News Feed Item

Prophecy Receives Updated Chandgana Preliminary Economic Assessment

VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 04/03/14 -- Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX: PCY)(OTCQX: PRPCF)(FRANKFURT: 1P2) announces that, further to its December 19, 2013 news release clarifying the Company's technical disclosure, the Company has today filed on SEDAR a revised National Instrument 43-101 compliant technical report on its Chandgana Tal coal mining licenses in central Mongolia dated effective November 30, 2012, titled "Technical Report, Coal Resources and Preliminary Economic Assessment, Coal Mine Component, Chandgana Tal Coal Project" (the "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 600MW (150MW x 4) Chandgana mine-mouth power plant (the "Power Plant"), which is planned to 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 (the "Previous Report") and the information contained in the PEA and this news release represents changes to the Company's pervious disclosure contained in its news releases dated May 10 and November 2, 2012 disclosing the results of the Previous Report which are summarized and reconciled below.

The following information is derived from the PEA, and should be read in the context of and is qualified in its entirety by the full text of the PEA. Highlights of the PEA are as follows:

Coal Resources and Mining

The two Chandgana Tal mining licenses contain an estimated 124 million tonnes 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 tonnes per year throughout the 30 year life of the mine, in order to meet the demands of the power plant. The mine will be a surface (open pit) 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 estimated total Run-of-Mine ("ROM") coal product tonnage recovered over the life-of-mine plan and other study results are shown in the table below:


              Description                             Amount
         ROM Coal Product (kt)                        103,946
             Waste (kBCM)                             73,122
            Stripping Ratio
                (BCM: t)                                0.70
   Annual Estimated Production (kt)                    3,500
           Mine Life (years)                            30

Operating Costs

The life of mine average total cash cost of sales is estimated at US $12.71 per tonne, including the fees for a contract miner with owner equipment. The breakdown of the cost is as follows:


             Direct Costs                       Unit Cost (US $ /t)
                 Labor                                 0.78
        Materials and Supplies                         6.30
         Subtotal Direct Costs                         7.08
      Cash Cost Contingency @ 10%                      0.71
            Indirect Costs
  General& Administration - Off Site                   0.75
  Royalties, Emissions Tax, Water Use
           Fee, License Fees                           1.60
    Contractor Management, Margin,
               Overhead                                2.57
        Subtotal Indirect Costs                        4.92
    Total Unit Cash Costs of Sales                     12.71

Capital Costs

The initial pre-production capital costs are estimated at US $30.9 Million, including a 10% contingency, are summarized below:


                 Area                              Cost (US $mn)
       Surface Equipment Capital                       14.2
      Site infrastructure Capital                       9.6
               Subtotal                                23.9
    Total Capital Contingency @ 10%                     2.4
       Pre-Production Cash Cost                         4.7
      Total Capital Expenditures                       30.9

The life of mine estimated capital costs total US $160.2 million.

The independent PEA study reports that the Chandgana Coal project will produce the following after-tax financial results:

--  28% Internal Rate of Return ("IRR").
--  5.3 Years payback on US $30.9 million capital.
--  US $47.8 million net present value ("NPV") at a 10% discount rate.

An after-tax financial model was prepared using an initial mine gate price of US $17.70 per tonne, 30 year mine life and 100% equity financing. The coal price is fully indexed and adjusted annually to account for variable costs such as fuel, parts, and wages. The mine gate price has been determined in reliance on the terms of the coal supply agreement executed June 5, 2013 between the Company's two wholly-owned subsidiaries, Chandgana Coal LLC and Prophecy Power Generation LLC pursuant to which all of the coal mined will be delivered to support the operation of the Power Plant (the "Coal Supply Agreement"). The Coal Supply Agreement is filed and available for review on SEDAR.

The Company cautions that the PEA is preliminary in nature and has a degree of accuracy of plus or minus 35%. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The results of a sensitivity analysis, carried out to evaluate project economics with respect to coal price, NPV, and IRR, are described in the following table.


                  Base                                          Capital
 Discount Rate %  Case    Coal Price      Operating Cost      Expenditure
                         +10%     -10%     -10%     +10%     -10%    +10%
                       (Better) (Worse)  (Better) (Worse)  (Better) (Worse)
        8         66.0   99.9     32.1     95.5     36.5     71.1     61.0
        10        47.8   74.6     20.9     71.2     24.3     52.1     43.4
        12        34.7   56.4     13.0     53.7     15.7     38.5     30.9
        15        21.4   37.6     5.0      35.7     7.0      24.6     18.1
     IRR (%)       28     37       18       37       19       31       25


The foregoing represents changes to the information previously disclosed by the Company in the Previous Report and its November 2, 2012 announcement disclosing the results of the Previous Report.

The principal changes to the Company's previous disclosure are as follows:

1.  The economic analysis was changed to be performed on an after-tax basis;
2.  Depreciation has been included in the analysis for income tax
    calculation purposes;
3.  Application of corporate income tax has been applied;
4.  An indirect cost for water usage was added;
5.  A direct cost figure in materials and supplies has been revised; and
6.  Revised support for the price of coal at the mine gate coal has been

The Previous Report was prepared on a before tax basis. The change to an after-tax basis in the PEA decreased the base financial results including reducing the IRR from 36% to 28%, increased the payback period from 4 to 5.3 years, and decreased the NPV from US $70.5 million to US $47.8 million at a 10% discount rate. The Previous Report was prepared without depreciation. The inclusion of depreciation completed for income tax calculation purposes effected an approximately US $5 million per year positive adjustment to after tax cash flow. The Mongolian income tax is a two tier rate that makes for an approximate US $3 million decrease in net cash flow. Net annual cash flow decreased slightly in the PEA due to an increase in the total indirect costs from US $1.24 to US $1.60 per tonne to account for additional water usage fees determined and applied by the Mongolian government after the Previous Report was prepared. The final revised direct cost of materials and supplies was also decreased resulting in a net decrease in total direct costs from US $6.56 to US $6.30 per tonne. The PEA has also been amended to provide that the US $17.70 per tonne mine gate price has been determined in reliance on the terms of the Coal Supply Agreement. In addition, the PEA contains revised Certificates of Qualified Persons for its authors, has been revised to include cautionary language required by National Instrument 43-101, and reference to a Feasibility Study not supported by the report or filed on SEDAR has been removed.

Conclusion and Opportunity:

The financial evaluation indicates that the project is potentially economically viable given the coal price assumption of US $17.70 per tonne 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 600MW by 2016 and 900MW by 2019. This deficit could be satisfied by a scaled up Chandgana power plant.

The Company cautions that the PEA is preliminary in nature and has a degree of accuracy of plus or minus 35%.

The technical contents of this news release have been prepared under the supervision of by Christopher M. Kravits, P.Geo, General Mining Manager of Prophecy. Mr. Kravits is a Qualified Person as defined in NI 43-101 with 35 years of US and international relevant coal geology experience. He has been active in Mongolia since 2007.

The financial contents of this news release have been prepared under the supervision of John T Boyd Company and Robert J. Farmer, Lead Qualified Person on the revised PEA. Mr. Farmer is a Qualified Person as defined in NI 43-101.

About Prophecy Coal

Prophecy Coal Corp. is a Canadian company listed on the Toronto Stock Exchange engaged in developing energy projects in Mongolia. The Company's wholly-owned subsidiary Prophecy Power Generation LLC is advancing plans for a proposed 600 MW mine-mouth power plant, which has been permitted by the Mongolian government, adjacent to its Chandgana coal deposit. Substantially all of the Company's resources are not mineral reserves, hence they do not have demonstrated economic viability. The Company cautions the Chandgana project is in Mongolia and requires substantial capital to develop.

Further information on Prophecy Coal can be found at www.prophecycoal.com.



JOHN LEE, Executive Chairman

Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this news release, including statements which may contain words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions, and statements related to matters which are not historical facts, are forward-looking information within the meaning of applicable securities laws. Such forward-looking statements, which reflect management's expectations regarding Prophecy's future growth, results of operations, performance, business prospects and opportunities, are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. These estimates and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies, many of which, with respect to future events, are subject to change and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by Prophecy. In making forward-looking statements as may be included in this news release, Prophecy has made several assumptions that it believes are appropriate, including, but not limited to assumptions that: there being no significant disruptions affecting operations, such as due to labour disruptions; currency exchange rates being approximately consistent with current levels; certain price assumptions for coal, prices for and availability of fuel, parts and equipment and other key supplies remain consistent with current levels; production forecasts meeting expectations; the accuracy of Prophecy's current mineral resource estimates; labour and materials costs increasing on a basis consistent with Prophecy's current expectations; and that any additional required financing will be available on reasonable terms. Prophecy cannot assure you that any of these assumptions will prove to be correct.

Numerous factors could cause Prophecy's actual results to differ materially from those expressed or implied in the forward looking statements, including the following risks and uncertainties, which are discussed in greater detail under the heading "Risk Factors" in Prophecy's most recent Management Discussion and Analysis and Annual Information Form as filed on SEDAR and posted on Prophecy's website: Prophecy's history of net losses and lack of foreseeable cash flow; exploration, development and production risks, including risks related to the development of Prophecy Coal's Ulaan Ovoo coal property; Prophecy Coal not having a history of profitable mineral production; commencing mine development without a feasibility study; the uncertainty of mineral resource and mineral reserve estimates; the capital and operating costs required to bring Prophecy Coal's projects into production and the resulting economic returns from its projects; foreign operations and political conditions, including the legal and political risks of operating in Mongolia, which is a developing country and being subject to its local laws; the availability and timeliness of various government approvals and licences; the feasibility, funding and development of the Chandgana Power Plant; protecting title to Prophecy Coal's mineral properties; environmental risks; the competitive nature of the mining business; lack of infrastructure; Prophecy Coal's reliance on key personnel; uninsured risks; commodity price fluctuations; reliance on contractors; Prophecy Coal's need for substantial additional funding and the risk of not securing such funding on reasonable terms or at all; foreign exchange risk; anti-corruption legislation; recent global financial conditions; the payment of dividends; and conflicts of interest.

These factors should be considered carefully, and readers should not place undue reliance on the Prophecy's forward-looking statements. Prophecy believes that the expectations reflected in the forward-looking statements contained in this news release and the documents incorporated by reference herein are reasonable, but no assurance can be given that these expectations will prove to be correct. In addition, although Prophecy has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Prophecy undertakes no obligation to release publicly any future revisions to forward-looking statements to reflect events or circumstances after the date of this news or to reflect the occurrence of unanticipated events, except as expressly required by law.

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Digitization is driving a fundamental change in society that is transforming the way businesses work with their customers, their supply chains and their people. Digital transformation leverages DevOps best practices, such as Agile Parallel Development, Continuous Delivery and Agile Operations to capitalize on opportunities and create competitive differentiation in the application economy. However, information security has been notably absent from the DevOps movement. Speed doesn’t have to negat...
SYS-CON Events announced today that eCube Systems, the leading provider of modern development tools and best practices for Continuous Integration on OpenVMS, will exhibit at SYS-CON's @DevOpsSummit at Cloud Expo New York, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. eCube Systems offers a family of middleware products and development tools that maximize return on technology investment by leveraging existing technical equity to meet evolving business needs. ...
SYS-CON Events announced today that MathFreeOn will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. MathFreeOn is Software as a Service (SaaS) used in Engineering and Math education. Write scripts and solve math problems online. MathFreeOn provides online courses for beginners or amateurs who have difficulties in writing scripts. In accordance with various mathematical topics, there are more tha...
In an era of historic innovation fueled by unprecedented access to data and technology, the low cost and risk of entering new markets has leveled the playing field for business. Today, any ambitious innovator can easily introduce a new application or product that can reinvent business models and transform the client experience. In their Day 2 Keynote at 19th Cloud Expo, Mercer Rowe, IBM Vice President of Strategic Alliances, and Raejeanne Skillern, Intel Vice President of Data Center Group and ...
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
In the 21st century, security on the Internet has become one of the most important issues. We hear more and more about cyber-attacks on the websites of large corporations, banks and even small businesses. When online we’re concerned not only for our own safety but also our privacy. We have to know that hackers usually start their preparation by investigating the private information of admins – the habits, interests, visited websites and so on. On the other hand, our own security is in danger bec...
@ThingsExpo has been named the Top 5 Most Influential Internet of Things Brand by Onalytica in the ‘The Internet of Things Landscape 2015: Top 100 Individuals and Brands.' Onalytica analyzed Twitter conversations around the #IoT debate to uncover the most influential brands and individuals driving the conversation. Onalytica captured data from 56,224 users. The PageRank based methodology they use to extract influencers on a particular topic (tweets mentioning #InternetofThings or #IoT in this ...
Join Impiger for their featured webinar: ‘Cloud Computing: A Roadmap to Modern Software Delivery’ on November 10, 2016, at 12:00 pm CST. Very few companies have not experienced some impact to their IT delivery due to the evolution of cloud computing. This webinar is not about deciding whether you should entertain moving some or all of your IT to the cloud, but rather, a detailed look under the hood to help IT professionals understand how cloud adoption has evolved and what trends will impact th...
"We've discovered that after shows 80% if leads that people get, 80% of the conversations end up on the show floor, meaning people forget about it, people forget who they talk to, people forget that there are actual business opportunities to be had here so we try to help out and keep the conversations going," explained Jeff Mesnik, Founder and President of ContentMX, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
The Internet of Things (IoT) promises to simplify and streamline our lives by automating routine tasks that distract us from our goals. This promise is based on the ubiquitous deployment of smart, connected devices that link everything from industrial control systems to automobiles to refrigerators. Unfortunately, comparatively few of the devices currently deployed have been developed with an eye toward security, and as the DDoS attacks of late October 2016 have demonstrated, this oversight can ...
Enterprises have been using both Big Data and virtualization for years. Until recently, however, most enterprises have not combined the two. Big Data's demands for higher levels of performance, the ability to control quality-of-service (QoS), and the ability to adhere to SLAs have kept it on bare metal, apart from the modern data center cloud. With recent technology innovations, we've seen the advantages of bare metal erode to such a degree that the enhanced flexibility and reduced costs that cl...
Intelligent machines are here. Robots, self-driving cars, drones, bots and many IoT devices are becoming smarter with Machine Learning. In her session at @ThingsExpo, Sudha Jamthe, CEO of IoTDisruptions.com, will discuss the next wave of business disruption at the junction of IoT and AI, impacting many industries and set to change our lives, work and world as we know it.
Bert Loomis was a visionary. This general session will highlight how Bert Loomis and people like him inspire us to build great things with small inventions. In their general session at 19th Cloud Expo, Harold Hannon, Architect at IBM Bluemix, and Michael O'Neill, Strategic Business Development at Nvidia, will discuss the accelerating pace of AI development and how IBM Cloud and NVIDIA are partnering to bring AI capabilities to "every day," on-demand. They will also review two "free infrastruct...
More and more brands have jumped on the IoT bandwagon. We have an excess of wearables – activity trackers, smartwatches, smart glasses and sneakers, and more that track seemingly endless datapoints. However, most consumers have no idea what “IoT” means. Creating more wearables that track data shouldn't be the aim of brands; delivering meaningful, tangible relevance to their users should be. We're in a period in which the IoT pendulum is still swinging. Initially, it swung toward "smart for smar...