TSX-listed Prophecy Development is considering spinning off a vanadium royalty and streamlining company to finance the construction of the Gibellini vanadium project, in Nevada.
The spinning off of Vanadium Royalty Company (VRC) also provides investors with direct participation in vanadium mining royalties, streaming and physical vanadium.
Under the proposed structure, subject to regulatory, shareholder and other necessary approvals, Prophecy will incorporate VRC as a wholly-owned subsidiary, which will receive a minority portion of vanadium production from the Gibellini project, which is expected to start production in 2021.
For each pound of vanadium pentoxide Prophecy produces and delivers to VRC, VRC will pay to Prophecy a substantially discounted price based on the European vanadium pentoxide price published by Metal Bulletin or any alternative reference price mutually agreed between Prophecy and VRC.
In exchange for the discounted vanadium purchase price, VRC will make a cash prepayment to Prophecy to cover the capital cost to construct the Gibellini project within 24 months, prior to the company receiving all permits required to start mine construction.
The company estimates Gibellini’s capital cost to be about $116.8-million with a 25% contingency margin.
Prophecy is planning an equity financing in conjunction with the proposed spinoff transaction whereby VRC shares will be distributed to its shareholders.
The above transaction and proposed terms would be contingent on the securities of VRC being listed for trading on a Canadian public stock exchange.