Prophecy Coal Consolidates Chandgana Coal Basin by Agreeing to Acquire Tugalgatai Licenses from Tethys Mining LLC.

Vancouver, British Columbia, 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 DIRECTORS Prophecy Coal Corp.
"JOHN LEE"
John Lee
CEO/Chairman 

David Brook
Manager, Investor Relations
1-800-358-5865
[email protected]
www.prophecycoal.com

*Mineral resources that are not mineral reserves do not have demonstrated economic viability.


Mineral resources that are not mineral reserves do not have demonstrated economic viability. Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.  

 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 potential mineralization, the estimation of mineral resources, the realization of mineral resource estimates, interpretation of prior exploration and potential exploration results, the timing and success of exploration activities generally, the timing and results of future resource estimates, permitting time lines, metal prices and currency exchange rates, availability of capital, government regulation of exploration operations, environmental risks, reclamation, title, and future plans and objectives of the company 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 failure to obtain necessary approvals in respect of the Transaction, unsuccessful exploration results, changes in project parameters as plans continue to be refined, results of future resource estimates, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, risks associated with operating in foreign jurisdictions, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays in receiving government approvals, unanticipated environmental impacts on operations and costs to remedy same, and other exploration or other risks detailed herein and from time to time in the filings made by the companies with securities regulators. Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral exploration and development of mines is an inherently risky business. 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 their businesses, investors should review their annual filings that are available at www.sedar.com.

"Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release."


This press release does not constitute an offer to sell or a solicitation to buy any of the securities in the United States.  The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (“the U.S. Securities Act”) or any state securities law and may not be offered or sold in the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

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*Ulaan Ovoo: 174 million tonnes  of measured and 34 million tonnes of indicated coal. Ulaan Ovoo’s resource numbers are from the Behre Dolbear & Company (USA), Inc  report referenced in the Dec 2010, 43-101 Prefeasibility Study by Wardrop Engineering. Chandgana consists of two properties-Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43-101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who was an independent Qualified Person under NI 43-101 at the time of report preparation. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43-101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is an independent Qualified Person under NI 43-101.