Prophecy Coal Corp. (TSE:PCY)(OTCQX:PRPCF) said late Monday that it has arranged a $10 million secured debt facility with Waterton Global Value, to complete the purchase of the Tugalgatai, Mongolia coal licenses.
"We appreciate Waterton Global’s continuing support. The proceeds
will fully fund completion of the acquisition of Tugalgatai coal
licenses which are expected to significantly increase our coal
resources,” said Prophecy’s CEO, John Lee.
The company announced last month that it entered into an agreement to
acquire assets relating to certain Tugalgatai coal exploration licenses
from Tethys Mining LLC.
The 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.
The $10 million loan will be used to complete the purchase of the
licenses on which a large coal resource is known to exist. The loan has a
one year term, and bears interest at 14 per cent per annum.
A structuring fee of 2.5 per cent plus a bonus of $600,000 is payable
through the issuance of 2,735,617 company common shares on closing of
the loan. The shares are subject to a four month hold period.
"We look forward to working with Prophecy Coal
to finance the company as they continue to expand in the Chandgana Coal
Basin," said Waterton’s portfolio manager, Cheryl Brandon.
"The Waterton Global facility provides the required capital to
complete the recently announced $10 million coal license acquisition and
implement the company’s production growth strategy in the region."
According to records reviewed by Prophecy, on March 15 of last year,
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
Since 2005, Tethys has performed "detailed exploration" on the
Tugalgatai licenses including drilling and geophysical methods, Prophecy
said, and conducted geotechnical, hydrogeological, environmental and
The terms of the agreement between Prophecy and Tethys include the
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. Its Ulaan Ovoo mine is in production.
The 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.
Shares of Prophecy Coal traded at 76 cents Tuesday Morning.