Chairman John Lee’s Open Letter to Shareholders

June 23, 2017 by John Lee, CFA (https://twitter.com/johnlee25893955?lang=en)

June 23, 2017 Ulaanbaatar, Mongolia

Dear Investors and Shareholders,

It’s been nearly eight years now, since I joined Prophecy in October 2009. I remember then, Prophecy was trading at $6 a share on the TSX Venture Exchange. By making several opportune project acquisitions and raising market awareness, the company managed to trade at over $100 a share in the first half of 2011, while sporting a market capitalization of about $150 million at its peak. Since 2009, Prophecy completed over $100 million in equity financings and acquired and advanced a portfolio of impressive mining and exploration projects.

In my opinion, the resource market bottomed in early 2016. So in 2017, Prophecy will be returning to its M&A roots by focusing on acquiring and developing vanadium mining projects in North America, in perhaps its busiest year ever. I believe our shareholders will be well rewarded for getting on the vanadium bandwagon early.

Why vanadium? Robert Friedland, recipient of the 2017 Northern Miner’s Lifetime Achievement Award, was recently quoted in The Northern Miner saying, “We think there’s a revolution coming in vanadium redox flow batteries,… You’ll have to get into the mining business and produce ultra-pure vanadium electrolyte for those batteries on a massive scale. We’re very deeply interested in how you store electrical energy in the grid.” I have also written extensively about vanadium batteries. A vanadium exploration company in Quebec, Canada recently secured a CAD$40 million equity financing led by Orion Mine Finance Group in June 2017, and I believe more investments will pour into this strategic sector.

Prophecy recently consolidated its ownership over our Titan vanadium-titanium deposit in Ontario, Canada to 100% in February 2017, and has just completed its lease acquisition of the Gibellini vanadium project in Nevada, USA.

With the Gibellini and Titan projects, Prophecy is well-positioned to achieve its business objectives, which are to:

  1. provide exposure and leverage to rising vanadium prices by defining and adding attributable vanadium resources in the ground, in politically stable jurisdictions; and
  2. successfully build the first vanadium mine in North America by steadily advancing mine permitting, project financing and construction.

Because these projects are located in Nevada and Ontario, we expect there to be minimal political or permitting issues which would be outside of the company’s control.

In short, we want to be the “vanadium standard”.

That said, we haven’t forgotten our other non-vanadium projects. Thermal coal prices have rebounded strongly, currently trading at USD$85/t at Asia’s eastern seaports, and we are in active talks to restart our Ulaan Ovoo mine to try to sell coal by rail south, into the Chinese market, through Mongolia. Discussions with Mongolian authorities on the Chandgana power purchase agreement are on-going, as the country will only need more power as time goes on. Concrete progress has been made to obtain authorization to start mine construction and production at the Pulacayo property, from the Corporación Minera de Bolivia (COMIBOL) in Bolivia (which is competing for foreign investment with its neighboring countries). These projects provide Prophecy with multiple opportunities to succeed in creating revenue and cash-flow, which is Prophecy’s ultimate objective i.e. to create a mining enterprise with stable and diversified cash flow, by mining and selling different mineral products.

In the meanwhile, to minimize further share dilution, we continue to trim expenses and watch our pennies. Our quarterly operating expenses compare very favourably with similar companies that actively manage multiple international projects. I would like to thank our dedicated team as each member has performed admirably, and often gone above and beyond their ordinary duties in terms of both scope and time, for the company.

With management also being Prophecy’s largest shareholders, we have intense focus on creating value for all shareholders. Management has injected cash into the company via participation in private placements in 2016 and 2017 at subscription prices that were higher than the Company’s share price today.

In short, I have never been more confident about Prophecy’s prospects. We have great projects and a tight share structure. This is going to be a fantastic year and I appreciate all our shareholders’ patience and support. We look forward to providing you with continuous updates throughout the year, and seeing you at the Company’s AGM next year.

With best regards,

“John Lee”

John Lee, CFA
Executive Chairman
Prophecy Development Corp.

Cautionary Note Regarding Forward-Looking Statements

The letter contains a number of forward-looking statements within the meaning of applicable securities laws, including statements which may contain words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or similar expressions, and statements related to matters which are not historical facts. Such forward-looking statements, which reflect management’s expectations regarding Prophecy’s future growth, results of operations, performance, business prospects and opportunities, are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements.

These factors should be considered carefully, and readers should not place undue reliance on the Prophecy’s forward-looking statements. Prophecy believes that the expectations reflected in the forward-looking statements contained in this letter and the documents incorporated by reference herein are reasonable, but no assurance can be given that these expectations will prove to be correct. In addition, although Prophecy has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Prophecy undertakes no obligation to release publicly any future revisions to forward-looking statements to reflect events or circumstances after the date of this letter or to reflect the occurrence of unanticipated events, except as expressly required by law.

For a full description of “Risk Factors” of the company, please refer to the company’s Annual Information Form dated March 29, 2017 and filed on SEDAR at: www.sedar.com.