VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 06/24/13 -- Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX: PCY) (OTCQX: PRPCF) (FRANKFURT: 1P2) is pleased to provide the following update of its Ulaan Ovoo mine.
Since production was suspended in July, 2012 (see the Company's August 9, 2012 news release), management has examined all aspects of the Ulaan Ovoo mine, from mining and transportation to marketing and sales, with the goal of lowering production costs and increasing coal sales upon the potential resumption of mining at Ulaan Ovoo.
The Company is actively discussing several potential coal sale and purchase agreements with the goal of resuming mining operations in Q3 2013 and the ramping up of production throughout 2014. Ulaan Ovoo coal is marketed specifically to power plants, heat/boiler plants, cement factories, metallurgical plants, direct reduced iron plants, and railway companies. Ulaan Ovoo coal (5,000 kcal/kg GCV, less than 1% Sulphur, less than 10% Ash, less than 3 % rocks) is well suited for all these applications.
Coal prices in the region have been largely shielded from global economic weakness. Current benchmark premium GAR 5,000 kcal/kg thermal coal pricing is exceeding $40/t in Mongolia and $50/t at several delivery points in the Russian Republic of Buryatia (Buryatia). These prices represent a material increase year over year. The Company is very encouraged by both the quantity requested by new and repeat customers, as well as current price trends.
The Company projects that Russian sales through Zeltura and Sukhbaatar border crossings will account for over 50% of the sales volume. In the past months, Prophecy has received written correspondence from Russian parties regarding the purchase of Ulaan Ovoo coal and/or the purchase of the Ulaan Ovoo mine itself.
The conditions for potential coal sales to Russia have improved in the following areas:
1. The Mongolian government has lowered the benchmark pricing used to calculate export royalties, while the average coal price has risen in Russia's Buryatia region.
2. Prophecy has had numerous meetings with Mongolian and Russian officials seeking the re-opening of the Zeltura border crossing between Mongolia and Russia. The Zultura crossing is less than 20km from Ulaan Ovoo, and the re-opening of the border would reduce transportation costs and potentially increase sales margins. The Company has received support from and continues to work with officials from both governments to re-open the Zeltura border crossing.
History of Ulaan Ovoo
Prophecy has successfully delivered over 300,000 tonnes of Ulaan Ovoo coal to 28 customers, with a track record of timely delivery and meeting or exceeding required coal quality specifications. Below is a brief chronologic history(i).
H1 2013: Sold 45kt from stockpile, 106kt stockpile remains, $55million invested to date.
H2 2012: Production curtailed in July due to low prices and lack of market penetration.
2012: Produced 165kt (H1), Sold 131kt (including 2.4kt to Russia)
2011: Produced 205kt, Sold 127kt (including 6kt to Russia)
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