"June 18, 2012
Prophecy Coal Consolidates Chandgana Coal Basin by Agreeing to Acquire Tugalgatai Licenses From Tethys Mining LLC.
VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 18, 2012) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to announce that it has entered into a binding Sale and Purchase Agreement (the "Agreement") to acquire assets relating to certain Tugalgatai coal exploration licenses from Tethys Mining LLC ("Tethys"), and subject to approval from the Minerals Resource Authority of Mongolia, to have such exploration licenses transferred to it. The Tugalgatai licenses are contiguous to the Company's Chandgana licenses which host a measured resource of 650 million tonnes and an indicated resource of 540 million tonnes of thermal coal.
According to records reviewed by Prophecy, on March 15, 2011, Tethys applied to register a resource estimate of 2.33 billion tonnes of thermal coal for the Tugalgatai licenses with the Minerals Resource Council of Mongolia. The resources registered by Tethys are not NI 43-101 compliant. Prophecy expects to conduct work in due course with a view of preparing its own NI 43-101 estimate of the contained resource at Tugalgatai.
Since 2005, Tethys performed detailed exploration on the Tugalgatai licenses including drilling and geophysical methods, and conducted geotechnical, hydrogeological, environmental and topographic studies. Exploration results indicate a large and geologically simple coal occurrence within the Tugalgatai licenses that is similar to Prophecy's Chandgana licenses. The coal seam is continuous across the Nyalga Basin and outcrops to the northwest, with the main coal seam measuring up to 30m in thickness.
The terms of the Agreement include a US$10 million upfront payment and an 8.5% royalty on future coal sales from both the Chandgana and Tugalgatai licenses. The royalty can be extinguished by paying Tethys US$20 million before 2021 or US$25 million from 2021 onwards. Of the purchase price, $2 million will be immediately deposited in escrow. The total payment will be paid to Tethys upon the transfer of the licenses.
John Lee, Chairman and CEO of Prophecy, states: "By consolidating the Chandgana coal basin of approximately 300 squared kilometers, Prophecy is looking for greater economies of scale to potentially produce low-cost electricity at the Chandgana mine mouth power plant, and further develop coal to chemicals and coal gasification projects. It's also possible to further increase the resource through exploration in this highly prospective basin."
The transaction is expected to close in Q3, 2012, subject to regulatory approval from the Minerals Resource Authority of Mongolia. The technical contents of this news release have been reviewed and approved by Christopher M. Kravits, P.Geo, who is a Qualified Person as defined in NI 43-101. Mr. Kravits has 34 years of US and international relevant coal geology experience. He has been active in Mongolia since 2007.
About Prophecy Coal
Prophecy Coal Corp. is a Canadian listed company engaged in developing energy projects in Mongolia. Prophecy's Ulaan Ovoo mine is in production. Prophecy's proposed 600 MW mine-mouth power plant adjacent to the Chandgana coal deposit has been permitted by the Mongolian government. Negotiations on financing, power purchase agreement and construction management are underway.
Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Further information on Prophecy Coal can be found at www.prophecycoal.com.
ON BEHALF OF THE BOARD OF PROPHECY COAL CORP.
JOHN LEE, CEO/Chairman
Forward-Looking Statements: This news release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, including, without limitation, statements regarding future plans and objectives of the companies are forward-looking statements that involve various risks and uncertainties. Although Prophecy believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Forward-looking statements are based on a number of material factors and assumptions. Factors that could cause actual results to differ materially from those in forward-looking statements include general economic, regulatory, market or business conditions, and other risks detailed herein and from time to time in the filings made by the companies with securities regulators. Mineral exploration and development of mines is an inherently risky business and large infrastructure projects such as power plants require huge amounts of capital which may not be available to Prophecy on terms which will allow its shareholders to realize a reasonable return or on any terms at all. Accordingly the actual events may differ materially from those projected in the forward-looking statements. For more information on Prophecy and the risks and challenges of its business, investors should review filings that are available at www.sedar.com.
Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.
Prophecy Coal Corp.
Manager, Investor Relations
INDUSTRY: Manufacturing and Production - Mining and Metals
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