Prophecy Provides Operation Update and Production Forecast at Ulaan Ovoo

Vancouver, British Columbia, March 23, 2011: Prophecy Resource Corp. ("Prophecy" or the "Company") (TSX-V: PCY, OTCQX: PRPCF, Frankfurt: 1P2) is pleased to provide the following update on its open pit coal operation at its 100% owned, Ulaan Ovoo mine in Mongolia:

Mining by Leighton Asia Limited

Year to date, under contract to Prophecy, Leighton has removed 1,289,300 bcm of topsoil and overburden thereby exposing 333,760 tons of in-situ coal of export-quality (5,200+ kcal/kg, 0.5% Sulphur, 5% ash) coal ready to be mined. Prophecy is working with Leighton to optimize mine plans for 2011 and 2012 at a fixed mining cost.

5,000 tons of export quality coal ready at Sukhbaatar Railway Siding April 1

Having secured a rail siding at Sukhbaatar covering an area of 23,770 sq meters, Prophecy has commenced the trucking of export quality coal from Ulaan Ovoo to the Sukhbaatar railway siding that is 120km from the mine by road. The coal has the following qualities on an as-received (AR) basis:

Heating value: 5,200 kcal/kg
Total sulphur: 0.5%
Ash: 5 %.

5,000 tons of export coal will be on stock ready for rail loading by 1 April 2011. All export coal will be customs cleared at Sukhbaatar station and then freighted by rail to the Russian domestic market as well as to the Russian Eastern Sea Coal Terminals for shipment to overseas customers.

Coal sales and production forecast

Since commissioning the Ulaan Ovoo mine in November 2010, Prophecy has transported and sold 27,597 tons of 3,500 kcal/kg coal to local power plants and companies in Mongolia. The Company was pleased to support local communities this winter.

Further, regarding international sales, which will be the principal driver to Prophecy's future margin and cash flow, the Company anticipates exporting approximately 520,000 tons of coal in 2011 with the following production schedule:

March - 5,000 tons
April - 20,000 tons
May - 35,000 tons
June - 40,000 tons
July - 50,000 tons
August - 60,000 tons
September- 78,000 tons
October- 78,000 tons
November - 78,000 tons
December - 78,000 tons

Having experienced a slow start due to New Year and Lunar Festivals, Prophecy expects to significantly ramp up production and reach a target rate of 1 million tons per annum by the end of 2011.

Equipment Purchase Update

In January, Prophecy purchased its entire auxiliary equipment and mining fleet on site.  consisting of 1 (one) CAT 385C Excavator, 1 (one) CAT D8R Dozer, 3 (three) Cat 773D Dump trucks, 1 (one) CAT 160 H Grader, and 1 (one) CAT 928G Loader plus additional miscellaneous equipment. This purchase has eliminated the high costs associated with equipment leasing and rental.

In addition to the on-site equipment buyout, Prophecy has ordered the following mining and transport units with delivery dates between March and June of 2011.

1 (one) CAT 390 Excavator,
3 (three) CAT 773D Dump Trucks
1 (one) CAT D8R Dozer and
1 (one) CAT 160K Grader.
18 (eighteen) Scania 32m30t Tipper trucks,
2 (two) Liebherr 580 Loaders and
2 (two) by Nissan Water Trucks. (for purpose of road maintenance)

The purchase of Scania trucks will enable Prophecy to more efficiently schedule coal deliveries and eliminates costly contract trucking. With the combined equipment purchases, Prophecy expects to reach production rate of 1 million tonne per year exit 2011.

Coal Off take/ Sales Agreement

Prophecy is in active discussion with several International and Russian coal customers. The priority is to export first shipment of 10,000-30,000 tons of quality 5,000+ kcal/kg coal through the Sukhbaatar rail station into Russia. Successful execution of this trial shipment will pave the way for rail coal deliveries to the Russian Eastern Ports to fulfill potential off-takes agreements. Meanwhile, Prophecy continues its non-exclusive discussion regarding logistics services agreement with JUST group.

Ronnie van Eeden, VP of Prophecy Mining Operations commented today that: "Prophecy has made great strides in the last 90 days towards profitable production at Ulaan Ovoo. John Lee, Chairman of Prophecy added: "Prophecy's objective is to reach positive operating cash flow in Q2 of 2011 and increase production rate to1 million ton per annum at the end of 2011."

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 surface minable thermal coal in Mongolia (839 Mt Measured, 579 Mt Indicated).  Prophecy's Ulaan Ovoo coal mine is fully commissioned. In Canada Prophecy owns Wellgreen PGM Project in Yukon, Lynn Lake Nickel Sulphide Project in Manitoba, and equity stakes in Victory Nickel Inc. and Compliance Energy Corp.  On February 17, Prophecy Agreed to sell its PGM Nickel assets to Pacific Coast Nickel Corp. for 450 million Pacific Coast Nickel shares. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Prophecy has commenced mining development activities on the Ulaan Ovoo coal mine without having completed a feasibility study. There are certain risks and uncertainty associated with commencing production without a feasibility study. The deposit has not been explored, developed and analyzed in sufficient detail to conclude a feasibility study and may ultimately be determined to lack one or more geological, engineering, legal, operating, economic, social, environmental, and other relevant factors reasonably required to serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production. Additionally, the outcome of the feasibility study may not be positive or optimal for the production scale being initiated.

 

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.