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Prophecy Coal Corp.: Chandgana Coal Project Signs 25 Year Coal Off-take Agreement

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VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 06/05/13 -- 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 - 5693661
bekzod@prophecycoal.com
www.prophecycoal.com