Prophecy Coal Corp. is pleased to
announce that it has entered into a binding Sale and Purchase Agreement (the
“Agreement”) to acquire assets relating to certain Tugalgatai coal
exploration licenses from Tethys Mining LLC (“Tethys”), and subject
to approval from the Minerals Resource Authority of Mongolia, to have such
exploration licenses transferred to it. The Tugalgatai licenses are contiguous
to the Company”s Chandgana licenses which host a measured resource of 650
million tonnes and an indicated resource of 540 million tonnes of thermal coal.

According to records reviewed by
Prophecy, on March 15, 2011, Tethys applied to register a resource estimate of
2.33 billion tonnes of thermal coal for the Tugalgatai licenses with the
Minerals Resource Council of Mongolia. The resources registered by Tethys are
not NI 43-101 compliant. Prophecy expects to conduct work in due course with a
view of preparing its own NI 43-101 estimate of the contained resource at
Tugalgatai.

Since 2005, Tethys performed
detailed exploration on the Tugalgatai licenses including drilling and
geophysical methods, and conducted geotechnical, hydrogeological, environmental
and topographic studies. Exploration results indicate a large and geologically
simple coal occurrence within the Tugalgatai licenses that is similar to
Prophecy”s Chandgana licenses. The coal seam is continuous across the Nyalga
Basin and outcrops to the northwest, with the main coal seam measuring up to
30m in thickness.

The terms of the Agreement include a
US$10 million upfront payment and an 8.5% royalty on future coal sales from
both the Chandgana and Tugalgatai licenses. The royalty can be extinguished by
paying Tethys US$20 million before 2021 or US$25 million from 2021 onwards. 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.

John Lee, Chairman and CEO of
Prophecy, states: “By consolidating the Chandgana coal basin of
approximately 300 squared kilometers, Prophecy is looking for greater economies
of scale to potentially produce low-cost electricity at the 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.”

The transaction is expected to close
in Q3, 2012, subject to regulatory approval from the Minerals Resource
Authority of Mongolia. The technical contents of this news release have been
reviewed and approved by Christopher M. Kravits, P.Geo, who is a Qualified
Person as defined in NI 43-101. Mr. Kravits has 34 years of US and
international relevant coal geology experience. He has been active in Mongolia
since 2007.

Prophecy Coal Corp. is a Canadian
listed company engaged in developing energy projects in Mongolia. Prophecy”s
Ulaan Ovoo mine is in production. Prophecy”s proposed 600 MW mine-mouth power
plant adjacent to the Chandgana coal deposit has been permitted by the
Mongolian government. Negotiations on financing, power purchase agreement and
construction management are underway.

Source: Marketwire