Prophecy Contracts Leighton For Q3 Coal Production At Ulaan Ovoo, Mongolia

VANCOUVER, B.C. - May 11, 2010, : Prophecy Resource Corp. (TSX.V: PCY; OTC: PCYRF; Frankfurt: 1P2) announced today that it has entered into a Mine Services Agreement with Leighton Asia Limited for the infrastructure establishment, equipment leasing, and mining operation at the Ulaan Ovoo coal deposit in northern Mongolia.

Ulaan Ovoo site establishment will commence in July 2010 to ensure that the commissioning of the 250,000 tonnes starter pit will take place as planned as of August 2010 with 57,500 tonnes in the first month ramping up to 100,000 tonnes per month by December 2010. The initial equipment suite will comprise one Caterpillar 385 excavator (85 tonne bucket capacity) and three Caterpillar 773D (50 tonne) dump trucks.

Prophecy expects to incur total cash payments to Leighton of $3.8 million for this contract in 2010. Prophecy currently has over $7.5million in cash.

Leighton Asia Limited is a wholly owned subsidiary of the world's largest contract miner, and Australia's largest project development and contracting group, the Leighton Group. It is the operating entity for the Asia region covering Hong Kong, Macau, Indochina, Indonesia, Philippines, Guam, China and Mongolia.

Leighton Asia have been operating across Asia for 35 years in all facets of mining including mine development, operation and management, resource optimisation, mine planning, cost estimating, machine maintenance ,mine infrastructure, crushing, processing and materials handling. Its strength lies in the ability to develop competitive, innovative, practical solutions for its clients.

2011 Target Mine Plan

In the second half of 2010, Leighton will undertake further mine planning to extract 2.0 million tonnes of coal for calendar year 2011. The optimal mining equipment suite will be configured based on the 2010 starter pit experience and a detailed mine plan by Wardrop Engineering's Preliminary Economic Assessment (PEA). Wardrop's PEA is expected in June 2010. Amortisation of the capital outlay will be spread over a 6 year time window and included in the delivered cost per ton. It is expected that the increased production volume will cause a decrease in the total cash cost per tonne by approximately 20%.

Close of 2% Ulaan Ovoo NSR

Prophecy is also pleased to have extinguished the 2% Net Smelter Return (NSR) held by Dunview Services Limited, a private British Virgin Islands company. Prophecy paid Dunview US$130,000 in cash and 2,000,000 Prophecy shares, subject to a 4 months hold.

Ulaan Ovoo Mining License

The Mongolian government has granted the project a 30 year mining license that can be extended by an additional 40 years. The project has met Mongolian environmental approvals as per the Mongolian Ministry of Nature and the Environment which approved a Detailed Environmental Impact Assessment (DEIA) and Environmental Protection Plan (EPP). As the last step to commence mining, Prophecy filed for its Ulaan Ovoo operating permit in April including necessary license, mine plan, and environmental approvals.  Prophecy is advised by its Mongolia counsel and the Minerals Resources and Petroleum Authority that current minerals licenses and operating permits are not affected by the President's recent order to freeze exploration license grants. The company expects to obtain the permit by summer.

John Lee Chairman of Prophecy Resource Corp stated today that: "Leighton Asia is the world's premier contract miner and we look forward to a long and fruitful partnership. We are moving at a rapid pace to commence coal production from Ulaan Ovoo this year in a responsible manner. We are also in excellent standing with the local and the national governments of Mongolia. The company is pleased to contribute to the local economy by supplying our coal to domestic coal-fired power plants and schools and hospitals in need. "

The material in this news release has been reviewed and approved by Danniel Oosterman P. Geo, a Prophecy geologist and also a Qualified Person as defined by NI 43-101. For more information about Prophecy, please contact Scott Parsons at +1.604.642.2625 ext. 106 or John Lee at +1.800.851.1528


ON BEHALF OF THE BOARD OF DIRECTORS
Prophecy Resource Corp.
"JOHN LEE"
John Lee
Chairman

About Ulaan Ovoo
Prophecy has 100% interest in the 208.8 million tonne Ulaan Ovoo project that features Bituminous (5,204 kcal/kg), low ash (12.46%), low sulphur (0.40%) thermal coal suitable for export markets. The deposit features single massive coal seam 45-80 m thick with an average strip ratio of 2:1 and requires no washing for the first 50 million tonnes of production. The project is located within 10 km of the Russian border, northern Mongolia and is 120km (75 miles) east of the Central Mongolian Railroad linking the project to the vast coal markets of Russia and Asia. 


Truck Route
Click to enlarge


About Prophecy
Prophecy controls over NI-43-101 compliant Measured and Indicated mineral resources of 232 million pounds of nickel, 1 billion tonnes of coal and 116 million pounds of copper as well as inferred resources of 82 million pounds of nickel, 500 million tonnes of coal, and 593 million pounds of copper.  The Company's Ulaan Ovoo Coal Project, Mongolia is expected to be in production this year. Prophecy will hold properties with significant exposure to vanadium and titanium.  All Prophecy's coal assets are located in Mongolia with its remaining assets located in Canada. The Company is currently reviewing additional opportunities for growth.

 


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.