Prophecy Coal Corp.
TSX : PCY
OTCQX : PRPCF
FRANKFURT : 1P2

Prophecy Coal Corp.

October 15, 2014 09:42 ET

Prophecy Coal to Acquire Pulacayo-Paca Silver-Lead Zinc Mining Project in Bolivia

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 15, 2014) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) has entered into a binding letter agreement (the "Letter Agreement") with Apogee Silver Ltd. ("Apogee") (TSX VENTURE:APE) to acquire the Pulacayo-Paca silver-lead-zinc mining project in Bolivia (the "Pulacayo Project").

Transaction Summary

Under the Letter Agreement, Prophecy will acquire Apogee's subsidiaries: Apogee Minerals Bolivia S.A. and ASC Bolivia LDC (which in turn, holds ASC Bolivia LDC Sucursal Bolivia) (the "Apogee Subsidiaries") which hold the Pulacayo-Paca joint venture by paying Apogee $250,000 in cash and issuing Apogee 60 million Prophecy Class B convertible, non-voting shares (the "Class B Shares") (the "Proposed Transaction"). The Class B Shares will become eligible for conversion by Apogee, to an equivalent number of listed Prophecy common shares in tranches over a two-year period, when certain price levels of the Prophecy shares trading on the TSX are met, or in the face of certain major triggering events. Prophecy has agreed to assume all liabilities of the Apogee Subsidiaries.

Certain shareholders of Apogee who hold an aggregate of 82,253,000 million common shares, representing approximately 18.2% of Apogee's common shares, have signed support agreements pursuant to which they have agreed to vote all of the Apogee shares beneficially owned by them in favour of the Proposed Transaction.

The Proposed Transaction would provide Apogee shareholders with liquidity and an opportunity to team up with Prophecy's mining production experience in a challenging investment climate. Apogee shareholders would also be able to participate in the potentially significant upside of both the Pulacayo-Paca and Prophecy's coal and energy projects. By combining advanced-stage mining and energy projects in different geographic regions, Prophecy will diversify its project portfolio by adding exposure to multiple commodities, broadening its appeal to Asian, European and American investors; and mitigating perceived political risks.

Pulacayo-Paca Project Summary

The Pulacayo-Paca property is located 18km east of Uyuni city in southwestern Bolivia. It is located 460km south-southeast of the nation's capital of La Paz and 150km southwest of the city of Potosi. An 18km paved road connects Pulacayo-Paca to Uyuni, which connects to the port of Antofagasta by 612km of railroad.

The Pulacayo-Paca property is comprised of approximately 22,850 hectares of contiguous mining concessions centered on the historic Pulacayo mine and town site with access to power and water. ASC Bolivia LDC Sucursal Bolivia (the indirectly held wholly-owned Bolivian subsidiary of Apogee) controls the mining rights to the concessions through a separate joint venture agreement with the Pulacayo Mining Cooperative who hold the mining rights through a lease agreement with the state-owned Mining Corporation of Bolivia, COMIBOL.

Between 2006 and 2012, a total of 69,739m of diamond drilling was conducted by Apogee, whereby 226 surface drill-hole and 42 underground drill-hole results support mineral resource and reserve estimates pertinent to the independent feasibility study dated January 17, 2013 as filed on the SEDAR profile of Apogee.

Pulacayo's trial mining and toll milling programs started in November 2011 and continued for 19 months.

During the trial mining period, the following results were achieved:

Trial Mining Results
Development
m
Total Ore tons Ag g/t Pb
%
Zn
%
Stoping
tons
Ag
g/t
Pb
%
Zn
%
1,247 12,550 270 2.7 2.4 7,547 339 3.8 3.1

The ore was trucked 150km to Potosi and processed by 3 custom mills owned by local cooperatives with varying operating capacity between 50 to 150 tonnes per day (tpd). Best recovery results were obtained from the Zabaleta mill which produced the following results:

Concentrate Grade Recovery
Pb% Zn% Ag g/t Pb% Zn% Ag%
Lead Conc 47.95 % 12.85 % 6,295 g/t 64.62 % 16.26 % 72.13 %
Zinc Conc 8.47 % 39.45 % 941 g/t 9.97 % 43.57 % 8.41 %
Tailing 0.58 % 0.97 % 49.38 g/t 25.41 % 40.16 % 18.45 %

Total silver recovery was 81.55%.

The concentrate was sold to Consorcio Minero S.A., a wholly-owned subsidiary of the Trafigura Group.

In December 2012, the Environmental Impact Assessment for the Pulacayo-Paca project (the "Pulacayo Project") was submitted to Bolivia's Ministry of Environment and Water and it was approved in October 2013. The submission was the result of over 30 months of technical studies and consultations, including a comprehensive water management plan, the feasibility study, archeological studies, flora and fauna studies, mine closure planning, social baseline studies, and results from two years of public consultations with local communities.

The approval of the EIA allows for mine and concentrator construction with a targeted production rate of up to 560 tpd at the Pulacayo Project.

Further Detail Regarding the Transaction

The Proposed Transaction is subject to the following:

  1. Prophecy and Apogee entering into a definitive agreement based largely on the terms set out in the Letter Agreement;
  2. Apogee securing voting support agreements in favour of the Proposed Transaction from its shareholders who hold a minimum of 20% of its outstanding shares, (the "Voting Support Agreements");
  3. Shareholders of Apogee approving the Proposed Transaction and if necessary, shareholders of Prophecy approving any necessary acts required to effect the terms of the Proposed Transaction;
  4. Apogee's shareholders holding more than 10% of Apogee's shares in the aggregate, not having exercised rights to dissent over the Proposed Transaction; and
  5. Obtaining all necessary regulatory approvals for the Proposed Transaction, including the approval of each of the Toronto Stock Exchange and the TSX Venture Exchange.

The final structure of the Proposed Transaction will be subject to the parties' receipt of qualified tax, corporate and securities legal and accounting advice.

On the closing date of the Proposed Transaction, Apogee shall appoint to its board of directors an individual nominated by Prophecy to serve as a director of Apogee. Prophecy currently has 251,878,634 common shares issued and outstanding. In the event Apogee were to convert all of the Class B Shares as of the date hereof, Apogee would hold 19.2% of Prophecy.

The parties have agreed to enter into a definitive agreement by October 24, 2014 and complete the Proposed Transaction by December 29, 2014. Apogee expects to mail an information circular to its shareholders providing full details of the Proposed Transaction in early November 2014.

The Letter Agreement includes a commitment by Apogee to not pursue or conduct negotiations to solicit alternative offers to the Proposed Transactions. In certain circumstances, if the Proposed Transaction is terminated by Apogee, a break-up fee of $850,000 will be payable in cash to Prophecy by Apogee.

Prophecy's focus remains coal and energy projects in Mongolia, where well over 90% of Prophecy's staff reside. Prophecy has conducted thorough due diligence on Pulacayo-Paca. Upon completion of the Proposed Transaction, Prophecy will examine the project economics in relation to prevailing metal prices prior to making any production decision. At the appropriate time, joint venture partners may be sought to develop the Pulacayo Project.

Qualified Persons

The technical contents of this news release have been prepared under the supervision of Christopher M. Kravits, P.Geo, General Mining Manager of Prophecy. Mr. Kravits is a Qualified Person as defined in NI 43-101.

About Prophecy

Prophecy Coal Corp. is a Canadian public company listed on the Toronto Stock Exchange that is engaged in developing energy projects in Mongolia. Further information on Prophecy Coal can be found at www.prophecycoal.com.

PROPHECY COAL CORP.

ON BEHALF OF THE BOARD

JOHN LEE, Executive Chairman

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.

Cautionary Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and "forward-looking information" within the meaning of applicable Canadian Securities Legislation. Statements containing forward-looking information express, as at the date of this news release, the Proposed Transaction, the Company's plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results and the Company does not intend, and does not assume any obligation to, update such statements containing the forward-looking information. Such forward-looking statements and information include, but are not limited to statements as to: the accuracy of estimated mineral reserves and resources, anticipated results of future exploration, and forecast future metal prices, anticipated results of future sales and expectations that environmental, permitting, legal, title, taxation, socio-economic, political, marketing or other issues will not materially affect estimates of mineral reserves. These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.

These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this news release and the Company has made assumptions and estimates based on or related to many of these factors.
Such factors include, without limitation: statements with respect to the future financial or operating performance of Prophecy and Apogee and its projects, statements regarding the prospects for the Proposed Transaction, statements regarding synergies and financial impact of the Proposed Transaction, the terms and conditions of the transaction, the benefits of the Proposed Transaction, risks related to the technological and operational nature of the Company's business; changes in national and local government, legislation, taxation, controls or regulations and political or economic developments in Canada, Mongolia, Bolivia or other countries where the Company may carry on business in the future; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, cave-ins and flooding); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with and claims by local communities and indigenous populations; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits and the presence of laws and regulations that may impose restrictions on mining; diminishing quantities or grades of mineral reserves as properties are mined; global financial conditions; business opportunities that may be presented to, or pursued by, the Company; the Company's ability to complete and successfully integrate acquisitions and to mitigate other business combination risks; challenges to, or difficulty in maintaining, the Company's title to properties and continued ownership thereof; the actual results of current exploration activities, conclusions of economic evaluations, and changes in project parameters to deal with unanticipated economic or other factors; increased competition in the mining industry for properties, equipment, qualified personnel, and their costs. Investors are cautioned against attributing undue certainty or reliance on forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements or information, other than as required by applicable law.

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