Vancouver,
British Columbia, December 16, 2010: Prophecy Resource Corp.
(�Prophecy� or the �Company�) (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) reports
the Company has received an updated prefeasibility study on the Ulaan
Ovoo deposit in northern Mongolia. The Report is authored by Brian Saul,
P.Eng., and Steve Krajewski, Ed. D., P.G. of Wardrop Engineering Inc., a
Tetra Tech Company, both independent Qualified Persons. The focus of this
study was for the development of low ash coal reserves in the form of a
starter pit. Considerable work has been completed on the starter pit
design, identification of market opportunities and transportation costs
since the Pre Feasibility Study was issued by Minarco in May 2009. The
study is filed and available on SEDAR.
Reserve
and Throughput:
The recommendation
is for the coal deposit to be mined by open pit methods. A mining
contractor is to mine 250,000 tonnes (t) of product coal in 2010, 1.1
million (M) t of product coal in 2011 and 2 million tonnes per year
thereafter.
The
estimated reserve is shown in the table below:
All
coal quality values are stated on an "as received" basis. The
total Mineral Reserve Estimate is 20.7 M proven t (Mt) of Product (Low
Ash) Coal. Mineral Reserve estimate considers only the first phase of the
project development of the Mineral resources contained in the Ulaan Ovoo
project. Opportunity may exist for extension of additional low ash
reserves to the south with an expanded pit and a higher throughput rate.
Operating
costs
Operating
costs per tonne of ore mined are estimated at $US10.23. The break down of
the costs is as follows.
The
above unit operating cost is the average for Life-of-Mine including
contractor and owner-operated mining. Contractor costs include equipment
lease costs.
Capital
Costs
Initial
Capital costs of US$69.7 million (including contingency) are estimated
for the project.
The
sustaining capital of the project is estimated at $18.5 million.
Since
July, substantial Road Transport and Site infrastructure development has
been completed. This includes a workshop, clinic, housing for 60 staff,
and road and bridge upgrade. Prophecy has also been sourcing availability
and pricing for Equipment Fleet in Mongolia.
Financial
Analysis
A
financial evaluation of the Ulaan Ovoo Project was based on a post-tax
financial model. For the 10.7 year mine life the following pre-tax
financial parameters were calculated:
- 25.5% Internal Rate of Return (IRR).
- 4.5 Years payback on US $ 85.9 M capital.
- US $ 71.0 M Net Present Value (NPV) at 10%
discount value.
Sensitivity
analyses were carried out to evaluate the project economics with US$40/t
base case coal price sold at the Mongolian-Russian border.
The
post-tax financial model was established on a 100% equity basis. Discount
rates of 10% were applied to all cases identified by coal price scenarios
with the results are presented below:
Conclusion
and Opportunity
The
financial evaluation indicates that the project is economically viable
given the coal pricing assumption of US $40 per product tonne sold at the
Russia/Mongolia border port of Naushki. The following actions are
recommended as part of a feasibility study:
- Sign coal contracts with end users or agents.
- Continue with additional coal marketing studies
to determine alternate opportunities.
- Complete detailed engineering to prepare
specifications for mobile equipment and site infrastructure
- Determine if the operation is to be owner
operated or contract operated for life-of- mine
The
mineral reserve estimate considers only the first phase of the project
development of the mineral resources contained in the Ulaan Ovoo project.
Opportunity exists for extension of additional low ash reserves to the
south with an expanded pit and a higher throughput rate.
A new
study is required to expand coal marketing opportunities into the eastern
seaboard of Russia due to proximity of the project to the Trans-Siberian
railway. This will determine if there is opportunity to increase coal
demand, thereby reduce unit mining costs with higher mining throughput
rates. The Company intends to commission such feasibility study in
fiscal 2011.
Brian
Saul, P. Eng., an independent qualified person with Wardrop Engineering
Inc. and one of the authors of the Report has reviewed and approved the
results presented in this press release.
About Prophecy Resource
Prophecy
Resource Corporation is an internationally diversified company engaged in
developing energy, nickel and platinum group metals projects. The company
controls over 1.4 billion tons of open-pittable thermal coal in Mongolia
(839 Mt Measured, 579 Mt Indicated). Prophecy's Ulaan Ovoo coal mine is
fully commissioned and in production. In Canada Prophecy owns Wellgreen
PGM Project in Yukon, Lynn Lake Nickel Sulphide Project in Manitoba, and
a 10% equity stake in Victory Nickel. Mineral resources that are not
mineral reserves do not have demonstrated economic viability.
ON BEHALF OF THE BOARD OF DIRECTORS Prophecy Resource Corp.
"JOHN LEE"
John Lee
Chairman
Telephone 1.800.851.1528
Email: john@prophecyresource.com
Mineral resources that are not mineral reserves do not have demonstrated
economic viability. Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Prophecy Resource Corp.
John Lee - Chairman and CEO
For further information:
John Lee
Telephone 1.800.851.1528
Email: john@prophecyresource.com
www.prophecyresource.com
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"Neither The TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the policies of
the TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release."