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Prophecy Consolidates Lynn Lake Nickel District, Gains VMS Ventures Inc. as Strategic Investor

January 12, 2010 - Prophecy Resource Corp. (TSX.V: PCY) has entered into an agreement with VMS Ventures Inc. whereby Prophecy has been granted the option to earn a 100-per-cent interest in the Lynn gabbros property located in Manitoba, Canada, near the company's Lynn Lake nickel-copper project.

The Lynn Lake nickel camp is located in Northern Manitoba, about 320 kilometres by road northwest of the Thompson mining camp. Historically, Lynn Lake is the third largest nickel producing region in Canada. Sherritt Gordon Mines Ltd. mined the Lynn Lake nickel-copper deposits from 1953 to 1976. The Main and EL gabbro plugs produced 20,151,146 tonnes of ore at an average grade of 1.023 per cent nickel and 0.535 per cent copper from two mines over the 24-year period.

Prophecy currently has the option to earn a 100-per-cent interest in the Main gabbroic plug from Victory Nickel. According to a technical report dated Dec. 5, 2007, prepared by Wardrop Engineering for Independent Nickel Inc., the Main Plug contains a National Instrument 43-101-compliant measured and indicated resource of 17 million tonnes with an average grade of 0.62 per cent nickel and 0.31 per cent copper. (This technical report can be accessed under Independent Nickel's filing at SEDAR.) By acquiring the Lynn gabbros claims, which include five gabbro plugs, from VMS Ventures, Prophecy now has six of the seven known gabbro plugs in the Lynn lake area and is now the dominant player in terms of land size and resource base in the Lynn Lake nickel camp.


A map of the gabbros identified at Lynn Lake
Click to enlarge

Under the agreement, in order to acquire a 100-per-cent interest in the Lynn gabbros property, subject to a 3-per-cent net smelter returns royalty (NSR), Prophecy will issue 750,000 of its common shares to VMS Ventures and reimburse VMS Ventures up to $100,000 to satisfy certain work obligations to be performed by VMS Ventures prior to the transfer of title by June 1, 2010.

Separately, VMS Ventures has also agreed to make a strategic investment in Prophecy totalling $300,000 by subscribing to one million units under the same terms as the company's private placement announced in Stockwatch on Dec. 9, 2009. On a partially diluted basis, VMS Ventures would own approximately 8 per cent of Prophecy.

Rick Mark, chairman and chief executive officer of VMS Ventures, states: "Prophecy's commitment to exploring and developing the Lynn Lake mine and surrounding area has impressed our board. We believe the opportunity to own a significant percentage of the complete Lynn Lake play through our option agreement and investment will produce benefits to VMS shareholders in the near and longer term. We have worked with John Lee in the past and feel Prophecy has the best chance to make the Lynn Lake mine and the surrounding properties a business success."

Mr. Lee, chairman of Prophecy, states: "Lynn Lake fits perfectly with our business strategy of acquiring advanced mineral assets to provide Prophecy investors financial leverage on rising metal prices. Prophecy is very pleased to acquire and consolidate this premier Lynn Lake nickel camp, where we intend to conduct an extensive exploration program in 2010."

About Prophecy Resource Corp.

Prophecy has entered into an agreement to acquire the Lynn Lake Nickel Project in Manitoba, which contains a National Instrument 43-101 compliant Measured and Indicated resource of 17 million tonnes with an average grade of 0.62% Nickel and 0.31% Copper at a 0.4% nickel cut-off grade. The Lynn Lake Technical Report, dated December 5, 2007, was prepared by Wardrop Engineering Inc. for Independent Nickel Inc. and is available under Independent Nickel's filings at www.sedar.com.    

Prophecy has also earned a 60% interest in the Okeover Copper-Molybdenum property in B.C. where, in 2006, Dr. N.C. Carter, PhD, P.Eng, completed a technical report on the Okeover Property pursuant to NI 43-101 that estimated an inferred mineral resource of 86.8 million tonnes grading 0.31% copper and 0.014% MoS2 at a 0.20% copper cut-off grade.  This report is available at www.sedar.com.  

ON BEHALF OF THE BOARD OF DIRECTORS

Prophecy Resource Corp.

"JOHN LEE"          
John Lee
Chairman

 

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.


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.

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*Ulaan Ovoo: 174 million tonnes  of measured and 34 million tonnes of indicated coal. Ulaan Ovoo’s resource numbers are from the Behre Dolbear & Company (USA), Inc  report referenced in the Dec 2010, 43-101 Prefeasibility Study by Wardrop Engineering. Chandgana consists of two properties-Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43-101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who was an independent Qualified Person under NI 43-101 at the time of report preparation. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43-101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is an independent Qualified Person under NI 43-101.