Vancouver, British Columbia, May 28, 2012: Prophecy Coal Corp. (“Prophecy” or the “Company”) (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) is pleased to announce that the Energy Authority of Mongolia (“EA”) has entered into a Cooperation Covenant (the “Covenant”) with Prophecy to bring the 600 MW Chandgana Power Project online by 2016.

The EA is the agency which implements governmental policy in the power and energy sector of Mongolia.  The Covenant provides required support for the construction and operation of the Chandgana 600 MW (4 x 150 МW) mine-mouth power plant in central Mongolia and its capacity to supply the necessary electricity to the central and eastern region’s power grids by 2016.

The Covenant also covers the basic rights and obligations of the Seller and Purchaser of the electric energy, including the following highlights:

1. The Energy Authority shall monitor the Chandgana Power Plant construction process to ensure the power plant is constructed within Mongolian regulations, and approved technical and design specifications.
2. Prophecy shall construct and commission the Chandgana Power Plant according to the license issued by the competent government body, and do so within approved design and technical specifications.
3. Prophecy shall supply electricity from the Chandgana Power Plant to the Central and Eastern Energy Systems with 100 MW Net Electric Output starting from the 1st quarter of 2016, up to 200 MW from the 3rd quarter of 2016, 300 MW from the 1st quarter of 2017, and 400 MW from the 3rd quarter of 2017.
4. Prophecy shall link the Central and Eastern Energy Systems by connecting the Chandgana power plant with the Baganuur 220 kV sub-station by 220 kV two-circuit overhead transmission lines to the west and with the Undurkhaan 110 kV sub-station by 220 kV overhead transmission lines to the east.
5. As the Mongolian government’s implementation agency, the EA confirms the need to purchase the Net Electric Output described in Clause 3 of the Covenant, to satisfy the electricity energy demands of the central and eastern regions.
6. The obligations and liabilities of the Parties provided in the Covenant shall serve as the guidelines, and basic terms and conditions of the “Power Purchase Agreement” (PPA) to be further entered into between the Seller (Prophecy) and Buyer (National Electricity Transmission Grid Company of Mongolia, NETGCO).

John Lee, Chairman and CEO of Prophecy states: “We are very grateful for the support from various Mongolian government agencies to help bring the Chandgana Power Plant project online and on schedule.  This landmark agreement forms the basis of our continued discussion regarding a PPA”

After lengthy legal, commercial, and technical consultations with a designated working group of more than 20 government members, the Company has prepared and submitted the power purchase agreement with full schedules to the Mongolian government for its review and comment.  The next step will be to reach an agreement on tariff, followed by execution of the PPA.

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.
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.