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Year End Letter from Chairman of Prophecy

Dear All,

I am pleased to provide this "Letter from the Chairman" of Prophecy Resource Corp. and to share with you my optimism for 2011 and beyond.

2010 was highlighted by several accomplishments including 5 successful mergers and acquisitions, namely:

  • The acquisition of the Lynn Lake mine from Victory Nickel Inc.
  • The acquisition of Titan Vanadium from Randsburg Gold Corp.
  • The acquisition of Lynn Gabbros from VMS Ventures Inc.
  • The merger with Red Hill Energy Inc.
  • The merger with Northern Platinum Ltd.

Additionally we:

  • Advanced our *1.2bt Chandgana Coal-Fired Power Plant project to EIA approval;
  • Commissioned our **200mt Ulaan Ovoo Coal Mine to production;
  • Made new discoveries at our Lynn Lake Project;
  • Discovered high-grade ***500meters+ PGE-Ni-Cu intercepts at our Wellgreen Project;
  • Assembled an advisory team including Mike Deats, Rob McEwen, and Harald Batista;
  • Commenced trading on both the Xetra and OTCQX and maintained active volumes; and
  • Concluded total equity raises of over $50million and a $10million loan facility.

When I began Prophecy in October of 2009 we had $500,000 in market capitalization; today our market capitalization exceeds $170 million and we are well-funded for our 2011 business plan. In 2010 Prophecy traded over 130 million shares on the TSX Venture Exchange.  (Not included are trading of Red Hill and Northern Platinum shares during the acquisition periods, which represents 20 million additional shares of trading.)

Prophecy's objectives for 2011 include the following:

  • Conclude long term Ulaan Ovoo coal off take agreements with regional Russian power plants;
  • Commence shipments of Ulaan coal to Asian customers via Russia's eastern coal ports;
  • Produce and transport between 1 and 1.5 million tonnes of coal at Ulaan Ovoo in 2011;
  • Increase profit margins at Ulaan Ovoo with owner equipment and Zeltura port opening;
  • Secure Chandgana power purchase off take MOUs with Mongolian entities;  
  • Obtain Government cooperation and full licensing on our Chandgana Power Plant;
  • Secure equity and debt financing for Chandgana Power Plant construction;
  • Consider a possible spin-off of Prophecy's Canadian assets; and
  • Seek additional listings.

We conclude the year with 35% to 40% ownership by institutions and insiders, including major Mongolian shareholders. In 2011 I will continue to direct Prophecy's transformation from a Canadian junior company to a profitable coal producer with a fast developing asset base and an internationally recognized management team. In 2011 I intend to attract additional cornerstone investors to raise our international profile.

I want to thank our team, and particularly our shareholders for your un-wavered support and patience. I also want to particularly extend my foremost gratitude to Mr. G. Arnold Armstrong, the founder of Red Hill Energy, for his faith in me to head the post Prophecy-Red Hill merger entity.

I met recently with Mr. Rob McEwen and was reminded that he began as an investor with no public company management experience before heading Goldcorp, where he transformed that company from $50million in market capitalization to over $8 billion. GoldCorp's share price achieved a compounded annual growth rate of 32% under his tenure. Peter Munk ,was in the hotel business before founding Barrick, which is now the world's largest gold producer. I am deeply inspired by Rob, and believe investor confidence and trust are earned by our hard work, integrity, and determination to build Asia's next major energy company. If we put our heads down and execute our well defined plan, with shareholder value in mind, the share price and everything else will take care of itself.  

I invite you to be part of Prophecy and share with us an exciting future.

Happy Holidays.


John Lee
Chairman and CEO
[email protected]

*208.8 million tonnes (174.5 Mt Measured, 34.3 Mt Indicated) and (35.9 Mt Inferred)  Ulaan Ovoo (See Press Release December 16, 2010)
**656.6 million tonnes Measured, 545.7 million tonnes Indicated (Chandgana Tal & Chandgana Khavtgai) (See press release August 16, 2010)                                                                                                    
*** ( Hole 177): 525.90m  of  0.55 g/t PGM+Au, 0.26% Ni, 0.17% Cu, (Hole 178): 566.78m of 0.39% of  0.52 g/t PGM+Au, 0.23% Ni, 0.16% Cu (See press release September 27, 2010)

About Prophecy Resource

Prophecy Resource Corporation is an internationally diversified company engaged in developing energy, nickel and platinum group metals projects. The company controls over 1.4 billion tons of open-pittable thermal coal in Mongolia (839 Mt Measured, 579 Mt Indicated). Prophecy's Ulaan Ovoo coal mine is fully commissioned and in production. In Canada Prophecy owns Wellgreen PGM Project in Yukon, Lynn Lake Nickel Sulphide Project in Manitoba, and a 10% equity stake in Victory Nickel. Mineral resources that are not mineral reserves do not have demonstrated economic viability.


John Lee
Telephone 1.800.851.1528
Email: [email protected]

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

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.