China’s metamorphic rise to developed nation status has resulted in hundreds of policy changes. One little noticed change was a mandate to construction companies to use higher tensile strength steel rebar. The policy change has sent the vanadium market into a tailspin.

As a result, steelmakers have gobbled up all existing inventories, meaning the only vanadium you can buy is currently underground. That was the reason why John Lee, a seasoned mining entrepreneur, discarded opportunities in Mongolia and Bolivia and decided to place all bets on a rich vanadium deposit in the hills of Nevada through Vancouver-based Prophecy Development Corp. (TSX: PCY | OTCQX: PRPCF).

The China steel rebar mandate is not the only reason why Lee is optimistic. Scientists believe vanadium redox flow batteries (VRB) may be a better way of storing grid energy than lithium-ion. Robert Friedland, the legendary mining investor, is investing in vanadium flow batteries through his Beijing-based investment firm Pu Neng.

“The big takeaway is that we have acquired the best vanadium project in North America,” Lee said. “The price has already gone bananas.”

Vanadium is already showing the streakiness of the electrical metals, outpacing gains in lithium and cobalt to shoot up to $14 a pound currently, from $4/lb in 2017 and $2.50 in in 2016. Demand is such that finding off-takers for Prophecy’s vanadium “is the least of our concerns” Lee said.

Vanadium is quite a small market with annual production of 75,000 tons to 80,000 tons. Adding 0.5% vanadium to steel doubles its strength, and that’s where 85% of vanadium goes. Like lithium, the expected choice of vanadium as the metal of choice as grid storage batteries would require an exponential increase in supply.

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