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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.

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.