Prophecy Development (“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.