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Prophecy Announces Adoption of Shareholder Rights Plan

VANCOUVER, BRITISH COLUMBIA, July 20, 2011 - Prophecy Coal Corp. ("Prophecy") (TSX-V: PCY)(OTCQX: PRPCF)(Frankfurt: 1P2) (the "Company") announces that it has adopted a shareholder rights plan (the “Rights Plan”) designed to encourage the fair treatment of its shareholders in the event of an unsolicited take-over bid for shares of the Company. The Rights Plan is designed to give the Company’s shareholders sufficient time to properly assess a take-over bid without undue pressure and to give the Company’s Board of Directors time to consider alternatives that allow the Company’s shareholders to receive full and fair value for their common shares.

John Lee, Chairman of Prophecy Coal states: “Prophecy management believes the company is very undervalued, thus vulnerable given the rise in value of its equity holding in Prophecy Platinum.”

Pursuant to the Rights Plan, each holder of record of the outstanding common shares of the Company at 5:00 p.m. (PST) on July 20, 2011 will be issued one right per common share. The rights will trade with the common shares and be represented by the certificates representing common shares. Although the Rights Plan is effective immediately, it is subject to TSX Venture Exchange approval and must be ratified by the shareholders of the Company within six (6) months of its adoption. The Rights Plan will be submitted to the shareholders of the Company for ratification at an extraordinary meeting of shareholders which is anticipated to be held in November or December of 2011.

A copy of the Rights Plan will be posted on SEDAR and on the website of the Company at the website address listed below.

The Rights Plan is similar to shareholder rights plans adopted by numerous other Canadian corporations. Neither the Board nor senior management of the Company is aware of any current, pending or threatened take-over bid for the Company.

About Prophecy Coal
Prophecy Coal Corp. (formerly Prophecy Resource Corp) is a Mongolian coal company engaged in developing energy projects.  The company controls over 1.4 billion tonnes of surface minable thermal coal resources on two coal properties in Mongolia.  Prophecy's Ulaan Ovoo thermal coal mine has been commissioned and its Chandgana mine mouth power plant is currently being permitted. Prophecy also owns 22.5 million common shares in Prophecy Platinum Corp. (TSX-V: NKL), as well as shares in Victory Nickel Inc. and Compliance Energy Corp. Mineral resources that are not mineral reserves do not have demonstrated economic viability.  Further information can be found at www.prophecycoal.com

ON BEHALF OF THE BOARD OF DIRECTORS of Prophecy Coal Corp.

"JOHN LEE"
John Lee
Chairman

For more information about Prophecy, please contact
David Jan
Chief Financial Officer
1-800- 358-5865
[email protected]
www.prophecycoal.com

Mineral resources that are not mineral reserves do not have demonstrated economic viability. 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.  

 Forward Looking Statements: This news release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, including, without limitation, statements potential mineralization, the estimation of mineral resources, the realization of mineral resource estimates, interpretation of prior exploration and potential exploration results, the timing and success of exploration activities generally, the timing and results of future resource estimates, permitting time lines, metal prices and currency exchange rates, availability of capital, government regulation of exploration operations, environmental risks, reclamation, title, and future plans and objectives of the company are forward-looking statements that involve various risks and uncertainties. . Although Prophecy believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Forward-looking statements are based on a number of material factors and assumptions. Factors that could cause actual results to differ materially from those in forward-looking statements include failure to obtain necessary approvals in respect of the Transaction, unsuccessful exploration results, changes in project parameters as plans continue to be refined, results of future resource estimates, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, risks associated with operating in foreign jurisdictions, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays in receiving government approvals, unanticipated environmental impacts on operations and costs to remedy same, and other exploration or other risks detailed herein and from time to time in the filings made by the companies with securities regulators. Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral exploration and development of mines is an inherently risky business. Accordingly the actual events may differ materially from those projected in the forward-looking statements. For more information on Prophecy and the risks and challenges of their businesses, investors should review their annual filings that are available at www.sedar.com.

"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."

This press release does not constitute an offer to sell or a solicitation to buy any of the securities in the United States.  The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (“the U.S. Securities Act”) or any state securities law and may not be offered or sold in the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.