Prophecy Coal has secured a $5 million debt facility with a resource lender and a $2 million inter-company loan with affiliate Prophecy Platinum to advance its Chandgana project in central Mongolia. 1

The loans are subject to due diligence and shareholder approval, with respective interest rates of 10% and 14.4% p.a. The inter-company loan allows either company to provide or request short term funding for the other, with the loans due within 60 days. Prophecy Coal has made an initial request to draw down $500,000 of the inter-co facility.

Prophecy’s chairman John Lee says the loan facility gives both companies flexibility. “These facilities should carry Prophecy Coal towards completing power plant project financing in 2012. The company currently has no debt and more than $120 million in assets.”

The Canadian-listed company is focused on developing energy projects in Mongolia, with more than 1.4 billion tonnes of surface minable thermal coal resources on two coal properties. Its Ulaan Ovoo coal mine is in production and the Chandgana mine-mouth power plant, in the north-east of the Nyalga coal basin, has been approved.

Prophecy’s Mongolian subsidiary East Energy Development received the licence to construct the 600MW power plant in November 2011. This is the first licence ever issued by the government for a thermal power plant in Mongolia, and construction is due to begin in 12 months.

Coal for the Chandgana mine-mouth power plant will be supplied from the company’s Chandgana Tal deposit, for which the company has already obtained a full mining licence. Tal contains 141 million tonnes of measured coal and is 9km north of Prophecy’s Chandgana Khavtgai project; a deposit with more than 1 billion tonnes of measured and indicated coal.

Chandgana is 60km from Underkhann city and 150 km from Baganuur city with construction of transmission lines linking the two cities through Chandgana seen as a top priority for a much improved and efficient national Mongolian energy system.

“Prophecy has distinguished itself as the premier candidate to build the next Mongolian thermal power plant. There is an understanding among all stakeholders that Mongolia, being one of world’s fastest growing economies, needs additional power,” says John Lee. “We look forward to working with all relevant agencies, authorities, and communities to commission the Chandgana plant by January 2016.”

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