Prophecy Coal Corp. ("Prophecy")
(TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to announce the
signing of a Coal Supply Agreement ("CSA") between Chandgana Coal
LLC ("Chandgana Coal") and Prophecy Power Generation LLC ("PPG"),
which is developing the 600MW mine mouth Chandgana power plant
project ("The Project").
Chandgana Coal and PPG are both wholly owned subsidiaries of
Prophecy, a Canadian company listed on the Toronto Stock Exchange.
If Prophecy is successful in obtaining power plant project
financing with debt and equity partners, Prophecy is expected to
retain various ownerships of PPG and Chandgana Coal.
As per the CSA, Chandgana Coal will supply 3.6 million tonnes of
coal annually, at a price of USD17.70 per tonne for a period of 25
years. The CSA coal price is competitive to Mongolian domestic
thermal coal prices and is subject to annual indexing on based on
the USA CPI Index, Mongolian Wage Index and Mongolian Diesel Price
Index. PPG has committed to purchase a minimum of 2 million tonnes
on a "take or pay" basis, with customary breakup fees payable by
PPG. The CS A's coal delivery date is anticipated to be in the
second half of 2016, subject to PPG signing a Power Purchase
Agreement, obtaining all necessary governmental approvals, and
project financing.
The signing of the CSA marks the accomplishment of another key
project milestone. Besides a bankable Power Purchase Agreement
("PPA"), stable and guaranteed fuel supply is required to obtain
project financing from equity partners and banks.
The CSA has been approved by Prophecy's independent directors,
who after studying various coal supply options to the proposed
Chandgana power plant project concluded that the coal supply from
Chandgana Coal, with existing licenses to mine the coal from
Chandgana Tal project adjacent to the proposed Power Plant site,
represents a practical and cost effective solution to meet
commissioning of a power plant targeted for 2016.
For Chandgana Coal, the CSA secures a long-term next-door
customer on attractive and extended terms that will provide stable
cash flow returns throughout the first 25 years of the mine.
The Chandgana Tal mining licenses contain an estimated 124
million tonnes of coal resources, all in the measured category. The
average in-place gross calorific value is 3,306 kcal/kg of coal.
The mine will be a surface open pit mine and will be located
approximately 2 km from the proposed power plant site. The average
waste to ore strip ratio is estimated to be 0.70:1 over the life of
the mine.
In November 2012, Prophecy received a Preliminary Economic
Assessment (PEA) on its Chandgana Tal coal mining licenses prepared
by John T Boyd Co. The independent PEA study reports that the
Chandgana Coal project will produce a 36% IRR, 4 years pay-back
period on USD 31 million initial capital invested and USD70.5
million Net Present Value (NPV) at 10% discount rate on a pre-tax
basis. Total cash cost per tonne of coal production is estimated to
be USD12.63 as per the PEA.
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.
About Prophecy Coal
Prophecy Coal Corp. is a Canadian company listed on the Toronto
stock exchange engaged in developing energy projects in Mongolia.
Prophecy's wholly-owned subsidiary Prophecy Power Generation LLC is
advancing plans for a proposed 600 MW coal-fired mine-mouth power
plant, which has been licensed by the Mongolian government,
adjacent to its Chandgana coal deposit. Chandgana Coal LLC, another
Prophecy wholly-owned Mongolian subsidiary, has contracted to
supply 3.6 million tonnes of coal per year to Prophecy Power for 25
years. Chandgana Coal LLC controls a significant coal resource.
This 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. Substantially all of Prophecy's resources are
not mineral reserves; hence, they do not have demonstrated economic
viability. Further information on Prophecy Coal can be found at
www.prophecycoal.com.
PROPHECY COAL CORP
ON BEHALF OF THE BOARD
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 "expects",
"anticipates", "intends", "plans", "believes", "estimates", 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 forward-looking statements as may be included 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, such as 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 Ulaan Ovoo coal mineral property and the
Chandgana coal mineral properties; and other information concerning
possible or assumed future results of operations of Prophecy.
Numerous factors could cause 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: 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 Ulaan Ovoo coal
property; 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 licences; the
feasibility, funding and development of the Chandgana Power Plant;
title to 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 minority
interest in Prophecy Platinum Ltd.; 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 and
the documents incorporated by reference herein 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.
Prophecy undertakes no obligation to release publicly any future
revisions to forward-looking statements to reflect events or
circumstances after the date of this news release or to reflect the
occurrence of unanticipated events, except as expressly required by
law.
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.
Contacts: Prophecy Coal Corp. Bekzod Kasimov Manager, Business
Development +976 - 99012672 or +1604 -
5693661bekzod@prophecycoal.com www.prophecycoal.com