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Prophecy Acquires Prospective Claims Near Its Ulaan Ovoo Mine In Mongolia

Vancouver, British Columbia, May 4, 2011: Prophecy Resource Corp. (“Prophecy” or the “Company”) (TSX-V: PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that it has entered into an Option Agreement ("Agreement") with a private Mongolian company  ("Seller") holding an exploration license near Prophecy’s Ulaan Ovoo mine, pursuant to which Prophecy has been granted the right to acquire 100% ownership for US $2 million within the first year, or US $4 million in the second year of the execution of the Agreement.

The 4,773-hectare property has an existing, fully transferable exploration license located 17 km northeast of Prophecy’s producing Ulaan Ovoo coal mine. It is contiguous to Prophecy’s existing exploration license covering 7,392 hectares. These exploration licenses are located in the same structural basin as the Ulaan Ovoo Mine. Recent reconnaissance programs including geophysical work to date indicates the presence of shallow sedimentary rocks up to 100meters in thickness, which demonstrates the potential for coal discovery.  Prophecy plans to commence drilling operations on the 4,773 hectare property in June 2011.
Pursuant to the Agreement, Prophecy has the right to acquire 100% of the property by making the following payments to the Seller:

US$200,000 on agreement signing (paid); and
US$1,800,000 before April 21, 2012, 50% payable in Prophecy shares.

Or

US$200,000 on agreement signing (paid);
US$500,000 on April 22, 2012; and
US$3,300,000 before April 21, 2013, 50% payable in Prophecy shares

A 2% net royalty on production from the Property is payable to the Seller, which can be purchased at any time at Prophecy’s discretion for US$1,000,000 on or before April 21, 2013. Half (½) of the royalty purchase price shall be payable through the issuance of common shares of Prophecy.

The transaction is subject to regulatory approval, including the approval of the TSX Venture Exchange. This news release has been reviewed and approved by Christopher M. Kravits, PGeo who is a Qualified Person as defined in NI 43-101.  Mr. Kravits has 34 years of US and international relevant coal geology experience.  He has been active in Mongolia since 2007.

About Prophecy Resource

Prophecy Resource Corp. is an internationally diversified company engaged in developing energy, nickel and platinum group metals projects. The company controls over 1.4 billion tonnes of surface minable thermal coal resources in Mongolia. Prophecy's Ulaan Ovoo coal mine is fully operational and its Chandgana mine mouth power plant is currently being permitted. In Canada, Prophecy owns the Wellgreen PGM Project in Yukon and Lynn Lake Nickel Sulphide Project in Manitoba, both of which it has agreed to sell to Pacific Coast Nickel Corp. Prophecy also owns equity stakes in Victory Nickel Inc. and Compliance Energy Corp. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

ON BEHALF OF THE BOARD OF DIRECTORS Prophecy Resource Corp.

"JOHN LEE"
John Lee
Chairman 
Telephone 1.800.851.1528 
Email: [email protected]

 

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.