PROPHECY Development Corp, through its wholly-owned subsidiary Red Hill Mongolia, has sold substantially all of its mining and transportation equipment from the company’s Ulaan Ovoo coal mine and received approximately US$2.34 million. The buyer chose not to purchase a few pieces of equipment which accounts for the difference of approximately $60,000 between the proceeds and the original contract value.
Proceeds will be used to repay the company’s existing loan from the Trade and Development Bank of Mongolia and to advance Prophecy’s Chandgana Mine Mouth Power Plant in central Mongolia and Pulacayo Silver-Zinc-Lead Project in Bolivia.
The company received consent for the sale of the equipment from creditor Linx Partners, which holds a general security interest over the company’s assets (including those held by subsidiaries). In consideration, John Lee, the beneficial owner of Linx, who is also a director and officer of Prophecy, received 12 million share purchase warrants of the company exercisable at $0.05 per common share for a period of five years from the date of issuance.
Prophecy is selling and will continue to sell its remaining Ulaan Ovoo coal inventory by contracting with a third party transportation company to haul coal stockpiles from the Ulaan Ovoo mine to a railway siding at Sukhbaatar. The coal inventory stands at around 80,000 tonnes, of which approximately 20,000 tonnes have GCV of more than 5000 kcal/kg.
Open-pit mining operations at Ulaan Ovoo may be restarted in the short term by signing with any one of several available third party contract-mining companies in Mongolia that provide a turnkey solution with labour and equipment. The company believes contract mining is a more efficient way to operate in Mongolia since contract mining firms will be responsible for labour agreements and equipment maintenance.
Meanwhile, Prophecy has been advised by the Mongolian Government that the Chandgana Mine Mouth Power Plant Project of its subsidiary Prophecy Power Generation LLC (PPG) has been included on a list of advanced and qualified concession projects to be fast-tracked.
PPG is developing the Chandgana project which includes construction of a 600MW (4 x 150MW) coal-fired mine-mouth power plant in two phases. The proposed power plant will be next to the Chandgana Tal coal deposit, on which Chandgana Coal LLC, another wholly-owned subsidiary of Prophecy, has mining licences covering the deposit.
Prophecy has noticed a more open political environment to conduct business in Mongolia and is very encouraged by the current Government’s positive sentiment towards foreign investment.