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Prophecy Coal receives updated Chandgana assessment

World Coal,

Canadian coal miner, Prophecy Coal Corp., announced last week that the company has filed a revised technical report on its Chandgana Tal coal mining licenses in central Mongolia, titled “Technical Report, Coal Resources and Preliminary Economic Assessment, Coal Mine Component, Chandgana Tal Coal Project” (PEA). The PEA examines the economics of coal production from the mining licenses and excludes the Chandgana Khavtgai exploration license.

Prophecy’s wholly-owned subsidiary, Chandgana Coal LLC, intends to mine the coal and supply it to the proposed 600 MW Chandgana mine-mouth power plant, which according to current plans will be operated by Prophecy’s wholly-owned Prophecy Power Generation, LLC. The PEA was prepared by John T Boyd Co., one of the world’s largest independent consulting firms exclusively serving the coal, mineral, financial, utility, and power-related industries. The PEA replaces the technical report on the Chandgana Tal Coal Project previously filed by the company on SEDAR on November 30, 2012.

Coal Resources and Mining

The two Chandgana Tal mining licenses contain an estimated 124 million t of coal resources all in the measured category. The average in-place coal gross calorific value is 3,306 kcal/kg. After a short ramp-up period, mine production will be 3.5 million tpa throughout the 30 year life of the mine, in order to meet the demands of the power plant. The mine will be an opencast mine and is located 2 km from the proposed power plant site. The aggregate coal seam thickness is as great as 50 m and the overburden is relatively thin, making for a low average strip ratio of 0.70:1 over the life of the mine.

The life of mine average total cash cost of sales is estimated at $US 12.71/ton, including the fees for a contract miner with owner equipment. The initial pre-production capital costs are estimated at US$ 30.9 million, including a 10% contingency. The life of mine estimated capital costs total US$ 160.2 million.

Conclusion and Opportunity

The financial evaluation indicates that the project is potentially economically viable given the coal price assumption of US$ 17.70/t sold at the mine gate directly to the power plant. The coal price is fully indexed and will rise according to rising input costs such as fuel, labor, and parts. Therefore the coal project is expected to provide stable return throughout the life of mine. Furthermore, the mineral resource estimate covers only the Chandgana Tal mining licenses with potential to scale up the Chandgana power plant project and source additional coal supply from Chandgana Coal’s nearby Khavtgai Uul coal deposit. An independent study sponsored by Asian Development Bank suggested a Mongolia power supply deficit of 600 MW by 2016 and 900 MW by 2019. This deficit could be satisfied by a scaled up Chandgana power plant.

Edited from various sources by Sam Dodson

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