Prophecy said the undisclosed buyer has indicated that the initial purchase will meet shortfalls from other suppliers, and that it would eventually like to increase the supply from Prophecy to 300,000 tonnes on an annual basis.

Shares in the company rose 2.04 percent after the announcement, trading at 25 cents as of 11:00 am EDT.

The buyer currently purchases in excess of 850,000 tonnes of coal annually from various local suppliers, said Prophecy.

The pricing is competitive to offers received from Russia, the company noted, and sets a benchmark for the continuation of off-take discussions with other local industries in the growing Mongolian economy, for which the Mongolian government forecasts 19% GDP growth in 2013.

No other details of the agreement were disclosed.

"As we move past the mine establishment phase at Ulaan Ovoo, we anticipate steadily decreasing operating cost and increasing sales quantity and price,” said Prophecy chairman and CEO John Lee.

"Our goal is to make Ulaan Ovoo operations cash flow positive in the near term without relying on Russian or Chinese export markets."

Prophecy said its "high quality thermal coal" (NAR 5100 kcal/kg) is ideal for DRI, which is also known as sponge iron.

DRI is produced from the direct reduction of iron ore in the form of lumps, pellets or fines by a reducing gas produced from burning coal, said the company, adding that the coal must be lumpy and of high calorific value.

Temperature, however, does not have to reach blast furnace levels, and therefore coking coal is not required.

Reducing gas from the coal requires a mixture of hydrogen (H2) and carbon monoxide (CO), which acts as a reducing agent.

Prophecy noted that this process of directly reducing the iron ore in solid form has been developed to overcome some of the high costs and difficulties of conventional blast furnaces.

DRI product is one of the chief raw materials in steel-making as it has higher qualities and advantages compared to scrap irons and pig irons, the company said. The products have been quoted in China at over US$300 a tonne.

Looking ahead, the company said it continues to make progress on opening the Zeltura border crossing - 10 kilometres from its Ulaan Ovoo mine - to facilitate coal export to Russia, which would then increase the total demand for Ulaan Ovoo coal past 1 million tonnes a year.

Prophecy is a Canadian listed company focused on developing energy projects in Mongolia.

With its Ulaan Ovoo mine now in production, Prophecy has proposed a 600 MW mine-mouth power plant adjacent to the Chandgana coal deposit, 14 kilometres away from the Ulaan Ovoo mine.

The plant has been permitted by the Mongolian government and negotiations on financing, power purchase agreements and construction management are underway.

Earlier this month, the company issued a statement clarifying previous disclosures related to a feasibility study of its Chandgana coal deposit, and also said it commissioned a preliminary economic assessment for Chandgana.

In January, the company issued a statement describing the feasibility study for the proposed mine-mouth power plant, and said that the report did not include an economic assessment of the Chandgana coal deposit under NI 43-101 compliant standards.

Given the report is linked to a specific coal deposit, a coal mine economic assessment under NI 43-101 is required before any disclosure can be made regarding the feasibility of a power plant project, as "economics of each is integral to the other", the company said.

As such, until an NI 43-101 economic assessment is prepared for the Chandgana coal deposit, "no meaningful feasibility study can be prepared in connection with the power plant," Prophecy said in May.

To address this, the coal producer retained John T. Boyd Co. to prepare a NI 43-101 compliant preliminary economic assessment for the Chandgana deposit.

The Ulaan Ovoo deposit hosts a measured resource of 174 million tonnes and has an indicated resource of 34 million tonnes, of which 20.7 million tonnes are classified as a reserve.

Meanwhile, the Chandgana coal property consists of three licenses: Chandgana Tal, which has a measured resource of 141 million tonnes and includes two licenses, and Khavtgai Uul – which contains one license and is located in the southwestern end of the basin – has a measured resource of 509 million tonnes and a 539 million tonne indicated resource.

In the past, the company said it has grouped its estimated coal resources on many occasions for the two Mongolian properties, contrary to NI 43-101.

These resources are only some 14 kilometres apart, and are close to important infrastructure - such as towns, roads, and electric transmission lines. They are linked by paved highway to Mongolia's capital, Ulaanbaatar, and the Trans-Mongolian Railroad.

It also said it commissioned a preliminary economic assessment for its Chandgana coal deposit.

In January, the company issued a statement describing the feasibility study for the proposed mine-mouth power plant, and said Thursday it reconfirms that the report pertains to the power plant only, and does not include an economic assessment of the Chandgana coal deposit under NI 43-101 compliant standards.

Given the report is linked to a specific coal deposit, a coal mine economic assessment under NI 43-101 is required before any disclosure can be made regarding the feasibility of a power plant project, as "economics of each is integral to the other", the company said.

As such, until an NI 43-101 economic assessment is prepared for the Chandgana coal deposit, which estimates a mine's capital costs and the operating economics of coal production for power plant use, "no meaningful feasibility study can be prepared in connection with the power plant," Prophecy said.

To address this, the coal producer has retained John T. Boyd Co. to prepare a NI 43-101 compliant preliminary economic assessment for the Chandgana deposit.

The report is expected to include a summary assessment of the Chandgana power plant economics, along with an assessment of the technical and economic viability of coal production at the deposit to verify the input prices assumed.

Accordingly, the company has fully retracted the power plant feasibility study disclosure until a Chandgana coal economic assessment is complete, Prophecy said.

Its January 17 release also made reference to a Chandgana mine costing study that was not compliant with NI 43-101.

"While no mine analysis from the study was disclosed, the company should not have referred to any study which was non-compliant with NI 43-101," it said.

The commissioned study will supersede the costing study, the company added.

In addition, the company clarified that its Ulaan Ovoo deposit hosts a measured resource of 174 million tonnes and has an indicated resource of 34 million tonnes, of which 20.7 million tonnes are classified as a reserve.

Meanwhile, the Chandgana coal property consists of three licenses: Chandgana Tal, which has a measured resource of 141 million tonnes and includes two licenses, and Khavtgai Uul – which contains one license and is located in the southwestern end of the basin – has a measured resource of 509 million tonnes and a 539 million tonne indicated resource.

In the past, the company said it has grouped its estimated coal resources on many occasions for the two Mongolian properties, contrary to NI 43-101.

These resources are nearly contiguous being only some 14 kilometres apart, and are close to important infrastructure - towns, roads, and electric transmission lines. They are linked by paved highway to Mongolia's capital, Ulaanbaatar, and the Trans-Mongolian Railroad.

The company’s share price rose 1.85 percent to reach 27.5 cents apiece on the Toronto Stock Exchange on Friday afternoon.

In an update on its open pit coal operation, Prophecy said that since 2010, it has invested over $30 million at Ulaan Ovoo, including road and bridge building, mining fleet, mining camp, pre-stripping, and other infrastructure and community improvements.

Prophecy said that since September 2011, it has sold and delivered some 188,915 tonnes of thermal coal, including 8,055 tonnes to Russia, 23,543 tonnes to private Mongolian companies, and 157,317 tonnes to Mongolian government-owned power plants.

The company said it has contracts to deliver an additional 228,388 tonnes in 2012, the majority of which is to be delivered to the Darhan and Erdenet power plants in Mongolia.

Prophecy reported that there are currently around 130,000 tonnes of coal stockpiled at Ulaan Ovoo.

The company’s total sales target for 2012 is 300,000 tonnes of coal, and for the rest of the year, it expects a stabilized production cost and minimal capital expenditures at Ulaan Ovoo.

"Ulaan Ovoo produces highly desirable thermal coal of NAR 5,100 kcal/kg quality to fulfill the regional demand of the thermal coal market," said chairman and CEO John Lee.

"The coal inventory levels at Mongolian power plants this past winter were down to only a few days, which created a national emergency."

In the past months, Prophecy said it has experienced a steady increase in both the demand and realized sale price for its coal.

In 2012, it said it received commitment and interest for a substantial quantity of Ulaan Ovoo coal from Russian buyers. But the company noted it is postponing sales to Russia pending the opening of the Zeltura border crossing and a revised export royalty scheme from the General Department of Taxation of Mongolia.

Prophecy is currently paying export royalties based on a government-set benchmark coal price, which is nearly three times higher than the actual sale price. The company said it is optimistic that progress will be made on both royalty and border opening fronts to improve the margin on sales.

"We are committed to delivering our quota to Mongolian power plants in 2012, while continuing to work with the Mongolian government on the 600 MW Chandgana Power Purchase Agreement to address the long-term energy needs of this rapidly developing country and at the same time, provide a stable return to our shareholders," concluded Lee.

In November 2011, the Vancouver-based company received a license from the Mongolian government to build a 600 megawatt power plant at its Chandgana Tal thermal coal deposit.

The company has over 1.4 billion tonnes of near surface thermal coal resources on two coal properties in Mongolia.  Prophecy’s Chandgana 600 MW power plant has been permitted and its Ulaan Ovoo coal mine is currently in production.

In March, the company announced that it closed a $10.06 million non-brokered private placement financing, selling 22.36 million shares priced at 45 cents each, up from the initial 20 million shares Prophecy originally planned to sell.

Prophecy said at the time that it would use funds for technical work to bring its Chandgana thermal coal power plant project toward development. The proceeds would also be used for general working capital.

The company sold 22.36 million shares priced at 45 cents each. That is up from the initial 20 million Prophecy originally planned to sell.

Prophecy said company insiders invested $508,500, and together with existing shareholders, subscribed for a majority of the financing.

Cash finder’s fees of six percent of the proceeds were paid to some arms-length portions of the placement, the company said.

Prophecy said it will use funds for technical work to bring its Chandgana thermal coal power plant project, found in Mongolia, toward development. The profits will also be used for general working capital.

In November 2011, Prophecy Coal, a Vancouver-based company, received a license from the Mongolian government to build a 600 megawatt power plant at its Chandgana Tal thermal coal deposit.

The company has over 1.4 billion tonnes of near surface thermal coal resources on two coal properties in Mongolia.  Prophecy Coal's Chandgana 600 MW mine mouth power plant has been permitted and its Ulaan Ovoo coal mine is now in production.

The company plans to sell 20 million shares for 45 cents each. Prophecy Coal said insiders and existing shareholders have subscribed for a majority of this offering.

Prophecy said finder's fees may be paid in connection with the financing in accordance with TSX Exchange policies. The offering is slated to close on March 7.

Prophecy said it will use funds for technical work to bring its Chandgana thermal coal power plant project, found in Mongolia, toward development. The proceeds will also be used for general working capital.

Additionally, the company also announced on Thursday that the credit facilities of $7 million announced on December 30, 2011 have been closed out. The $800,000 balance has been paid off and Prophecy remains debt free.

In November 2011, Prophecy Coal, a Vancouver-based company, received a license from the Mongolian government to build a 600 megawatt power plant at its Chandgana Tal thermal coal deposit.

The company has over 1.4 billion tonnes of near surface thermal coal resources on two coal properties in Mongolia.  Prophecy Coal's Chandgana 600 MW mine mouth power plant has been permitted and its Ulaan Ovoo coal mine is now in production.

Earlier this month, the company released the results of a feasibility study on the Chandgana Mine-Mouth power plant project, which is to be built next to the company's Chandgana Tal coal deposit from where coal will be supplied.

Construction of the power plant project, which is estimated to have 30 years of commercial operation, is planned to start in April 2013, with the first 150 MW unit being commissioned in October 2015.  The remainder of the units are to be rolled out in April 2016, October 2016, and April 2017.

The study projected an after tax internal rate of return (IRR) of 21.9 percent from the project, and a net present value of US $364.7 million, assuming a discount rate of 12 percent, and a debt interest rate of 10 percent.

The company said Tuesday that in the past three months, four Chinese EPC companies have reviewed the project data, and conducted site visits in Mongolia, while several other international companies have also expressed a written interest in bidding for the contract.

Prophecy expects to have key EPC proposals by March 31, 2012, with the company expecting to have picked a firm by the second quarter. The EPC firm is also expected to bring in a lender for debt financing, the company said.

With regards to the power purchase agreement, the company has been in close talks with the Mongolian Ministry of Natural Resources and Energy for the signing of the deal since Prophecy obtained the power plant construction license last November.

This month, a working commission on the power purchase agreement was constituted, and endorsed by the Minister, with both the company and the commission working together towards a deal. The aim is to have the power purchase agreement and the EPC contract selection finished at the same time.

Separately, Prophecy has met with Chinese government-sponsored policy banks involved in Mongolian projects for project financing, as well as private equity firms focused on international energy production projects.

The company also expects interest in the project from institutional investors. Prophecy said that once a power purchase agreement is signed, it anticipates being able to secure the necessary equity funding this year to move the project towards construction in the second quarter of 2013.

Under the feasibility study for the power plant, it was projected that coal will be supplied by the Chandgana Tal deposit, which contains 140 million tonnes of measured coal, at a steady rate of 2.7 million tonne per year, with the delivered coal price set at $15.50/t with a 2 percent semi-annual price increase.

The electricity tariff is targeted at US $0.06/kWh, with a 2 percent semi-annual increase.

Capital cost is projected to be US $744 million for the 600MW project, or US $1,240 per kW. This includes the power plant, overhead transmission lines, and administrative costs, the company said, but excludes mine development costs.

The company's coal resource is next to a two-lane highway and 150 kilometres from the existing power grid.  Once power and the mine are brought online, there is good potential to introduce additional plant units at lower capital costs, it added.

Prophecy Coal is a Canadian company that has over 1.4 billion tonnes of surface minable thermal coal resources on two coal properties in Mongolia. Its Ulaan Ovoo coal mine is in production and its Chandgana mine mouth power plant has been permitted.

The company advanced the Ulaan Ovoo project to production, having mined 230,000 tonnes of coal to date, and selling a total of 130,000 tonnes of coal.

In the fourth quarter of 2011, Prophecy signed several sales agreements for 90,000 tonnes of coal, with buyers from both Russia and Mongolia.

Prophecy expects Ulaan Ovoo to produce between 300,000 to 500,000 tonnes of coal in 2012, with increasing sales to Russia and at higher selling prices.

The company also said it expects the Russian border crossing at Zeltura, located about 10 kilometres from the mine, to open in 2012, which will reduce transportation costs.

While selling coal through the Russian eastern seaports has been complex and difficult, Prophecy said, it will further pursue this option in the second half of 2012, after it focuses first on its Chandgana Power Plant project.

In November, Prophecy received a construction license for its 600 megawatt (MW) power plant - the first in Mongolian history. The plant will be located at the mouth of the Chandgana Tal coal mine, which Prophecy secured a mining license for in 2011.

Construction for the plant is expected to start in 2013, with completion slated for 2016. Prophecy said it plans on securing up to 80 percent of the required capital through debt financing from Chinese policy banks. To raise the remaining capital in equity, the company said it will rely on the financial model from the completed Evonik-Steag power plant feasibility study.

Prophecy said it hopes to sign an equipment, procurement and construction (EPC) contract as well as a power purchase agreement (PPA) by mid-year 2012, and complete the financing of the Chandgana project by the end of 2012.

Also this year, Prophecy completed the spin-off of its Canadian assets to Prophecy Platinum (CVE:NKL), in which it holds 22.5 million shares, or 40.8 percent. It also graduated to trading on the Toronto Stock Exchange, from the more junior TSX-Venture market.

"With a substantial coal resource in Mongolia and 22.5 million shares of Prophecy Platinum, Prophecy Coal is currently trading below its book value," said the company in a statement.

"While market volatility in the past several months has discouraged some of our shareholders, the Company has remained focused on unlocking the tremendous value of our 1.2-billion-tonne Chandgana coal resource, which is approximately 350 km from China, the world's most populous country and second largest economy."

As of 12:30 pm EDT, Prophecy Coal shares traded up 3.75 percent to $0.415.

Coal for the power plant will be supplied from the company's Chandgana Tal Deposit, for which Prophecy already obtained a full mining license. Tal contains 141 million tonnes of measured coal and is located just nine kilometres north of Prophecy’s Chandgana Khavtgai project, a deposit with over 1 billion tonnes of measured and indicated coal.

The license for the power plant, which was received by Prophecy's Mongolian subsidiary, East Energy Development, is the first such license of its kind issued by the Mongolian government in terms of size.

To ensure strict compliance with Mongolian laws and regulations, the company has retained a number of Mongolian and international consultants over the past 18 months, with considerable efforts also spent on community relations, Prophecy said.

Chandgana is 60 kilometres from Underkhann city, and 150 kilometres from Baganuur city. Construction of transmission lines linking the two cities through Chandgana is considered a top priority for an improved national Mongolian energy system, Prophecy said.

Chairman and CEO of Prophecy, John Lee, commented: “Prophecy has distinguished itself as the premier candidate to build the next Mongolian thermal power plant. There is an understanding among all stakeholders that Mongolia, being one of world’s fastest growing economies, needs additional power.

"With the IMF projecting a deficit of over 600MW by 2016, this need has become critically urgent and can no longer be delayed.”

The license issuance paves the way to conclude various contracts and project financing arrangements, as well as joint venture discussions in 2012. The company plans to start construction of the plan in the first quarter of 2013.

"Prophecy has navigated the permitting process with rigor and results. With the above timeline, and considering Mongolian climate, we will work diligently to fire up the first unit by January 2016. We look forward to working closely with all relevant agencies, authorities, and communities to commission the Chandgana plant,” Lee concluded.

Prophecy Coal is a Canadian-listed company engaged in developing energy projects in Mongolia. The company has over 1.4 billion tonnes of surface minable thermal coal resources on two coal properties in Mongolia. Its Ulaan Ovoo coal mine is in production.

Prophecy Coal, which controls over 1.4 billion tonnes of open-pittable thermal coal in Mongolia, said shares currently trading on the junior TSX Venture Exchange will be delisted.

The company will trade on Toronto's main market under the symbol “PCY".

In a statement, Prophecy’s chief executive, John Lee, said: "The high standards embraced by TSX should improve Prophecy's trading efficiency and liquidity, strengthen access to capital markets, and broaden the company's market exposure."

In separate news, Prophecy Coal also announced it has appointed Patrick Langlois as vice president of corporate development and Joseph Li to its board of directors.

The first appointee, Langlois, brings investment banking and venture capital experience. His past roles include director of investment banking at Stonecap Securities, and managing director of investment banking at Laurentian Bank Securities.

Li, the second appointee, is a certified general accountant and for 13 years, was a senior auditor for the Ministry of Finance in British Columbia.  Since January, he has been general manager and corporate secretary for Prophecy.

In addition, he also oversaw the successful spin-off of Prophecy Platinum Corp. (CVE:NKL).

Prophecy Coal develops and explores energy projects in Mongolia. Its flagship Ulaan Ovoo property started production in 2010 and its Chandgana mine mouth power plant is currently being permitted.

This coal is from the company's wholly owned Ulaan Ovoo coal deposit, located 430 kilometres from the Mongolian capital city of Ulaanbataar, and about 17 kilometres from the Russian border.

The mine has a measured and indicated resource estimate of approximately 209 million tonnes of low-ash, low-sulphur coal.

The first agreement, Energy LLC, is a company registered in the Buryatia Republic of the Russian Federation, which has agreed to purchase 22,000 tonnes of coal to be consumed in local Buryat power stations and boilers.

Over the next two months, the coal that Prophecy has stockpiled at the Sukhbataar rail station will be loaded and transported across the Mongolia-Russia border into Russia, via the city of Naushki.

Other coal purchasers announced today include two local Mongolia companies and two Mongolian government power plants. These Mongolian groups have agreed to buy up a total minimum of 70,000 tonnes over this year.

Prophecy said it expects to deplete its coal stockpile, and operate continually to meet these commitments.

"Ulaan Ovoo's clean coal with its low ash (8%) and sulphur (0.5%) is highly desired," said CEO John Lee.

"We are making steady and solid progress to establish Ulaan Ovoo as a recognized coal supplier in local and international markets."

Prophecy’s stock on the TSX-Venture Exchange rose 8.7% as of 10:10 am EDT, to trade at $0.75 per share.

The newly acquired property, which encompasses 4,773 hectares, is located 17 kilometres northeast of its producing Ulaan Ovoo coal mine.

Vancouver-based Prophecy drilled hole RHJ-11-01 on Ilch, confirming the presence of coal, and providing information for future exploration.

On an air dried basis, assay results of the coal core found inherent moisture of 20.96%, ash of 14.52%, volatile matter of 29.83%, fixed carbon of 34.69% and total sulfur of 0.35%.

“We believe through systematic exploration, there exists great potential to discover additional coal seams of minable depths in the surroundings of Ulaan Ovoo mine," said chairman and CEO, John Lee.

The company said though that these are preliminary results because core recovery was poor and more drilling is needed.

“Due to its shallow nature, the coal seam has the potential to be mineable. This new information is being reviewed and additional surface mapping will be performed to plan additional drilling,” the company said in a statement.

As part of an options deal with a private Mongolian company, Prophecy can acquire 100% ownership of Ilch for US$2 million within the first year, or US$4 million in the second year after the agreement signing.

Prophecy Coal is a diversified thermal coal production company. It controls 1.4 billion tonnes of surface minable thermal coal resources on two coal properties in Mongolia.

The Ulaan Ovoo coal mine is in production, and the Chandgana mine mouth power plant is currently being permitted.

The shipment, which is the equivalent of ten wagons, was loaded on to rail at Sukhbartaar rail station and crossed the border into Buryatia through Naushki.

The coal was sold to Energy LLC, a Buryatia-registered company, and then consumed in local Buryat power stations and boilers, Prophecy said in a statement.

"This is a historic event, as this is the first ever shipment of Mongolian coal to Buryatia, Russia, and we believe that Ulaan Ovoo coal will become a significant source to feed the energy sector of this region,” said Minister of Buryat, J. Batuyev.

Prophecy said the shipment to Buryatia helps it determine local sales logistics, wagon loading times, export requirements and customs procedures to ensure smooth operations for future coal export of larger quantities.

The thermal coal producer has been engaged collaboratively with a number of government and private entities to open the Zeltura border post, to facilitate trade between Mongolia’s Selenge province and Russia’s Buryatia province.

The opening of Zeltura border, which is 15 kilometres from the Ulaan Ovoo mine, would allow Prophecy to easily sell coal to Russian industrial consumers, translating into significant transportation savings for Prophecy, the company added.

Currently, Prophecy is preparing and ordering wagons for its July shipment destined for the port of Sovetskaya Gavani, for which the company has secured an annual capacity of 300,000 tonnes.

Earlier this month, the company announced that it had arranged with the port of Sovgavan in the State of Khabarovsk, Russia to have initial access to the port for 25,000 tonnes per month starting in June, offering Ulaan Ovoo access to the Asian seaborne export coal markets.

The port, located at the Russian Far Eastern seaboard, is privately-owned and has a loading capacity of 6,000 tonnes per day, offering direct connections to Trans-Siberian railroads and Russian state highways.

The Ulaan Ovoo coal mine, which began production this year and has thus far produced 200,000 tonnes of coal year to date, has measured and indicated mineral resources of 208 million tonnes. To date, more than $25 million has been committed or invested in the equipment and commissioning of the mine.

However, the first quarter saw Prophecy re-pay its $5 million debt facility, completely clearing the company of its debt.

It also began the sale of its Lynn Lake and Wellgreen nickel properties to Pacific Coast Nickel Corp in January, completing it five months later, a move that allows the company to focus on its Mongolia coal properties, while maintaining an upside in the nickel assets.

In exchange for its nickel properties, Prophecy received 450 million Pacific Coast shares, representing 44.5% of of Pacific Coast.

Meanwhile, at its Ulaan Ovoo coal mine near the Russian border in Mongolia, Prophecy said it produced nearly 230,000 tonnes of thermal coal, removing over 1.5 million bank-cubic-metres of waste in the process. The Vancouver, B.C.-based company also added 20,000 tonnes of coal, ready for export, to its stock yard.

Similarly, the Chandgana Power Plant, Prophecy’s flagship operation, which is located on the company's Chandgana coal project in southeast central Mongolia, is progressing.

Prophecy received a mining license for 141 million tonnes of coal, and submitted a feasibility study to the Mongolian Ministry of Natural Resources and Energy for approval, which it hopes to receive in the third quarter.

John Lee, Prophecy`s chairman, said the company is pleased with both the Ulaan Ovoo and Chandgana mines' progress.

Prophecy, whose stock on the TSX Venture Exchange was trading at $0.59 per share as of 1:01 pm EDT on Thursday, said it currently has over $100 million in assets.

The port, located at the Russian Far Eastern seaboard, is privately-owned and can handle seagoing vessels up to 160 metres in length, and has a loading capacity of 6,000 tonnes per day, offering direct connections to Trans-Siberian railroads and Russian state highways.

Prophecy said that access to port allocation could expand to 50,000 tonnes per month, reflecting 300,000 to 600,000 tonnes annually. The coal company has also been assigned a coal storage area at the port.

The pact opens Prophecy up to a large number of coal buyers, it said.

In other news, Prophecy’s Ulaan Ovoo mine in Mongolia, which began production this year, has so far produced 200,000 tonnes of coal year to date, of which 50,000 tonnes is being stockpiled at the mine and at Sukhbaatar rail siding destined for Sovgavan port. The average quality of the total 200,000 tonnes of stockpiled coal is 4,200 Kcal/kg NAR.

The Ulaan Ovoo coal mine has measured and indicated mineral resources of 208 million tonnes. Thus far, over $25 million has been committed or invested in the equipment and commissioning of the mine.

In May, Prophecy received its second mining fleet and expects to get 18 coal transport trucks by the end of the month, which are expected to reduce transportation costs from hauling coal from the mine to the Sukhbataar rail station.

The company also said that as a result of fuel rationing undertaken by the Mongolian government, it is monitoring its fuel consumption and optimizing production rates to sustain mining and coal transportation activities for the remainder of the year.

The move is part of Prophecy's plan to focus resources primarily on its coal properties, while still benefiting from the potential of its nickel assets. The Mongolian thermal coal producer has over 1.4 billion tonnes of surface minable thermal coal resources, with its main property being the Ulaan Ovoo coal mine.

The Wellgreen property covers an area of about 22 square miles in the Yukon Territory, Canada, while the 22.9 million ton Lynn Lake nickel asset is located in Manitoba, which Prophecy acquired in October 2009.

Under the terms of the transaction, Pacific Coast Nickel Corp (PCNC) issued 450 million of its common shares to Prophecy. Of these shares, Prophecy has retained 225 million shares and plans to distribute 180.8 million PCNC common shares to Prophecy shareholders today, the company said.

Prophecy has also reserved 44.2 million common shares which it will disperse to holders of Prophecy options and warrants when these are exercised. Following the transaction, PCNC will consolidate its share capital on a ten old for one new basis, Prophecy said.

As a result of the transaction, Prophecy shareholders will receive 0.095 of a PCNC post-consolidation share for each Prophecy share held.  Each option and warrant holder of Prophecy will also receive the same number of PCNC shares when exercised.

PCNC will also change its name to Prophecy Platinum Corp, but retain its existing trading symbol, while Prophecy will be renamed Prophecy Coal Corp and retain its existing trading symbol as well. Both companies are expected to trade under their new names within two to five days.

After the transaction, Prophecy will own 22.5 million common shares of PCNC, or more than 42% on an outstanding fully-diluted basis.

The program initially began by Prophecy and will be completed by Pacific Nickel, after an announcement yesterday that shareholders approved the sale of Prophecy's Wellgreen and Lynn Lake properties to Pacific.

The program, which will comprise of 8,000 metres of core diamond drilling from May to September, will use up to three drills to test a minimum of 17 infill and exploration targets.

The campaign is designed to add to the existing resource, which is currently being updated to NI 43-101 compliant standards by Wardrop Engineering. The non-NI 43-101 compliant resource is estimatedat 55 million tonnes grading 0.35% copper, 0.36% nickel, and 0.78 g/t platinum group metals.

The upcoming resource estimate, based on 701 historic drillings before 2011, is expected to be released in July of this year.

In 1972, Hudbay Minerals milled 171,652 tons, grading 2.23% copper and 1.39% nickel on the Wellgreen mine. The mine then ceased operations due to low nickel prices and poor ground conditions, Prophecy said.

Drillings by past operators since have verified the presence of lower grade nickel-copper and platinum group metal-bearing mineralization, highlighted by intercepts of 496.1 metres of 0.596 g/t platinum group metals+gold, 0.27% nickel, 0.18% copper and 0.02% cobalt.

Wellgreen is part of Kluane Ultramafic Nickel belt, which is the second largest behind the Thompson Belt in Canada and remains vastly unexplored.

Under the terms of the deal, Prophecy will pay the seller US$2 million within the first year, or US$4 million in the second year.

The 4,773-hectare property being acquired has an existing, fully transferable exploration license, located 17 km northeast of Prophecy’s producing Ulaan Ovoo coal mine in Mongolia, and on the same structural basin.

According to Prophecy, recent reconnaissance programs, including geophysical work to date, indicates the presence of shallow sedimentary rocks up to 100 metres in thickness, which demonstrate the potential for coal discovery.

Prophecy plans to start drilling operations on the 4,773 hectare property in June this year.

A 2% net royalty on production from the property is payable to the seller, which can be purchased at any time by Prophecy for US$1.0 million before April 21, 2013. The transaction remains subject to regulatory approvals.

Separately, Prophecy also announced Thursday that it has appointed David Jan as the company's new CFO.

Jan joins Prophecy from Western Coal Corp, where he was head of investor relations, prior to its merger with Walter Energy.

Last August, the company, which is focused on energy, nickel and platinum group metals projects, appointed local Mongolian consultants to initiate feasibility and other studies on the planned 600MW Chandgana mine power plant, as Prophecy holds the Chandgana coal deposit in central Mongolia.

The necessary financial and technical analysis has been completed, including an environmental impact assessment for the facility, which was approved by the Mongolian ministry last November, and the feasibility study required to construct and operate the plant.

The 600MW thermal power plant will be connected with Mongolia's existing Central and Eastern energy systems, part of the long-term development policy of the country to supply cleaner energy.

The company said that as the project scales up to 4,200MW, there is potential to export the surplus power to China, with Beijing located just 1,000 kilometres to the south.

Once Prophecy receives the Ministry's formal endorsement, the company will proceed to work with the Mongolian Energy Regulatory Authority for the issuance of a permit. The application and permitting process is anticipated to take between three to six months.

Prophecy controls over 1.4 billion tons of surface minable thermal coal in Mongolia.

To date, 333,760 tons of in-situ "export-quality" coal has been exposed at the site and is ready to mined. The company has already begun the trucking of export coal from Ulaan Ovoo to the Sukhbaatar railway, located 120 kilometres from the mine by road.

Prophecy said it expects 5,000 tons of export coal will be on stock ready for rail loading by April 1, which will then be delivered to the Russian domestic market, as well as to the Russian Eastern Sea Coal terminals for shipment to overseas customers.

Since commissioning the mine last year, Prophecy has transported and sold 27,597 tons of 3,500 kcal/kg coal to local power plants and companies in Mongolia, and anticipates exporting approximately 520,000 tons in 2011.

By the end of the year, the company plans to ramp up production to a rate of 1 million tons per year, and reach positive operating cash flow by the second quarter.

Prophecy controls over 1.4 billion tons of surface minable thermal coal in Mongolia, and has nickel and other mineral properties in Canada.

In July of last year, Prophecy collected 3.7 million tonnes of ore from Lynn Lake in Manitoba and sent it to South Africa's Mintek for study. The test was designed to see how amenable the resources are to the bioleach process, which is less expensive and a greener alternative to smelting. The process will also allow for the production of pure nickel onsite without transporting it elsewhere.

The company said that preliminary results show that nickel recoveries in excess of 95% can be achieved using only a moderate grind and leach temperature, whereas high copper recoveries require finer grinding and higher temperatures.

Continuous pilot flotation tests produced a bulk concentrate containing 5.3% nickel and 3.4% copper at 89% recovery for both metals.

Prophecy said the results show a marked improvement in nickel recoveries by as much as 6.5% compared to a previous bioleach study done by PRA Associates in 2008.

The current nine-month long study is expected to be completed by June this year, from which full results will be included in a feasibility study in late 2011.

The Lynn Lake mine, which was operated by Sherritt-Gordon from 1953 to 1976, ranked as the third largest nickel producer in North America, after only the Sudbury and Thompson mining camps. As of May last year, it was estimated to contain a measured and indicated resource of 22.9 million tons at 0.57% nickel and 0.3% copper, and an inferred resource of 8.1 million tons at 0.51% nickel and 0.28% copper.

Aside from the Lynn Lake project, Prophecy controls more than 1.4 billion tons of open-pittable thermal coal in Mongolia, as well as the Wellgreen nickel-copper project in the Yukon, Canada.

The company rallied nearly 3% on Friday to trade at $1.04 as of 1:00pm EST.

The Chandgana Tal deposit, which contains 141 million tonnes of measured coal, is located 9 kilometres north of Prophecy's Chandgana Khavtgai project, which has over one billion tonnes of measured coal.

The full mining license for Tal follows Prophecy's receipt of environmental approval from the Mongolian Ministry for its planned 600 MW capacity power plant project in the Chandgana area.

As part of Prophecy's plan, the Tal deposit, as the starter pit, will supply an estimated 2.4 million tonnes per year of coal to the power plant project. The Khavtgai property, which is still in exploration status, will then supplement mine production in later years.

The company also said today that a feasibility study for the power plant project has now been completed, details of which will be released after final review.

Prophecy controls over 1.4 billion tons of open-pittable thermal coal in Mongolia, with the company's Ulaan Ovoo coal mine fully commissioned and in production. In Canada,  it owns the Wellgreen PGM Ni-Cu project in the Yukon, the Lynn Lake Nickel Sulphide property in Manitoba, and a 10% equity stake in Victory Nickel.

Under the terms of the transaction, Pacific Coast will acquire the Wellgreen platinum group metal Ni-Cu property and the Lynn Lake nickel project, located in the Yukon and Manitoba, respectively.

In exchange, Prophecy will receive 550 million common shares of Pacific Coast, which equates to roughly a 90% stake in the company. Based on the closing price of Pacific Coast on January 17, the day before the deal was announced, the gross value of the deal is $107.25 million.

Following the transaction, Pacific Coast will consolidate its share capital on a "10 old for 1 new" basis, and Prophecy will change its name to Prophecy Coal Corp., while Pacific Coast will be renamed as Prophecy Platinum Corp.

Indeed, the deal will allow Prophecy to focus on its Mongolian coal operations, while its shareholders will still realize the value of its Canadian projects. Prophecy said it plans to distribute half of its Pacific Coast interest to stakeholders on a pro rata basis.

Meanwhile, Pacific Coast will become a mid-tier resource company with the addition of Wellgreen and Lynn Lake, as it already owns the Las Aguilas nickel platinium group metal project in Argentina.  The company's property portfolio also includes the Burwash property, located adjacent to the Wellgreen Mine.

Wellgreen is part of the Kluane Ultramafic Nickel belt, which is the second largest behind the Thompson Belt in Canada and remains vastly unexplored. An NI 43-101 report last July indicated that the potential of the property ranges between 77 to 254 million tonnes at 0.26 to 0.38% Nickel, 0.26% to 0.36% Copper and 0.55 to 0.85 g/t Platinum and Palladium.

According to an NI compliant estimate completed in May last year, Lynn Lake contains measured and indicated mineral resources of 22.9 million tons grading 0.57% nickel and 0.30% copper, as well as 8.1 million tonnes of inferred resources at 0.51% Nickel and 0.28% Copper. Approximately 50% of the host rock remains unexplored.

"This transaction unlocks the intrinsic value of Prophecy's assets. Investors will have a choice to own Prophecy Coal for 1.4-billion-tonne coal exposure, or own Prophecy Platinum for unique and significant Nickel PGM exposure," said chairman and CEO of Prophecy John Lee.

Lee will be appointed interim CEO of Pacific Coast, effective immediately, replacing James Walchuk.

Prophecy also said it has agreed to fund up to $2.0 million of flow-through expenses on the Canadian properties until the end of the year.

The deal, which remains subject to shareholder and regulatory approvals, is expected to close by the end of May 2011. Following the news, Prophecy has risen more than 3.8% on Wednesday morning to trade at $1.09 as of 11:25am EST.

Operating costs per metric tonne of coal mined, are estimated at $US10.23 on a life of mine basis, which includes mining $9.40, on site handling $0.35, administration and overhead of $0.48. Capital costs, including contingencies, were estimated at US$69.7 million, and covered mobile equipment fleet, site infrastructure, indirect project cost, owners cost, road transport, reclamation, working capital, with sustaining capital adding $18.5 million.

The financial evaluation was based on US $40 per tonne of thermal coal sold at the Russia/Mongolia border port of Naushki, which produced a 25.5% Internal Rate of Return, Net Present Value of US$71.0 million, and a 4.5 year payback of US$85.9 million on capital costs. Prophecy has announced the execution of a Memorandum of Understanding with JUST Group of Mongolia, securing the sale of a minimum 1.2 million tonnes of coal per year on a 3% commission basis. This coal will be sold into Russia’s Buratya Province, located 10 kilometers from Ulaan Ovoo.

The minimum price of coal is set at US$35 per tonne at Naushki, rising to US$84 per tonne at Russia’s eastern seaports. Russian power plants and seaport clients have expressed interest in buying coal from the newly formed venture.

Having established the mine plan and secured rail transport, Prophecy finalized a truck leasing agreement to provide hauling of coal from mine site to Sukhbaatar, thus rounding up the entire transportation logistics to Russian markets.

Subsequent to this the company reached a major milestone by receiving its mine permit from the Mongolian Ministry of Mineral Resource and Energy, giving the company the green light to begin production. The company started its operation with the stockpiling of small amounts of ROM coal in 2010 and saleable coal production is slated to begin in 2011, with plans to produce 1.5 million tonnes in 2011, ramping up to for 4 - 5 million tonnes in the future.

In the last few months, the company has been actively negotiating off take agreements and signed on off take agreement with Mongolian JUST Group.  The agreement will see Prophecy Resource sell at least 1.2 million tonnes of thermal coal per annum, and JUST Group will receive 3 percent commission fee for its intermediary services.

A feasibility study will explore coal marketing opportunities into Russia via Russian and Mongolian rail links located 120 kilometers from the deposit. New contracts will allow an increase in throughput rates and a reduction in unit production costs. The second development stage will extract thermal coal from a Measured and Indicated Resource of 209 million tonnes, and an Inferred Resource of 36 million tonnes of high quality, high volatile bituminous thermal coal with a 2:1 strip ratio. This coal seam has a thickness of 53 meters and requires no washing with an estimated production cost of $10-$15/ton.

A second thermal coal resource is held at Chandgana Tal and Chandgana Khavtgai, located in eastern Mongolia, approximately 300 kilometers east of Ulaanbaatar, and 160 kilometers from the nearest rail line. The Chandgana Khavtgai Deposit contains a NI43-101 Compliant Measured and Indicated Resource of 1,211 million tonnes, which is mostly contained within one seam averaging 37.7 meters to 45.4 meters in thickness, with an open pit strip ratio of 1.9: 1, low ash level of 12.49% and low sulfur of 0.68%. The much smaller Chandgana Tal deposit contains a JORC defined thermal coal resource measured “in situ” of 141.3 million tonnes.

The Mongolian Government recently approved a Detailed Environmental Impact Assessment submitted by Prophecy for construction of a 600 MW coal fired power plant. The approval allows the company to build and operate the plant within 20 months and to supply electricity into the Central and Eastern Electricity systems.

Mongolia has a population of 2.7 million and operates aging infrastructure producing a total of 650 MW, leaving an energy deficit of over 120 MW that is made up from expensive Russian electricity imports.   The deficit is expected to balloon to 500MW by 2013 fueled by Mongolia’s GDP growth and new mission-critical mill and smelter openings.

Chandgana is ideally situated to meet this demand, located 150 kilometers from existing power infrastructure, and capable of expanding to a 4,200 MW - 10,000 MW installed base that can export surplus electricity into China via dedicated 800kv DC lines. 

The power plant will consist of 2 x 300MW generators, running on 2.4 million tonnes of coal per year supplied by Chandgana Tal, with a low strip ratio of 0.5: 1. Chandgana Khavtgai can supply future demand, with permitting available in 90 days. Discussions are currently underway for construction of plant, transmission lines, off take agreements and investment.

Prophecy management may spin off of Canadian assets that include the Wellgreen Nickel, Copper, Platinum, Palladium and Rhodium Project, located in the Yukon Territory. The potential at Wellgreen falls into a range of 77 - 254 million tonnes at 0.26% - 0.38% nickel, 0.26% - 0.36% copper, 0.55 g/t - 0.85 g/t platinum and palladium, based on a strike length range of 4000 - 7000 meters, depth of 200 - 250 meters and a width of 30 - 35 meters. Drilling will continue on this project until the middle of 2011, when scoping and pre-feasibility studies will commence.

The Lynn Lake Nickel Mine is the fourth largest known nickel sulphide deposit in Canada, and contains a NI43-101 Compliant Measured and Indicated Resource of 22.9 million tons at 0.57% nickel and 0.30% copper, for 262 million pounds of nickel and 138 million pounds of copper. In 2008 a new near-surface discovery was made at the Disco Zone located 1.5 kilometers from the Lynn Lake Mine. This new zone measures 80 x 20 x 270 meters, with drill highlights of 18 meters of 1.5% nickel, 0.7% copper, 0.04% cobalt and 47.1 meters of 0.7% nickel, 0.5% copper and 0.02% cobalt. Feasibility studies and permitting are underway, with mine construction scheduled for 2012. Production is scheduled to commence in 2013 at a rate of 10 million pounds of nickel per year.

Prophecy is developing the Titan Vanadium, Titanium, Iron Ore Project, located in Ontario with an Inferred Resource of 49.0 million tonnes of 0.24% vanadium/ 0.43% vanadium pentoxide, 14.82% titanium dioxide, and 48.09% iron oxide. Drilling is expected to continue into mid 2011, followed by scoping and pre-feasibility studies. The last project under review is the Okeover Property, located in British Columbia, containing a NI 43-101 Compliant Inferred Mineral Resource of 86.8 million tonnes grading of 0.31% copper for approximately 593 million pounds, and 0.014% MoS2 for approximately 15.9 million lbs of molybdenum disulfide, for the North Lake Zone, which is one of 8 mineralized zones known on the property.

Prophecy is managed by John Lee and Arnold Armstrong, who own approximately one quarter of the issued shares, and are focused on building Asia’s next energy company. The company retains Rob McEwen, founder of Goldcorp and Harald Batista, a member of the family that founded Vale Inco, as advisors and attests to the financial firepower being assembled to develop the company.

Prophecy has fully diluted 236 million shares, options and warrants for a fully diluted market capitalization of $248 million. This includes a recent offering of $49.475 million shares, issued at 85 cents that raised $42 million to develop the company’s Mongolian coal assets. 

Mongolia is certainly a good address to have for coal players in particular, thanks to its proximity to China and its veracious appetite for coal. Prophecy Resources entry into the country appears to be very well timed, and with energy assets in Asia combined with base and precious metals projects in Canada, the company has quickly built a balanced portfolio of interests to help diversify risk. Recent strength in all raw materials linked to steel bodes well for the company, underlined by the recent placing which significantly strengthened the company`s balance sheet.

The coal will be supplied from Prophecy’s Ulaan Ovoo Mine, and through JUST, will be resold to end users predominately to buyers in Russia.  Ulaan Ovoo lies close to the Russian border, and it therefore ideally situated to supply consumers in Russia’s Buratya province.  Coal is currently trading hands at the Mongolian-Russian border for $35 per tonne.

JUST will receive a 3% commission of the final coal sales price. Both Prophecy and JUST will also work together to rail coal to Russian east seaports, where coal of Ulaan Ovoo's quality is trading at a 2 year high of $84 per tonne.
Prophecy has also agreed to purchase JUST Oil LLC Diesel Products at “prevailing market prices”.

"Our alliance with JUST ensures seamless coal delivery to end customers. Again I'd also like to thank the Mineral Resources Authority of Mongolia and the Ministry of Mineral Resources and Energy for expediting Ulaan Ovoo permitting, which allows Prophecy to serve local and regional thermal plants in this harsh winter in times of need,” John Lee, CEO of Prophecy stated.

JUST Group is active in the trading, distribution and bulk transportation of energy products, logistics, and mining in Mongolia. The company currently employs 3,300 people and ranks as the 5th largest company in Mongolia.

Deats previously worked at Iscor South Africa, ultimately being responsible for the company's mining operations, including the Sishen Iron Ore export mine and Grootegeluk coal mine. During his career at Iscor, he also personally introduced fully mechanised longwall coal mining at Durban Navigation Colliery.

Deats has also served as a director of BP Southern Africa, as managing director of BP Coal Southern Africa and other companies including The Richards Bay Coal Terminal Company and The Transvaal Coal Owners Association.

In addition, Deats worked at Eskom, being promoted to senior general manager of primary energy, engineering and project services. During his last two years at Eskom, he was responsible for the direction of the entire Generation Division viz all coal-fired power stations/hydro-stations and the nuclear power station.

Separately, the company has also announced the retirement of G. Arnold Armstrong, co-chairman and director of Prophecy.

Prophecy develops energy, nickel and platinum group metals projects. The company controls over 1.4 billion tons of open-pittable thermal coal in Mongolia. In Canada, it owns the Wellgreen PGM Project in Yukon, the Lynn Lake Nickel Sulphide Project in Manitoba, and a 10% equity stake in Victory Nickel.

Highlights from the program include hole PCY10-02, which returned 17.3 metres at 0.60% Ni and 0.30% Cu, including 8.0 m at 0.90% Ni and 0.60 % Cu.

The company said that holes PCY10-02, PCY10-03, and PCY10-05 were drilled on the same section to test a West induced polarization (IP) anomaly, which now represents a new zone called 'Tango'.

The zone of mineralization extends from 220 metres depth at the top of hole PCY-10-03 to a depth of 400 metres at the bottom of hole PCY-10-05, for a minimum total vertical extent of approximately 180 metres.

"The mineralized zone has an average thickness of 13.8 meters true-thickness; the best intersection being PCY10-02," the company said in a statement.

According to Prophecy, hole PCY10-04 tested an IP anomaly in another area on the property, located to the south of the 'B' open-pit. PCY10-04 intersected 14.7 metres at 0.40% Ni and 0.2% Cu, including 7.6 metres at 0.5% Ni and 0.20% Cu.

The company began a 3,00 metre drilling program in September to test the IP targets derived from its spring survey.

Prophecy said it intends to expand its drill program to test along the strike of the intercepts reported at Tango, as well as test three other significant targets from the survey, including the North Anomaly, Middle East Anomaly, and South Anomaly.

The Lynn Lake mine was operated by Sherritt-Gordon from 1953 to 1976 and ranked as the third largest nickel producer in North America, after the Sudbury and Thompson mining camps.

An Ni 43-101 compliant report estimated Lynn Lake to contain a Measured and Indicated resource of 22.9 million tons at 0.57% nickel and 0.3% copper, and an Inferred resource of 8.1 million tons at 0.51% nickel and 0.28% copper.

Prophecy develops energy, nickel and platinum group metals projects. The company controls over 1.4 billion tons of open-pitable thermal coal in Mongolia. In Canada, it owns the Wellgreen PGM Project in Yukon, Lynn Lake, and a 9.9% stake in Victory Nickel.

The company was up more than 7% on Monday, trading at $1.02 as of 2:52pm EST.

The company has agreed to issue 32.29 million common shares at a price of C$0.85 per share.

The new funds will be used to finance work on the company's existing properties in Mongolia, as well as to repay an outstanding credit facility, Prophecy said.

Jacob Securities and Renaissance Capital are acting as joint lead managers for the deal, which is expected to complete around December 17, subject to regulatory approvals.

Prophecy develops energy, nickel and platinum group metals projects. It controls over 1.4 billion tons of open-pittable thermal coal in Mongolia. In Canada, the company owns the Wellgreen PGM Project in Yukon, the Lynn Lake Nickel Sulphide Project in Manitoba, and a 10% equity stake in Victory Nickel.