Prophecy Enters MOU for 1.2 Million Tonnes Per Year Coal Offtake With JUST Group

Vancouver, British Columbia, January 5, 2011: Prophecy Resource Corp. ("Prophecy" or the "Company") (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2)  announced today that it has entered into a Memorandum of Understanding ("MOU") with JUST Group ("JUST") of Mongolia pertaining to a minimum of 1.2 million tonnes of coal sales from Prophecy's Ulaan Ovoo mine.

For the next 3 years, JUST will purchase a minimum of 1.2 million tonnes of coal per year from Prophecy (subject to production capacity) and re-sell this coal to end users pursuant to back-to-back sales agreements entered into by all relevant parties. JUST will assist Prophecy with customer acquisition, revenue collection, customs, and rail transportation within Russia's Buratya province (10km from Ulaan Ovoo) and towards Russia's east seaports such as Vladivostok and Vostochiny.

The minimum sales price at Nauski, the northern Mongolian-Russian border crossing, is set at US$35 per tonne of coal, subject to quarterly market adjustment. As total consideration for its services, JUST will receive a 3% commission of the final coal sales price. Both Prophecy and JUST will also cooperate to rail Ulaan Ovoo coal to Russian east seaports in the soonest time frame possible, where coal of Ulaan Ovoo’s quality is trading at a 2 year high of $84/tonne.

Pursuant to the MOU, Prophecy has also agreed to purchase JUST Oil LLC Diesel Products at prevailing market prices. Both parties have agreed to finalize all details in a binding Co-operation Agreement within 30 days of the MOU. 

John Lee, CEO of Prophecy states: "Since Ulaan Ovoo's commissioning in October, Prophecy has received numerous expressions of coal off take interest from both local Russian power plants and far east clients at Russian east seaports. Our alliance with JUST ensures seamless coal delivery to end customers. Again I'd also like to thank the Mineral Resources Authority of Mongolia and the Ministry of Mineral Resources and Energy for expediting Ulaan Ovoo permitting, which allows Prophecy to serve local and regional thermal plants in this harsh winter in times of need."

Batkhuu, Chairman of JUST states: "Prophecy is a trustworthy, energetic company. The Ulaan Ovoo and Chandgana projects have a lot of potential and the JUST group looks forward to a solid partnership with Prophecy to develop those projects to serve and power Mongolia as well as other parts of Asia."

This news release has been reviewed and approved by Danniel J. Oosterman, PGeo, and a Qualified Person as defined in NI 43-101. For more information about Prophecy, please contact Paul McKenzie at +1.604.642.2625 ext. 107 or John Lee at +1.800.851.1528.

About JUST Group

JUST Group is a private Mongolian company incorporated in 1999 that is, through subsidiary companies, active in the trading, distribution and bulk transportation of energy products, logistics, and mining in Mongolia. The company has extensive experience in rail transportation between Mongolia and Russia and currently carry by rail bulk energy products such as oil and coal.

JUST Group currently employs 3,300 people and currently ranks as the 5th largest company in Mongolia, in a survey completed by the Government of Mongolia, Mongolian Chamber of Industry and Commerce, and is one of the top 3 Mongolian oil products retail and wholesale companies. Thanks to Just Group's experience in the trading and distribution of energy products (such as oil, coal, and electricity) the company has established preferred business relationships with all the major Mongolian businesses active in heavy industry, power and mining.

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.

 


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