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Prophecy Contracts Leighton For Q3 Coal Production At Ulaan Ovoo, Mongolia

VANCOUVER, B.C. - May 11, 2010, : Prophecy Resource Corp. (TSX.V: PCY; OTC: PCYRF; Frankfurt: 1P2) announced today that it has entered into a Mine Services Agreement with Leighton Asia Limited for the infrastructure establishment, equipment leasing, and mining operation at the Ulaan Ovoo coal deposit in northern Mongolia.

Ulaan Ovoo site establishment will commence in July 2010 to ensure that the commissioning of the 250,000 tonnes starter pit will take place as planned as of August 2010 with 57,500 tonnes in the first month ramping up to 100,000 tonnes per month by December 2010. The initial equipment suite will comprise one Caterpillar 385 excavator (85 tonne bucket capacity) and three Caterpillar 773D (50 tonne) dump trucks.

Prophecy expects to incur total cash payments to Leighton of $3.8 million for this contract in 2010. Prophecy currently has over $7.5million in cash.

Leighton Asia Limited is a wholly owned subsidiary of the world's largest contract miner, and Australia's largest project development and contracting group, the Leighton Group. It is the operating entity for the Asia region covering Hong Kong, Macau, Indochina, Indonesia, Philippines, Guam, China and Mongolia.

Leighton Asia have been operating across Asia for 35 years in all facets of mining including mine development, operation and management, resource optimisation, mine planning, cost estimating, machine maintenance ,mine infrastructure, crushing, processing and materials handling. Its strength lies in the ability to develop competitive, innovative, practical solutions for its clients.

2011 Target Mine Plan

In the second half of 2010, Leighton will undertake further mine planning to extract 2.0 million tonnes of coal for calendar year 2011. The optimal mining equipment suite will be configured based on the 2010 starter pit experience and a detailed mine plan by Wardrop Engineering's Preliminary Economic Assessment (PEA). Wardrop's PEA is expected in June 2010. Amortisation of the capital outlay will be spread over a 6 year time window and included in the delivered cost per ton. It is expected that the increased production volume will cause a decrease in the total cash cost per tonne by approximately 20%.

Close of 2% Ulaan Ovoo NSR

Prophecy is also pleased to have extinguished the 2% Net Smelter Return (NSR) held by Dunview Services Limited, a private British Virgin Islands company. Prophecy paid Dunview US$130,000 in cash and 2,000,000 Prophecy shares, subject to a 4 months hold.

Ulaan Ovoo Mining License

The Mongolian government has granted the project a 30 year mining license that can be extended by an additional 40 years. The project has met Mongolian environmental approvals as per the Mongolian Ministry of Nature and the Environment which approved a Detailed Environmental Impact Assessment (DEIA) and Environmental Protection Plan (EPP). As the last step to commence mining, Prophecy filed for its Ulaan Ovoo operating permit in April including necessary license, mine plan, and environmental approvals.  Prophecy is advised by its Mongolia counsel and the Minerals Resources and Petroleum Authority that current minerals licenses and operating permits are not affected by the President's recent order to freeze exploration license grants. The company expects to obtain the permit by summer.

John Lee Chairman of Prophecy Resource Corp stated today that: "Leighton Asia is the world's premier contract miner and we look forward to a long and fruitful partnership. We are moving at a rapid pace to commence coal production from Ulaan Ovoo this year in a responsible manner. We are also in excellent standing with the local and the national governments of Mongolia. The company is pleased to contribute to the local economy by supplying our coal to domestic coal-fired power plants and schools and hospitals in need. "

The material in this news release has been reviewed and approved by Danniel Oosterman P. Geo, a Prophecy geologist and also a Qualified Person as defined by NI 43-101. For more information about Prophecy, please contact Scott Parsons at +1.604.642.2625 ext. 106 or John Lee at +1.800.851.1528

ON BEHALF OF THE BOARD OF DIRECTORS
Prophecy Resource Corp.
"JOHN LEE"
John Lee
Chairman

About Ulaan Ovoo
Prophecy has 100% interest in the 208.8 million tonne Ulaan Ovoo project that features Bituminous (5,204 kcal/kg), low ash (12.46%), low sulphur (0.40%) thermal coal suitable for export markets. The deposit features single massive coal seam 45-80 m thick with an average strip ratio of 2:1 and requires no washing for the first 50 million tonnes of production. The project is located within 10 km of the Russian border, northern Mongolia and is 120km (75 miles) east of the Central Mongolian Railroad linking the project to the vast coal markets of Russia and Asia. 

About Prophecy
Prophecy controls over NI-43-101 compliant Measured and Indicated mineral resources of 232 million pounds of nickel, 1 billion tonnes of coal and 116 million pounds of copper as well as inferred resources of 82 million pounds of nickel, 500 million tonnes of coal, and 593 million pounds of copper.  The Company's Ulaan Ovoo Coal Project, Mongolia is expected to be in production this year. Prophecy will hold properties with significant exposure to vanadium and titanium.  All Prophecy's coal assets are located in Mongolia with its remaining assets located in Canada. The Company is currently reviewing additional opportunities for growth.

 

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