Toronto-listed Prophecy Coal on Monday said it would expand
its coal resources in Mongolia by acquiring certain assets next to its
Chandgana licences from privately held Tethys Mining.

CEO John Lee said consolidating the coal basin of about 300 km² offered
greater economies of scale to potentially produce low-cost electricity at the
proposed 600MW Chandgana mine-mouth power plant, and further develop
coal-to-chemicals and coal gasification projects.

“It’s also possible to further increase the resource through exploration in
this highly prospective basin” he said in a statement.

Under the agreement, Prophecy would pay $10 million upfront and an 8.5% royalty
on future coal sales from the Chandgana and Tugalgatai lisences.

Paying Tethys $20 million could extinguish the royalty at any time before
2021 or $25 million would do the same from after that date.

Of the purchase price, $2 million will be immediately deposited in escrow. The
total payment will be paid to Tethys upon the transfer of the licenses, subject
to approval from the Mineral resources Authority of Mongolia.

According to records reviewed by Prophecy on March 15, 2011, Tethys applied
tp register a resource estimate of 2.33 billion tons of thermal coal for the
Tugalgatai licenses, however, the resources registered by Tethys are not
Canadian National Instrument 43-101-compliant.

Prophecy said it would undertake exploration work with a view of preparing
its own NI 43-101 estimate of the contained resource at Tugalgatai. Since 2005,
Tethys had performed detailed exploration on the Tugalgatai licenses, using
drilling and geophysical methods, to produce geptechnical, hydro-geological,
environmental and topographic studies.

Exploration results indicated a large and geologically simple coal
occurrence within the Tugalgatai licences that is similar to Prophecy’s
Chandgana licenses, The coal seam is continuous the Nyalga basin and outcrops
to the north-west, with the main coal seam measuring up to 30 m in thickness.

Prophecy existing Tugalgatai licenses are contiguous licenses, which host a
measured resource of 650 million tons and an indicates resource of 540 million
tons of thermal coal.

The transaction is expected to close in the third quarter of this year,
subject to regulatory approval from Mineral resources Authority of Mongolia.

Prophecy is a Canadian company developing energy projects in Mongolia.
Prophecy’s Ulaan Ovoo mune os in production, supplying thermal coal to power
plants, and the government has permitted a planned mine0mouth power plant
adjacent to the Chandgana coal project.

Negotiations on financing, a power purchase agreement and construction
management are under way.

Prophecy Coal holds 22.5 million shares of Prophecy Platinum, while its
Okeover copper/molybdenum project and the Titan vanadium/titanium/iron projects
are situated in Canada.

The company’s stock rose 12.96% in Toronto on Monday, closing at C$0.30
apiece.

Source: miningweekly.com