (available on Fairmont’s
website http://www.fairmontresources.ca/ and on SEDAR) is given in the following table.
Fe2O3
(%)
TiO2
(%)
SiO2
(%)
MgO
(%)
CaO
(%)
V2O5
(%)
MnO2
(%)
Al2O3
(%)
S
(%)
P
(%)
69.4 18.9 0.89 3.57 0.08 0.54 0.33 6.49 0.02 0.01
The conditions of sampling, assay and reporting of these assay results are not known.
Thus, the assay results should not be relied upon.
Fairmont advises the Company based on their experience, that a typical blast furnace
producing one million tonnes of pig iron annually, could potentially extend the life of its
hearth by adding 15,000 to 30,000 tonnes of DSO lump titano-magnetite per year directly
with the burden.
3. DSO for Titanium Slag - Vanadium Slag Furnace:
Buttercup titano-magnetite with high vanadium content can be an ideal DSO feed for
furnaces that produce titanium slag and vanadium slag.
Titaniferous magnetite is first, partially reduced with coal in rotary kilns, and then melted in a
furnace (most such facilities are located in Asia). This produces a titanium slag (>90% TiO2,
US$1200/tonne*) and pig iron containing most of the vanadium. The titanium slag is
removed and sold to pigment producers for further processing to pigment grade (>99%
TiO2, US$2500/tonne*). The molten pig iron is blown with oxygen to form a new slag
containing 12–24% vanadium pentoxide (V2O5), which is further processed to either ferro
vanadium (80% vanadium) or vanadium pentoxide (98% V2O5).
*Source: http://www.ferroalloynet.com
Based on the Company’s research, the Buttercup Project has an unusually high vanadium
content, with also a low content of deleterious elements for a Canadian deposit, which the
Company believes may attract Asian smelters that specialize in vanadium slag production.
John Lee, Executive Chairman of Prophecy states:
“According to RioTinto, comparative DSO products with 62% (Fe+TiO2) are being offered at
US$83/t FOB (Free on Board) at Quebec ports from its mines there.
Such a price represents attractive economics for the Buttercup Project based on Prophecy’s
internal assessment. For the next three months, Prophecy and Fairmont will work
collaboratively to identify dense aggregate off takers, arrange mining equipment, and
organize land and sea transport. Our goal is to commence production and load the first
shipment by the end of 2017.
With Gibellini, Louie Hill, Titan and now Buttercup, Prophecy offers a diversified package of
vanadium projects in Canada and United States. We believe the story has unique attributes
and qualities in the vanadium space.”
Further Details Regarding the Proposed Transaction
The proposed transaction will be subject to Prophecy being satisfied with the results of its
due diligence inquiries into the Buttercup Project.
The parties have agreed to replace the Letter Agreement with a more comprehensive
definitive agreement by November 1, 2017, subject to such due diligence results and other
conditions be satisfied.
The Letter Agreement includes a commitment by Fairmont to not solicit, pursue or negotiate
alternative offers with other parties for the Buttercup Project.
Note: All references to “$” are expressed in Canadian dollars unless otherwise noted.
Qualified Persons
The technical contents of this news release have been reviewed and approved by
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
About Prophecy Prophecy Development Corp. is a Canadian public company listed on the
Toronto Stock Exchange. The Company aims to provide exposure and leverage to rising
vanadium prices by defining and adding attributable vanadium resources in the ground in
politically safe jurisdictions, and to build the first vanadium mine in North America by
steadily advancing mine permitting, project financing and construction.
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”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or similar
expressions, and statements related to matters which are not historica l 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 a nd 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 achievemen ts expressed or implied by such forward -
looking statements. These estimates and assumptions are inherently subject to significant
business, economic, competitive and other uncertainties and contingencies, many of which,
with respect to future events, are s ubject 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 Prophe cy’s
current mineral resource estimates; labour and materials costs increasing on a basis
consistent with Prophecy’s current expectations; that any additional required financing will
be available on reasonable terms; and market developments and trends in g lobal 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 th ose
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 Info rmation
Form as filed on SEDAR and posted on Prophecy’s website: Prophecy’s history of net
losses and lack of foreseeable positive cash flow; exploration, development and production
risks, including risks related to the development of Prophecy’s mineral pr operties; Prophecy
not having a history of profitable mineral production; commencing mine development
without a feasibility 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 conditions, 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 feasibility,
funding and development of Prophecy’s projects; protecting title to Prophecy’s mineral
properties; environmental risks; the competiti ve nature of the mining business; lack of
infrastructure; Prophecy’s reliance on key personnel; uninsured risks; commodity price
fluctuations; reliance on contractors; Prophecy’s need for substantial additional funding and
the risk of not securing such fun ding on reasonable terms or at all; foreign exchange risk;
anti-corruption legislation; recent global financial conditions; 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 forward -looking statements. Prophecy believes that the expectations
reflected in the forward -looking statements contained in this news rele ase and the
documents incorporated by reference herein are reasonable, but no assurance can be
given that these expectations will prove to be correct. In addition, although Prophecy has
attempted to identify important factors that could cause actual action s, 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 pub licly 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.