Prophecy Coal Corp. (TSE:PCY)(OTCQX:PRPCF) Monday entered into an agreement to acquire assets relating to certain
Tugalgatai coal exploration licenses from Tethys Mining LLC.
Tugalgatai licenses are contiguous to the company's Chandgana licenses
which host a measured resource of 650 million tonnes and an indicated
resource of 540 million tonnes of thermal coal.
"By consolidating the Chandgana coal basin of approximately 300 square kilometers, Prophecy is looking for greater
of scale to potentially produce low-cost electricity at the Chandgana
mine mouth power plant, and further develop coal to chemicals and coal
gasification projects," Prophecy Coal chairman and CEO John Lee said.
"It's also possible to further increase the resource through exploration in this highly prospective basin."
to records reviewed by Prophecy, on March 15 2011 Tethys applied to
register a resource estimate of 2.33 billion tonnes of thermal coal for
the Tugalgatai licenses with the Minerals Resource Council of Mongolia.
The resources registered by Tethys are not NI 43-101 compliant.
expects to conduct work in due course with a view of preparing its own
NI 43-101 estimate of the contained resource at Tugalgatai.
2005, Tethys performed detailed exploration on the Tugalgatai licenses
including drilling and geophysical methods, and conducted geotechnical,
hydrogeological, environmental and topographic studies.
results indicate a large and geologically simple coal occurrence within
the Tugalgatai licenses that is similar to Prophecy's Chandgana
The coal seam is continuous across the Nyalga Basin and
outcrops to the northwest, with the main coal seam measuring up to 30
metres in thickness.
The terms of the agreement include a US$10
million upfront payment and an 8.5 percent royalty on future coal sales
from both the Chandgana and Tugalgatai licenses.
The royalty can
be extinguished by paying Tethys US$20 million before 2021 or US$25
million from 2021 onwards. Of the purchase price, $2 million will be
immediately deposited in escrow.
The total payment will be paid to Tethys upon the transfer of the licenses.
Prophecy Coal is engaged in developing energy projects in Mongolia. Prophecy's Ulaan Ovoo mine is in production.
company's proposed 600 megawatt mine-mouth power plant adjacent to the
Chandgana coal deposit has been permitted by the Mongolian government.
Negotiations on financing, power purchase agreement and construction
management are underway.