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Prophecy Coal Signs Ulaan Ovoo Coal Offtake Agreement with Direct Reduced Iron Manufacturing Plant in Mongolia

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 24, 2012) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to announce that it has entered into a coal sales contract with a local Mongolian direct reduced iron (DRI) manufacturing plant (the "Buyer"), for the sale of 22,100 tonnes of thermal coal from the Company's Ulaan Ovoo mine.

The Buyer has indicated that the initial 22,100 tonne purchase is to meet shortfalls from current suppliers and that it would eventually like to increase the supply from Prophecy to 300,000 tonnes on an annual basis. The Buyer currently purchases in excess of 850,000 tonnes of coal annually from various local suppliers.

The pricing is competitive to offers received from Russia, and sets a benchmark for Prophecy to continue offtake discussions with other local industries in a surging Mongolian economy, for which the Mongolian government forecasts 19% GDP growth for 2013.

Prophecy's high quality thermal coal (NAR 5100 kcal/kg) is ideal for DRI, which is also known as sponge iron. DRI is produced from direct reduction of iron ore in the form of lumps, pellets or fines by a reducing gas produced from burning coal. The coal must be lumpy and of high calorific value, however temperature does not have to reach blast furnace levels, hence coking coal is not required. The reducing gas from the coal is a mixture majority of hydrogen (H2) and carbon monoxide (CO) which acts as a reducing agent. This process of directly reducing the iron ore in solid form by reducing gases from coal technology has been developed to overcome some of the high costs and difficulties of conventional blast furnaces.

DRI product is one of the chief raw materials in steel-making as it has higher qualities and advantages compared to scrap irons and pig irons. DRI products are in high demand and have been quoted in China at over US$300 a tonne.

John Lee, Chairman and CEO of Prophecy, who resides in Ulaan Baatar, states: "As we move past the mine establishment phase at Ulaan Ovoo, we anticipate steadily decreasing operating cost and increasing sales quantity and price. Our goal is to make Ulaan Ovoo operations cash flow positive in the near term without relying on Russian or Chinese export markets."

The Company continues to make progress on opening the Zeltura border crossing (10 km from the Ulaan Ovoo mine) to facilitate coal export to Russia, which would then increase the total demand for Ulaan Ovoo coal past 1 million tonnes a year.

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

About Prophecy Coal

Prophecy Coal Corp. is a Canadian listed company engaged in developing energy projects in Mongolia. Prophecy's Ulaan Ovoo mine is in production. Prophecy's proposed 600 MW mine-mouth power plant adjacent to the Chandgana coal deposit has been permitted by the Mongolian government. Negotiations on financing, power purchase agreement and construction management are underway.

ON BEHALF OF THE BOARD OF DIRECTORS Prophecy Coal Corp.
"JOHN LEE"
John Lee
CEO/Chairman 

David Brook
Manager, Investor Relations
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.