Prophecy Proposes to Spin Off Vanadium Royalty Co to Finance Construction of Gibellini Vanadium Project
Date: Jul 10, 2018
July 9, 2018 (Source) — Prophecy Development Corp. (“Prophecy” or “the Company“) (TSX: PCY; OTCQX: PRPCF; FRA: 1P2N) announces that it is engaged in discussions with advisors regarding spinning off a vanadium royalty and streaming company (“VRC“). It would be a means to provide investors with direct participation in vanadium mining royalties, streaming, and physical vanadium.
Under the proposed structure, Prophecy would incorporate VRC as a wholly owned subsidiary – subject to regulatory, shareholder, and other necessary approvals. VCR would receive a minority portion of the vanadium production by the Company’s Gibellini project in Nevada, USA. That project would have the target of starting production in 2021.
For each pound of vanadium pentoxide (“V2O5“) that Prophecy produces and delivers to VRC, VRC would pay Prophecy at a substantially discounted price. That price would be based on the European vanadium pentoxide price published by Metal Bulletin – or any alternative reference price agreed to by Prophecy and VRC.
In exchange for the discounted vanadium purchase price, VRC would make a cash prepayment to Prophecy. This would cover the capital cost of constructing the Gibellini project, prior to the Company’s receiving all the permits required to start the Gibellini mine construction. As announced in the Company’s May 29, 2018 news release, the Company estimates Gibellini’s capital cost to be approximately $116.8M, with a 25% contingency margin.
An equity financing is planned in conjunction with the proposed spinoff transaction whereby VRC shares would be distributed to Prophecy shareholders.
The above transaction and proposed terms would be contingent upon the securities of VRC being listed for trading on a Canadian public stock exchange.
Below is a summary of the preliminary economic assessment study (“PEA“) for the Gibellini project prepared by Amec Foster Wheeler E&C Services Inc. (“AMEC“), as announced in the May 29, 2018 press release:
| Highlights of the PEA (after tax): | |
| Internal rate of return | 50.8% |
| Net present value (NPV) | $338.3 million at 7% discount rate |
| Payback period | 1.72 years |
| Average annual production | 9.65 million lb V2O5 |
| Average V2O5 selling price | $12.73 per lb |
| Operating cash cost | $4.77 per lb V2O5 |
| Initial capital cost, including 25% contingency | $116.76 million |
| Life of the mine | 13.5 years |
The PEA is preliminary in nature, and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
