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

Prophecy Coal Corp.

April 16, 2013 08:30 ET

Prophecy Provides Update on Chandgana Power Plant Project

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 16, 2013) - Prophecy Coal Corp. ("Prophecy") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to provide the following update regarding its Chandgana coal mine-mouth power plant project (the "Power Project"), located in central Mongolia.

As previously announced by Prophecy, all major permits required for the construction of the Power Plant have been received and required studies have been completed, including land use rights, geotechnical study, environmental impact assessment study, raw water supply feasibility study and seismic study. Prophecy made progress with scheduled preliminary mobilization, design and engineering work in Q1 2013, and seeks to accomplish the following objectives in Q2 2013:

  1. Prophecy's Mongolian subsidiary Prophecy Power Generation LLC (PPG) obtained water permits for the use of well water at site for the staff and construction camp facilities in Q1 2013, and tenders for drilling well(s) and water treatment facilities are being initiated. This facilitates the start of mobilization work at site, targeted for June 2013;
  2. PPG obtained approval from a local electricity distribution authority to provide a temporary electricity supply required for construction work at the Power Project. The design work for the temporary electricity supply and tendering process have been initiated;
  3. Tenders have been received from reputable Chinese engineering consulting firms to be selected by PPG to oversee the design work of the EPC contractor on PPG's behalf;
  4. Tenders have also been received from engineering firms to oversee the Power Plant construction work to be carried out by the to-be-selected EPC contractor on behalf of PPG. The tender process for firms seeking to provide these services is targeted for closing on April 30, 2013;
  5. Tendering for fencing the Power Plant site, has been initiated and expected to close on April 30th, 2013; and
  6. Other Q2 objectives include installing a drinking water well system, construction of temporary office and accommodation, construction of a water supply system, site fencing and construction of an access road.

Prophecy continues on-going discussions with the Ministry of Energy of Mongolia, its various working groups and the Energy Regulatory Commission on the Power Purchase Agreement (PPA) and the Tariff Application. Although all parties have indicted willingness and desire to conclude the PPA and Tariff Application, this is a time-consuming process, as the PPA is a major power off-take agreement with an independent power supplier for the Mongolian energy sector. Prophecy is optimistic that the negotiation of the PPA and Tariff Application can be successfully completed and will provide updates as appropriate.

Prophecy has received final detailed binding turnkey EPC quotes, amended for various cost optimization measures and transportation scenarios. The respective tailored EPC contract(s) are ready to be executed, pending conclusion of the PPA.

The Chandgana Power Project has attracted several major IPP (independent power plant) enterprises assessing a potential investment in the Power Project. One interested IPP enterprise has established an office in Mongolia, and is collaborating with Prophecy on the Power Project's technical and commercial aspects. Joint development discussions on the Power Project are actively on-going with a number of IPP enterprises.

In order to diversify its potential power supply customer base, Prophecy has discussed direct power purchase contracts with potential customers in the mining industry, who need substantial electricity in the South Gobi region. While the discussions are preliminary at this stage, Prophecy believes that it can deliver very competitive, tangible, energy solutions to offset the very high Chinese electricity export tariffs in the South Gobi region, for the benefit of the general Mongolian economy, including the mining industries in Mongolia.

About Prophecy's Power Plant Project

Prophecy Coal Corp. is a Canadian TSX listed company engaged in developing coal properties and an energy project in Mongolia. The Company's wholly-owned subsidiary, Prophecy Power Generation LLC, is advancing plans for the proposed 600 MW coal mine-mouth Chandgana power plant located in central Khentii Province in east-central Mongolia, which has been permitted by the Mongolian government. Chandgana Coal LLC, a wholly-owned Mongolian subsidiary of Prophecy Coal Corp, controls a significant coal asset located adjacent to the site of the proposed Chandgana power plant, which includes the two Chandgana Tal mining licenses containing 124 million tonnes of measured resource with an average strip ratio of 0.7 to 1, and the Khavtgai Uul license containing 509 million tonnes measured and 539 million tonnes indicated resource with a strip ratio of 2.2 to 1. Chandgana Coal LLC could potentially supply 3.5 million tonnes of coal per year for 25 years to the Chandgana power plant. Prophecy cautions that mineral resources that are not mineral reserves, do not have demonstrated economic viability, that the Chandgana project is located in Mongolia, and that its successful development is subject to a variety of risks, including substantial capital requirements. Readers are encouraged to refer to the risk factors disclosed in Prophecy's most recent annual information form and MD&A, both of which are available at www.sedar.com, and to the caution regarding forward-looking statements below.

Further information on Prophecy and its projects can be found at www.prophecycoal.com.

Qualified Person

Mr. Christopher Kravits, LPG, CPG, is a qualified person as defined under National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). Mr. Kravits is not considered independent of Prophecy Coal given the large extent that his professional time is dedicated solely to, and his position as Manager of Mining with, Prophecy Coal Corp. Mr. Kravits has reviewed and approved the technical and scientific disclosure within this news release.

ON BEHALF OF THE BOARD OF PROPHECY COAL CORP

John Lee, Executive Chairman

* Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this news release, including statements which may contain words such as "believes", "could", "potentially", or similar expressions, and statements related to matters which are not historical facts, are forward-looking information within the meaning of applicable securities laws. Such forward-looking statements, which reflect management's expectations regarding Prophecy's future growth, results of operations, performance, business prospects and opportunities, are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. These estimates and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies, many of which, with respect to future events, are subject to change and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by Prophecy. In making the forward-looking statements in this news release, Prophecy has made several assumptions that it believes are appropriate, including, but not limited to assumptions that: all required third party contractual, regulatory and governmental approvals will be obtained for the development, construction and production of Prophecy's properties and the Chandgana Power Plant; there being no significant disruptions affecting operations, whether due to labour disruptions; currency exchange rates being approximately consistent with current levels; certain price assumptions for coal, prices for and availability of fuel, parts and equipment and other key supplies remain consistent with current levels; production forecasts meeting expectations, the accuracy of Prophecy's current mineral resource estimates; labour and materials costs increasing on a basis consistent with Prophecy's current expectations; and that any additional required financing will be available on reasonable terms. Prophecy cannot assure you that any of these assumptions will prove to be correct.

In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion or incorporation by reference of forward-looking statements in this news release should not be considered as a representation by Prophecy or any other person that Prophecy's objectives or plans will be achieved. Forward-looking statements in this news release include, without limitation, statements regarding the permitting, feasibility, plans for development and production of Prophecy's Chandgana Power Plant, including finalizing of any power purchase agreement; the likelihood of securing project financing; estimated future coal production at the Chandgana coal mineral properties; and other information concerning possible or assumed future results of operations of Prophecy. Numerous factors could cause the Prophecy's actual results to differ materially from those expressed or implied in the forward-looking statements, including the following risks and uncertainties, which are discussed in greater detail under the heading "Risk Factors" in Prophecy's most recent Management Discussion and Analysis and Annual Information Form as filed on SEDAR and posted on Prophecy's website www.prophecycoal.com: Prophecy's history of net losses and lack of foreseeable cash flow; exploration, development and production risks, including risks related to the development of Prophecy's coal properties; Prophecy not having a history of profitable mineral production; the uncertainty of mineral resource and mineral reserve estimates; the capital and operating costs required to bring Prophecy's projects into production and the resulting economic returns from its projects; foreign operations and political conditions, including the legal and political risks of operating in Mongolia, which is a developing jurisdiction; the availability and timeliness of various government approvals and licenses; the feasibility, funding and development of the Chandgana Power Plant; title to the Prophecy's mineral properties; environmental risks; the competitive nature of the mining business; lack of infrastructure; Prophecy's reliance on key personnel; uninsured risks; commodity price fluctuations; reliance on contractors; Prophecy's need for substantial additional funding and the risk of not securing such funding on reasonable terms or at all; foreign exchange risks; anti-corruption legislation; recent global financial conditions; the payment of dividends; and conflicts of interest.

These factors should be considered carefully, and readers should not place undue reliance on the Prophecy's forward-looking statements. Prophecy believes that the expectations reflected in the forward-looking statements contained in this news release are reasonable, but no assurance can be given that these expectations will prove to be correct. In addition, although Prophecy has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended.

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.

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