Power Plant Disclosure Clarified by Prophecy Coal

As a result of a review by the British Columbia Securities Commission, Prophecy Coal Corp. (TSX:PCY,OTCQX:PRPCF,FWB:1P2) clarified previous disclosures on the proposed mine-mouth power plant to be located adjacent to the Company’s Chandgana coal deposit in Mongolia.

As quoted in the press release:

Further to the Company’s January 24, 2012 news release, the Company reconfirms that the Report pertains to the power plant study only, and does not include an economic assessment of the Chandgana coal deposit pursuant to the Canadian National Instrument governing disclosure standards for mineral projects (NI 43-101).
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. 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.

To address the deficiency, the Company has retained John T. Boyd Company (“Boyd”) to prepare a NI 43-101 compliant preliminary economic assessment (PEA) for the Chandgana deposit. The report is expected to incorporate a summary assessment of the Chandgana power plant economics along with an assessment of the technical and economic viability of coal production from Chandgana’s coal resources to verify the feasibility of the input prices assumed in the Report.

Accordingly, the Company has fully retracted the power plant feasibility study disclosure until a Chandgana coal economic assessment is complete. The retracted disclosure includes the Company’s February 8, 2011 and September 15, 2011 news releases whereby progress on power plant feasibility was discussed.

The Company’s news releases have on several occasions grouped together its estimated coal resources in the two Mongolian properties contrary to NI 43-101. The Company clarifies that its Ulaan Ovoo deposit hosts a measured resource of 174 million tonnes and an indicated resource of 34 million tonnes, of which 20.7 million tonnes have been classified as a reserve in accordance with a December 2010 prefeasibility study. The Chandgana property coal resources consist of three licenses. Chandgana Tal, located in the north-eastern end of the basin, includes two licenses and has a measured resource of 141 million tonnes. Khavtgai Uul contains one license and is located in the south-western end of the basin with a 509 million tonne measured and 539 million tonne indicated resource. These resources are nearly contiguous being only some 14 km 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. Resources that are not reserves do not have demonstrated economic viability.

Click here to read the Prophecy Coal Corp. (TSX:PCY) press release