Prophecy Coal Професи

Chandgana

Overview:

Mongolia's economy has experienced significant growth over the past several years, with favorable projections being made for the future, as well. The country's domestic energy production has been unable to keep up with rising demand, leaving a deficit that has been offset by imports of power from Russia. Many of Mongolia's existing power plants are dated, with low-efficiency output and lacking in clean technology. To help address this, in November 2011, Prophecy was granted a license from the Mongolian government to construct the 600MW Chandgana mine-mouth power plant and the Company continues to methodically advance the project. Results of a feasibility study, completed by Evonik/Steag, were released in January 2012 (see below), will form the basis of a power purchase agreement (PPA) with the Mongolian energy concern which should be finalized in Q2 2012. Prophecy has also been in ongoing discussions with Engineering, Procurement and Construction (EPC) management firms and anticipates awarding a construction contract also in Q2 2012.

Prophecy Coal Corp has received a positive feasibility study (Feasibility results) for the Company's 600 MW Chandgana Mine-Mouth Power Project in Central Mongolia. The Report was independently prepared by Ralf Thomsen, Project Manager at Steag, a German firm specializing in the planning, financing, construction and operation of highly efficient, thermal power plants for fossil fuels.

The scope of the feasibility study covers technical specification, deployment, and financial analysis of a 4 x 150 MW thermal power plant to be built adjacent to Prophecy’s Chandgana Tal coal deposit, which contains 140 million tonnes of measured coal*. Engineering, Procurement & Construction Management (EPCM) selection and Project Financing Discussion are underway and expected to be concluded in 2012.

Power Plant Feasibility Highlights:

• Construction is planned to start in early 2013, with the first 150 MW unit being commissioned in late 2015, and subsequent units to roll out in 2016 to 2017.
• The power plant will have a capacity of 600MW and a project life of 30 years.
• Capital cost (powerplant and transmission lines) is projected to be US $744 million.
• Target capital structure is 30% equity, and 70% debt with a 10% annual interest rate and 10-year pay back.
• Coal will be supplied by the Chandgana Tal deposit at a steady rate of 2.7 million tonne per year.
• The delivered coal price is set at $15.50/t with a 2% semi-annual price increase. Electricity Tariff is targeted at US $0.06/kWh, with a 2% semi-annual increase.
• The plant's power production cost is US $0.023/kWh (including coal). Capital recovery, including loan principal and interest payments, is estimated to be US $0.025/kWh.
• A 70%-30% debt to equity, generates a post-tax internal rate of return (IRR) of 21.9%, and NPV of US $364.7 million. The base case assumes a discount rate of 12%, debt interest rate of 10%, and exchange rate of MNT 1,250/US dollar.
• The project economics are sensitive to electricity tariffs and coal prices. For example, a $0.005 kWh (8.3%) tariff hike from base case would increase project IRR to 24.8% and NPV to $473.4 million.
• The Chandgana project will adhere to international and Mongolian emission standards, particularly regarding emissions of Particle Matters (PM), NOx, and SO2.

With its vast reserves of high-quality coal, Mongolia has the capacity to not only supply its own domestic consumption needs, but to provide exports to neighbouring China. Already the world's largest consumer of coal, in 2010, Chinese imports exceeded 133 million tonnes. With an annual economic growth rate of approximately 10%, and forecasts predicting continuing expansion, it is expected that China's demand for coal and other energy sources will continue to outpace domestic supply and at an ever-increasing rate.

Prophecy Coal’s 100% owned Chandgana coal project is in the northeast part of the Nyalga coal basin, located in the southeast of central Mongolia.  The Chandgana coal project consists of two major deposits, Chandgana Tal, with a measured resource of 141 million tonnes, and Chandgana Khavtgai, with a measured and indicated resource of over 1,000 million tonnes (524mt measured and 545mt indicated). A mere 9 km apart, the projects are both close to important infrastructure – towns, roads, and electric transmission lines. Chandgana is linked by paved highway to both Mongolia's capital, Ulaanbaatar, and the Trans-Mongolian Railroad, giving direct rail access to China to the south and Russia to the north. Read more >>

• Change in Power Plant
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Mine Highlights:

• The Chandgana Project consists of Chandgana Tal and Chandgana Khavtgai, two distinct properties which are part of the same thermal coal deposit and separated by just 9km.
• 1.2 billion tonnes of measured & indicated coal resource (665mt measured and 545mt indicated).
• Consists of a shallow, 38 - 45 meter thick coal seam.
• Coal quality is well-suited to fuel the 600MW mine mouth power plant.
• Coal is low ash (12.49%), very low sulfur (0.68%) and with a calorific value of 4,354 kcal/kg.
• Strip ratio over entire resource is 1.9:1.
• Close proximity to infrastructure: Chandgana is within 160km from rail, 45km north of the proposed railway, 16km from paved highway, and 150km from 2x220 kV power line connecting to the main Mongolian grid.

Chandgana Coal Resource:

Next Steps:

• License has been granted for a 600 MW power plant license
• Receipt of Feasibility Study (Q1 2012)
• Concluding of the Power Purchase Agreement (PPA) with Mongolian Government (early 2012)
• Selection of EPC contractor for power plant construction (early 2012)
• Project financing (Q3 2012)
• Power plant construction starts (early 2013)

Technical Reports:

• Sep 2010, 43-101 Technical Report On Chandgana Khavtgai (File size: 13.0mb)
• Jan 2008, 43-101 Technical Report On Chandgana Khavtgai (File size: 10.0mb)
• Sep 2007, 43-101 Technical Report On Chandgana Tal (File size: 11.0mb)

Maps, Models, and Diagrams:

Photo Gallery

• Power Plant License Ceremony (Nov. 2011)
• Power Plant License Ceremony (Nov. 2011)
• Power Plant License Ceremony (Nov. 2011)
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News Release:

January 24, 2012 - Prophecy Provides EPC, PPA, Project Financing Update on Chandgana Power Plant Project
Prophecy Coal Corp. is pleased to provide the following update on EPC (Engineering, Procurement, Construction), PPA (Power Purchase Agreement), and project financing in connection with its proposed 600 MW Chandgana power plant project in Mongolia. Read more >>

January 17, 2012 - Prophecy Receives A Positive Feasibility Study for the Chandgana Mine-Mouth Power Plant Project in Central Mongolia (Diagrams Included)

November 21, 2011 - Prophecy Granted Landmark Chandgana Power Plant License (Maps Included)

September 15, 2011 - Mongolian Government Endorses Chandgana Power Plant Project

April 21, 2011 - Prophecy Submits Formal Request to Mongolian Government To Build Chandgana Power Plant

February 8, 2011 - Prophecy Obtains Full Mining License for its 141-million-tonne Chandgana Tal Coal Deposit, Mongolia (Map & Diagrams Included)

November 15, 2010 - Detailed Environmental Impact Assessment Approved for 600 MW pit-mouth powerplant by Prophecy's 1.2 billion tonne Chandgana coal project, Mongolia (Maps Included)

August 16, 2010 -Prophecy Reports Measured 524.3 Mt and Indicated 545.7 Mt Coal Resources at Chandgana Khavtgai, Mongolia (Drill Map Included)

June 21, 2010 - Drilling Completed at Prophecy's Chandgana-Khavtgai Coal Project, Updated NI 43-101 Resource Report is Expected by August (Drill Maps included)

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