The Rise of Prophecy Vanadium

The Rise of Prophecy Vanadium

Date: Dec 11, 2017

Prophecy Development Corp. (TSX: PCY) (“Prophecy”) has recently confirmed that it intends to follow through on development of its Gibellini deposit, aiming to be the first operational primary vanadium mine in North America. The resource, acquired in June, became an immediate priority since a Feasibility Study had already been prepared by the previous operator. Gibellini’s prior explorer invested approximately US$20 million in permitting, engineering, and feasibility studies from 2009, only to relinquish the project in 2016 due to low vanadium prices. The vanadium pentoxide (V2O5) price has since increased by around 400% from its 2016 low.

The company initially caught my attention as a result of its excellent financial position. Only 10.66 million fully diluted outstanding, $5.5 million cash on hand and 17% owned by John Lee, CFA, CEO and Chairman. Mr. Lee’s personal cash investments in Prophecy to date total more than $3 million. Impressively, the company became debt-free at the end of November. Further back, before commodity markets tanked, Prophecy shares have traded above CAD$150, and it’s worth noting that the company is basing many of its decisions on the idea that the relevant markets bottomed in 2016; an analysis with which I’d have to agree.

The rise in vanadium prices and the associated decline of stockpiles was, in part, made possible by 2017’s ‘black swan’ of minerals, China’s environmental crackdown. Commodity prices have rallied throughout the state’s environmental enforcement checks, and the resultant supply disruption is an opportunity for new mines to come online globally. To take advantage of the Chinese production cap, competitors would have to be, at the very least, near-term, but a low-cost operation is a significantly less risky venture, especially in the early days of market recovery.

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