Prophecy Coal Corp.

TSX : PCY
OTCQX : PRPCF
FRANKFURT : 1P2


Prophecy Coal Corp.

February 06, 2013 08:48 ET

Prophecy Receives Non-Binding Project Financing Indicative Term Sheet and Letter of Intent on a Project Equity Investment

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 6, 2013) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to announce that it has received indicative terms and conditions issued by a major international bank, (the "Potential Lender"), for a proposed loan (the "Loan") in favour of Prophecy Coal Corp. ("Borrower") for the purpose of funding the development and construction of the Chandgana Tal 4X150MW Power Plant Project in Khentii Province, Mongolia (the "Project").

It is proposed that the proceeds of the Loan will be used to finance up to 85% of the total value of the commercial contract which to be signed between the appointed engineering, procurement and construction ("EPC") contractor and the Borrower. The Loan would be repaid in 24 consecutive instalments for a repayment period of up to 12 years at a fixed premium to LIBOR.

Conditions precedent to the proposed Loan include, but are not limited to the following:

  • receipt of all authorizations from all relevant authorities in Mongolia and China;
  • approval from an export credit agency and by the credit committee of the Potential Lender;
  • completion of due diligence and preparation of required documentation each to the satisfaction of the Potential Lender; and
  • the execution of all relevant project and loan documentation.

Separately, Prophecy has received a non-binding letter of intent respecting an equity investment (the "Investment") of up to 20% in the Project. The letter of intent was received from a qualified EPC contractor (the "Potential Investor") who is on Prophecy's final list of EPC bidders and is the same EPC contractor referred to in the indicative terms and conditions issued by the Prospective Lender. It is proposed that the Investment would be subject to the receipt of a guarantee on the Project by the Mongolian Government, a signed EPC contract with the Investor, satisfactory execution of a power purchase agreement (the "PPA"), completion of the remaining 80% of the Project financing, and receipt of all necessary project clearances and approvals.

Further to the press release dated November 14, the Ministry of Energy of Mongolia has issued the letter of support to Prophecy's proposed JV partner ("JV Partner"), one of world's largest thermal power generation groups. Prophecy and JV Partner are advancing the due diligence towards a definitive investment agreement.

Prophecy, led by Chairman John Lee, continues to engage closely with all relevant Mongolian government agencies and Ministries to complete the PPA timely. The Company likes to take the opportunity to thank all Mongolian government officials and working group members for their time and effort dedicated to the Project. The proposed construction starting date is 2nd quarter of 2013 with a signed PPA.

The Company cautions that Project Financing can have a very long lead time and there is no assurance that the Company and the Project can pass all the due diligence requirements to secure the necessary funding.

About Prophecy Coal

Prophecy Coal Corp. is a Canadian listed company engaged in developing energy projects in Mongolia. The Company's wholly-owned subsidiary Prophecy Power Generation LLC is advancing plans for a proposed 600 MW mine-mouth power plant, which has been permitted by the Mongolian government, adjacent to its Chandgana coal deposit. Chandgana Coal LLC, another Prophecy wholly-owned Mongolian subsidiary, is expected to supply 3.5 million tonnes of coal per year to Prophecy Power for 25 years. Chandgana Coal LLC controls over 1.2 billion tonnes of thermal coal in the measured and indicated categories, including two mining licenses containing 124 million tonnes of measured resource with a strip ratio of 0.7:1. Substantially all of the Company's resources are not mineral reserves, hence they do not have demonstrated economic viability.

Further information on the Company can be found at www.prophecycoal.com.

The technical contents of this news release have been reviewed and approved by Christopher M. Kravits, P.Geo. who is a Qualified Person as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects. Mr. Kravits has 34 years of US and international relevant coal geology experience. He has been active in Mongolia since 2007.

ON BEHALF OF THE BOARD OF PROPHECY COAL CORP.

John Lee, Executive Chairman

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.

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