Canada-based Prophecy Development has signed a binding letter agreement to acquire through lease, the Gibellini vanadium project in Nevada, US.
Under the letter agreement signed with private parties, Prophecy will lease the project comprising Gibellini mining leases by making annual advance royalty payments.
The royalty fee is based on the average vanadium pentoxide price of the preceding year. Claims have been leased for a period of ten years, with an option for an additional decade.
Once production begins, Prophecy will pay the lessor a 2.5% net smelter return (NSR) until a total of $3m is paid.
Following the fulfilment of the $3m threshold, the NSR will be reduced to 2% over the remaining mine life.
All advance royalty payments made by Prophecy will be deducted as credits against future production royalty payments.
Prophecy has noted that its acquisition of Gibellini mining leases in combination with its 100%-owned, Titan titanium-vanadium project in Ontario, Canada, will enable it to become a leading North American vanadium exploration company.
The Gibellini Project is located in Eureka County, Nevada, 25 miles south of the town of Eureka. It has 40 unpatented lode claims with an aggregate of about 771 acres in the state of Nevada.
Under a feasibility report, mine production is estimated to average 11.4 million pounds of vanadium pentoxide per year at 66% recovery.
The success of the transaction depends on Prophecy’s satisfaction with results of its due diligence inquiries into the Gibellini Project.
The parties expect to sign a comprehensive definitive agreement by 17 May.