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Prophecy Development Corp. (TSX: PCY) CEO Gerald Panneton on Why He Joined Prophecy: The Gibellini Vanadium Project’s Economics

October 15, 2018

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Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the new President and CEO of Prophecy Development Corp. (TSX: PCY)(OTC: PRPCF), Mr. Gerald Panneton. Gerald, how are you this morning?

Gerald Panneton: Very good, thank you.

Gerardo Del Real: For people that aren't familiar with your background, let me just kind of provide some context, because it's pretty rare to have somebody with your background and experience stepping into a company to advance a project at the stage that it's at now, the Gibellini Vanadium Project.

You're a geologist. You have over 30 years’ experience. You were the Founder, President and CEO, of course, of Detour Gold. You took Detour Lake from 1.5 million ounces to over 16 million ounces in reserves. It ends up becoming one of the largest gold mines in Canada. You now step in with Prophecy to advance the Gibellini Vanadium Project in Nevada.

What motivated you to come back? I know you don't do it for projects that you don't plan on seeing through.

Gerald Panneton: It's a very similar situation, actually, to Detour Lake. I don't think Gibellini is going to be the largest, biggest vanadium producer in the world, but it may be one of the most profitable ones. And I think at this stage, we're taking Gibellini, and I trust that what I've seen so far is that John and his team that he put together so far have done a tremendous job over the last year to bring the project to the baseline permitting process that we are in.

As you know, the feasibility study is already complete. It's not about drilling the resource. We do have an excellent potential to increase the resource and bring that into reserves for the future. We have some very good lead on the property. John and his team have done a great job.

Now it's basically the time of stepping in and bringing the experience that I bring in, bringing projects through production, which I've done twice at Barrick, which I've done with Detour, what I was trying to do with NewCastle. So Gibellini is another very good example of a project that should have a very good positive return for investors.

Gerardo Del Real: Now just to be clear, John Lee will remain as Chairman of the Board of Directors of the company. Correct?

Gerald Panneton: Correct, yes.

Gerardo Del Real: Fantastic. Now, tell us about the project. I'm familiar with the project, but for people that may be new to the project, people that maybe follow you and are going to come and get familiar with the story because of your background and your success, can you explain the Gibellini project and what is so attractive about it to you?

Gerald Panneton: What's very, very attractive is the economic aspect of developing the project. First, we're in Nevada. We had a meeting at BLM (Bureau of Land Management), very friendly, very supportive. One year from now, we're going to be in the environmental report annual review, which will last approximately 12 months. We could easily be starting construction 2 to 2.5 years from now. That is what the current administration, the U.S., wants to see. A short environmental period review, but well done. Very well done. And very impressively, there were 15 people at the BLM meeting. This was an introduction meeting. It's not even the kick-off meeting. We know exactly what needs to be done over the next 12 months. Very straightforward and a very supportive BLM office in Battle Mountain, Nevada.

What's interesting at the project? Low strip ratio, 0.17 to 1. Almost no waste. We're basically mining a hill which is approximately 200 feet, 250 feet height. It's a heap leach. The hill is completely oxidized. There are no sulfites. So it's a very, very easy and cheap process. When you look at the cost, we'll be able to produce – according to the feasibility study – vanadium or V2O5, at $6.35 all in, including depreciation, and capital expenditure and operating costs. So it's a very attractive project. When you look at vanadium price in today's world, with pentoxide at $26 to $27 US a pound, you cannot ask for a better timing.

Gerardo Del Real: Now, this project is the only large-scale open pit, heap leach vanadium project in North America. Is that accurate?

Gerald Panneton: It is. It is host in black shales. It is oxidized. It is right on surface, and it is a very, very easy project. We're not even going into the water table, for example. You know, water table is always like, "Are you going to affect the water table? Are you going to touch the water table?" Even if you dig a quarry for gravel or rock, they always worry about the water table. We're not even going there. We're staying on surface, and that is a very big positive.

Gerardo Del Real: Now, Gerald, since the end of September, the stock is up more than 240%. Obviously, you coming on board is garnering a very, very positive response. What can shareholders and potential shareholders look forward to here in the next coming months and year?

Gerald Panneton: I think it's the progress on the project. We are applying for exploration work because we are very confident that we can increase the resource and the reserve. At the same time, we're doing the permitting. As all people know, in resource when you stop drilling and you go into that feasibility, the permitting process, there's always a hype that is being done, and there's no more news.

We will keep the market updated on all our exploration success because I think the project has tremendous potential, maybe not to do a ten-fold like a Detour, go from 1.5 million to 16 million, but maybe there's a chance for doubling the resource, doubling the reserve, which where this sits with a 13 years life of mine. So if we can increase it, then it's good.

The project is not very expensive to develop. There's not a huge amount of capital to be raised in the future. There is a lot of opportunity for debt financings or offtake agreements. We're going to be producing one of the highest, pure V2O5 pentoxide, more than 98%, which is exactly what, for example, not just the steel industry but the aerospace industry wants to mix with titanium or aluminum to make these two metals stronger.

Vanadium is a strategic metal, and it is very important for the future. This is exactly what this project means to the near future, and being the only operation in North America makes us very enviable. We don't have to worry about political risk. We don't have to worry about the supply that can come from China. And China, basically, doesn't have enough supply for its own demand. Yes, China is the biggest producer, but it keeps everything inside China. Nothing goes out, so it's up to the rest of the world to supply the needs for alloy for steel or for aluminum, titanium in the aerospace.

Plus, there's also a company, Sumitomo, developing long-term storage vanadium batteries.

Gerardo Del Real: Right.

Gerald Panneton: Which is, as we all know in our world of consumption of the energy, the biggest problem we have is storage.

Gerardo Del Real: Absolutely.

Gerald Panneton: I think this future is just amazing, and the timing for this vanadium project to go up and running is right on time. You could draw a parallel, Detour was easier to be done in 2006 than it is probably today. Try to put a low-grade deposit in production today with, even if gold is at $1,200, it doesn't matter. There was a lot of interest in gold in 2006, but there's much less in today's world.

Gerardo Del Real: Absolutely. Well, it's got to be exciting to shareholders to hear that you think you could possibly double the resource. It's got the right address. It's in Nevada. Vanadium prices are at a decade high, and you mentioned the low cost to be able to bring this into production. I got to believe that you're already entertaining conversations with potential offtake partners.

Gerald Panneton: Not really. I'm not running after this. I think we have some other priorities, but I think some of the priorities that eventually we will need to do is to address this. But I think our first objectives are the permitting. An offtake, once you have the permit, has a lot more value in negotiation than it is now.

Gerardo Del Real: Well said. Gerald, thank you very much for taking the time today. I'm looking forward to having you back on as you move along the permitting process. You mentioned the fact that you're going to be busy and with plenty of news flow, so I'm looking forward to covering that.

Gerald Panneton: Yeah, we'll make sure that the story gets out there.

Gerardo Del Real: I appreciate it, Gerald. Thank you.

Gerald Panneton: Thanks for your time.

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