Red Hill Energy (total spent $30million) 2005 Acquired Ulaan Ovoo ($10million) 2006 Expands Ulaan Ovoo to 208 mt – 174 mt measured and 34 mt indicated ($5million) Acquired Chandgana Tal ($5million) Expands Chandgana Tal to 140 mt measured ($3million) 2007 Discovers Chandgana Khavtgai ($2million) 2008 Expands Chandgana Khavtgai to 1 bt - 500 mt measured and 500 mt indicated ($8million) 2010 Prophecy Coal Acquired Red Hill ($20million) 2
Prophecy Coal (total spent $60million) 2010 Filed Feasibility Study Ulaan Ovoo, Received Mine License Drilled Chandgana Khavtgai (Khavtgai Uul) Commissioned Ulaan Ovoo to production ($30million) Drilled Chandgana, File Technical & Economic Studies ($8million) Filed Environmental Impact Assessment (Power Plant) 2011 Received Chandgana Mine License Received EIA (Power Plant) Filed Power Plant Technical & Economic Studies Received Power Plant Construction License 2012 Acquiring Tethys’ Vale claims ($10million) Negotiate EPC and PPA 3
Prophecy 1.2 billion tonnes* & Tethys’ Vale historicresource estimate of 2.3 billion tonnes** *Chandgana consists of two properties-Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43-101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who was an independent Qualified Person under NI 43-101 at time of report. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43-101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is an independent Qualified Person under NI 43- 101.. Chandgana Tal has a strip ratio of 0.5:1 and Chandgana Khavtgai has a strip ratio of 2.2:1.. ** According to records reviewed by Prophecy, Tethys applied on March 15, 2011 to register a resource estimate of 2.33 billion tonnes of thermal coal for the Tugalgatai licenses with the Minerals Resource Council of Mongolia. This 2.33 billion tonnes is a historical estimate under NI43-101. The resources registered by Tethys were not prepared in accordance with NI 43-101 and should not be relied upon. The assumptions, parameters, and methods used to prepare the historical estimate are unknown. A qualified person has not done sufficient work to classify the historical estimate as a current 4 mineral resource; and Prophecy is not treating the historical estimate as a current mineral resource. The 2.3 billion is in the A, B and C categories of reserves estimated using the Mongolian (similar to former Soviet) method. Because the methodology and assumptions of the Mongolian reserve estimation method are different than CIM, JORC and US the reserves categories are not easily equated.
Resource: 1.2 Billion Tonnes* – 650 mt measured Chandgana deposit & power plant site and 550 mt indicated, 3,300kcal/kg NAR, Basin 300 sqkm, Target 3.5 to 5 Billion tonnes Next to Paved Road, 120km from Rail 0.5:1 Strip Ratio*, Mining License Issued 600MW Construction License Issued (first IPP) 50km to East Grid and 150km to West Grid 350km From China, 1,110km Beijing.*Chandgana consists of two properties-Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgaiconsists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43-101 ChandganaKhavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., whowas an independent Qualified Person under NI 43-101. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43-101 Chandgana TalTechnical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. Gardar G. Dahl, Jr., CPG of Behre Dolbear & Company (USA), Inc., who is anindependent Qualified Person under NI 43-101.. Chandgana Tal has a strip ratio of 0.5:1 and Chandgana Khavtgai has a strip ratio of 2.2:1. 5
150km to grid 2 km 350km to ChinaChandgana Power Plant Power Coal Transmission Proposed Installed capacity: Program 1: 600 MW (connect to CES, EES of Mongolia) Program 2: 3,000 MW+ (connect to China) Central Energy system (CES) Eastern Energy system (EES) 6
Central Tower, UB Oyu Tolgoi, Mongolia Blue Sky Tower, UB ShangriLa Hotel, UB Tavan Tolgoi, Mongolia 9
Power Supply and GDP Growth Forecast $16 1600 $14 1400 GDP, US$bn 1200 $12 1000 $10MW 800 $8 600 $6 Supply 400 Russia Russia $4 EES East Supply 200 $2 CES Central Supply 0 2010 2011 2012 2013 2014 2015 Source: Energy International Corporation, Eurasia CES – Central Energy System Capital’s Mongolia Outlook Report EES – Eastern Energy System 10
Power Demand Forcast by 2030 2500 2,321 2,030 2000 1,728 1,625 1,483 1,544 1500 1,394MW 1,313 1000 862 934 762 819 500 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2025 2030 *Source Asian Development Bank 11
In 2002:Electricity and heat retail prices increased by 4.4% and 12.4-30.0% on average, respectively.In 2005:A growth in electricity and heat end user prices represented 8.5% and 19.3% on average, respectively.In 2007:Electricity price was increased by 4.4%.Heat prices in Darkhan and Erdenet cities were increased by 20.1-26.4%.In 2008:Electricity price was increased by 27.8%.Heat prices in Ulaanbaatar city were increased by 39.0%. Hot water use tariff for residential consumers inan apartment was increased by 61.3-141.9%.In 2009:Electricity price was increased by 17.35%.Heat prices in Ulaanbaatar, Darkhan and Erdenet cities were increased by 14.5%.In 2010:Electricity price and heat tariffs increased in WES, Dalanzadgad, Nalaikh, and Baganuur districts. *Source ERA 14
• 50km to East Grid, 150km to West Central Grid• Supply East, Central, South, Just in time to meet shortage• Phase 1a (150MW x 2, T-lines) starts 2013, expected rollout 2016• Phase 1b (150MW x 2) starts 2014, expected rollout 2017• Capex Phase 1a: ~$700million, Phase 1b: ~$500million• Debt(10yr) to Equity : 70 to 30• Tariff (cost +), Lower than Russian import• Approximate Tariff* breakdown: Fuel 15%, O&M 10%, Debt & Interest 40% Tax 11%, Equity 24% *Full Financial worksheet available 17
• National Electricity Transmission Grid Co. of Mongolia (NETGCO) is buyer• NETGCO is owned by MOF, MMRE, and SPC• EDNs collect customer tariff and deposit in escrow• IPP collects from escrow• PPA (ver 10), Meter at Plant Site• Target tariff price indexed for Mongolia/US CPI• Target sign date Q1, 2013 18
• RFP issued in Jan 2012, 6 Chinese EPC bids• CFB, air cooled, Mine Mouth• June 30, 3 shortlist, Design Specification Discussion• October 1, Award EPC• 2012: Leveling Site• Q1, 2013: Foundation Concrete• Q1, 2016: 2 x 150MW, Transmission lines• Q1, 2017: total 4 x 150MW• Capex: $1 billion to $1.2 billion 19
• From Chandgana Mine (Chandgana Coal LLC), Licensed• 3million tonne a year, 3,300 NAR, 0.8% Sulphur• Mine Mouth Set up, 1.2 billion* tonnes resource• Chandgana Coal LLC owned by Prophecy Coal Corp.• $15.5/tonne delivered, annual CPI indexation• Coal price flexible at start, additional return to Power Plant Sponsor possible *Chandgana consists of two properties-Chandgana Tal and Chandgana Khavtgai. Chandgana Tal consists of 141 mt of measured resource. Chandgana Khavtgai consists of 509 mt measured and 539 mt indicated resource. Chandgana Khavtgai’s resource estimates are based on the September 2010 NI 43-101 Chandgana Khavtgai Technical Report by Kravits Geological Services, LLC. The report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC., who was an independent Qualified Person under NI 43-101 at time of report. And the Chandgana Tal resource estimate is also based on the September 2007 NI 43-101 Chandgana Tal Technical Report by Behre Dolbear & Company (USA), Inc..The report is authored by Mr. Gardar G. Dahl, Jr., CPG of Behre Dolbear & 20 Company (USA), Inc., who is an independent Qualified Person under NI 43-101.. Chandgana Tal has a strip ratio of 0.5:1 and Chandgana Khavtgai has a strip ratio of 2.2:1..
• Government Tender Closed May 1, 2012• GDF/Sojitz/Posco awarded right to negotiate• 450 MW gross + heat, built in UB next to CHP3• Various issues (concession law, land, coal supply, water)• Construction > 48 months (Prophecy Estimation)• Co-exist: CHP5 (UB, North), Chandgana (East, South, UB) 2012: 800MW (Russia supplies 150MW), 2017: 1500MW GAP of 850MW By 2017 (Eliminate Russia supply) CHP5 net 400MW, Chandgana net 500MW 21
Chandgana (IPP) CHP5 (Concession)Ownership Prophecy Power Generation GDF Posco Sojitz Newcom LLC (100%)Coal Chandgana Coal LLC Baganuur, Shivee OvooSite Chandgana Mine Mouth UB, by CHP3 (land issue)Size Phase 1a: 150MWx2 150 MW x 3 1b: 150MWx4 totalMarket East, South, UB UB, NorthEPC Chinese EPC, Final by Oct Posco?Status IPP Licensed – PPA stage Concession, Not licensed yetRequest Construction Spring 2013 ?Operation Start Early 2016 (est 30 months) ? (Korean EPC is 5 yr) 22
Energy Authority of Mongolia ("EA") has entered into a Cooperation Covenant (the"Covenant") with Prophecy to bring the 600 MW Chandgana Power Project online by 2016.Prophecy shall construct and commission the Chandgana Power Plant according to thelicense issued, with 100 MW Net Electric Output starting from the 1st quarter of 2016, up to200 MW from the 3rd quarter of 2016, 300 MW from the 1st quarter of 2017, and 400 MWfrom the 3rd quarter of 2017. Prophecy shall link the Central and Eastern Energy SystemsAs the Mongolian governments implementation agency, the EA confirms the need topurchase the Net Electric Output described in Clause 3 of the Covenant, to satisfy theelectricity energy demands of the central and eastern regions.The obligations and liabilities of the Parties provided in the Covenant shall serve as theguidelines, and basic terms and conditions of the “Power Purchase Agreement” (PPA) to befurther entered into between the Seller (Prophecy’s East Energy Development LLC) andBuyer (National Electricity Transmission Grid Company of Mongolia, NETGCO). May, 2012 23
Strategic Sponsor: • Granted right to 51% power plant Power Plant JV • Granted EPC (option) and O&MStrategic • Fund Prophecy Operation to PPASponsor 20% • Lead arranger of power plant financingPE PE Sponsor participates in financingSponsor 51% 29%Prophecy Prophecy retained 20% carried interest by -contributing license and local knowledge -finalize PPA, EPC,FUEL SUPPLY contracts -expert team to move the project forward. 24
Debt Financing: Exim, CDB, EPC SupplierProject Financing (~$1.2b*) Phase 1a (150MW x 2, 155km T-line to West) $700 million x 70% = $490millionDebt 30% Phase 1b (total 150MWx4, 205km T-line East-West) $500 million x 70% = $350millionEquity 70% Equity Financing: Strategic Sponsor, PE Sponsor*EPC estimate, could be less Will be firmed by Oct 31 Phase 1a (2013) : $700million x 30% = $210million Phase 1b (2014) : $500million x 30% = $150million 25
Equity Commitment by year ($million) 2013 2014 Strategic Sponsor (IPP) (51%) $130 $95 Private Equity Sponsor (29%) $80 $55 Prophecy (20% carry) 0 0 Total $210 $150 Based in total EPC $1.2 billion, equity to debt of 30 / 70Prophecy gets 20% free carry by contributing license and local knowledge, finalize PPA, EPC,FUEL SUPPLY contracts, and expert team to move the project forward.
Coal JVPower Sponsor Prophecy Strategic Sponsor buys 20% of Coal JV (one time upfront payment) 20% Prophecy will develop Coal Mine (total ~$70million) Power Plant Sponsor will finance its 20% 80% Guarantee supply to plant for 25 years Starting price $15.5/t, possible to reduce Coal price to accelerate plant payback 27
2nd Phase 3,000+MWWould enableMongolia to exportpower directly into BeijingChina Source: SSE, sxcoal, McQuarie Research 28
• Commissioned in 2006 by China State Grid• 3,600 MW (600MW x 6) built in Mongolia• CAPEX and Tariff calculated• Based on a coal deposit owned by Mongolian Gov’t• The Feasibility Study is available upon request Propose: 3,600 MW Feasibility Study (2012) 3,600 MW Export MOU (2013) 3,600 MW License (2013), Construction (2014), Power on (2017) 29
100% Owned – Status: CommissionedResource: 209 million tonnes*1.8: 1 Strip Ratio – Single 50 meterseam May 2011Production:2011: 200,000 tonnes2012: 300,000 tonnes (est.)5,100 kcal/kg NAR, next to road, 10kmfrom Russian Border$52 million invested *Coal resources of 174 million tonnes measured and 34 million tonnes indicated from the NI 43-101 Behre Dolbear report prepared in 2007. **Information based on Dec. 2010, 43-101 Prefeasibility Study by Wardrop Engineering. The qualified persons responsible for the preparation of this31 NI 43-101 Technical Report and PFS are Brian Saul, P. Eng. (Mining) and Dr. Steve Krajewski, P. Geo., MSME (Resource Estimate Review).
Ulan- Ude TPP 1 & 2 Demand: 1mt paGusinoozersk TPPDemand: 1mt pa Blending Plant~350kms Demand: 2mt pa Transmission LineUlaan Uvoo Transmission Line to UB 32
Top Free-On-Rail Domestic Pricing = USD 38/t, up 50% YOYMine gate pricing = USD 25/t conditional on openingZeltura (Russian export)Current production stopped• Bridge repair (estimated to year end)• Received support to transport through Zeltura• Stockpiled 180,000t on site (for remainder 2012 sales)
Shares 227 million (basic); 263 million (diluted)Market ~$42 million (52week high $200m, 52week low $42m)CapitalizationOwnership 50% Retail, 30% Institutional, 20% Management & DirectorsMarketable $38millionSecurities Canadian Office: Vancouver, BC CanadaLocations Mongolian Office: Ulaanbaatar, Mongolia *As of 08/29/12 34
John Lee, CFA – Chairman / CEO • Founder of Prophecy Coal Corp. and Prophecy Platinum Corp.VP Sharma – Technical Advisor • 40 years experience in the power. Joined CLP Group in 1978. Former Director- Head of India, Managing Director of GPEC and CEO of CLP Power India, Regional Business Manager CLP Power Asia.Jivko Savov - Director • Deputy CEO of En+, company owned by Oleg Derispeska • Former Chairman of Rusal, Chairman of EuroSibEnergJoseph Li - General Manager, Corporate Secretary, Director • Former Senior Auditor with the BC Ministry of Finance; oversaw successful spin- out of Prophecy Platinum Corp. and acquistion of Shakespeare project.Michael Deats - Director • Former Managing Director of BP Coal South Africa, Ex-Director of Eskom 35
CANADIAN OFFICE MONGOLIAN OFFICE342 Water Street – 2nd Floor 8/F Monnis Tower, ChinggisVancouver, BC Ave.Canada V6B 1B6 1st Khoroo, Sukhbaatar DistrictPhone: 604-569-3661 Ulaanbaatar, MongoliaFax: 604-569-3617 Tel: +976.11.331669Toll Free: 1-800-459-5583 Fax: +firstname.lastname@example.org email@example.com 36
DisclaimerThe information contained in this presentation (“Presentation”) has been prepared by Prophecy Resources Corp. (“Company”) and is being communicated for general background informational purposes only. ThePresentation has not been independently verified and the information contained within is subject to updating, completion, revision, verification and further amendment. Neither the Company, nor its shareholders, directors,officers, agents, employees, or advisors give, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information inthis Presentation, or any revision thereof, or of any other written or oral information made or to be made available to any interested party or its advisers (all such information being referred to as “Information”) and liabilitytherefore is expressly disclaimed. Information contained in this Presentation is the property of the Company. It is made available strictly for the purposes referred to above. Neither the communication of this Presentationnor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any transaction. This Presentation does not constitute, or form part of, any offer or invitation to sell or issue,or any solicitation of any offer to subscribe for or purchase any securities in the Company, nor shall it, or the fact of its communication, form the basis of, or be relied upon in connection with, or act as any inducement toenter into, any contract or commitment whatsoever with respect to such securities. The communication of this Presentation in or to persons in certain jurisdictions may be restricted by law and persons who may rceivecommunication of this Presentation should inform themselves about, and observe, any such restrictions in advance of communication to them of this Presentation. In particular, this Presentation has not been approved byan authorised person pursuant to Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) and accordingly it is being delivered in the United Kingdom only to persons to whom this Presentation may bedelivered without contravening the financial promotion prohibition in Section 21 of the FSMA. Those persons are described in the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“Order”)and include persons who have professional experience in matters relating to investments and who fall within the category of person set out in Article 19 (investment professionals) of the Order. In addition, other than alimited number of persons reasonably believed to be qualified institutional buyers (as defined in Rule 144A under the US Securities Act of 1933, as amended) or accredited investors (as defined in the National Instrument45/106), neither this Presentation nor any copy of its may be transmitted into the United States of America or Canada or distributed directly or indirectly, in the United States of America or Canada, or to any resident thereofexcept in compliance with the applicable securities laws. Any failure to comply with these restrictions may constitute a violation of applicable US or Canadian securities laws. By accepting communication of thisPresentation, the recipient represents and warrants that it is a person to whom this Presentation may be communicated without a violation of the laws of any relevant jurisdiction. This Presentation is not to becommunicated to any other person or used for any other purpose and any other person who receives communication of this Presentation should not rely or act upon it. In furnishing this Presentation, the Company doesnot undertake or agree to any obligation to provide the attendee with access to any additional information or to update this Presentation or to correct any inaccuracies in, or omissions from, this Presentation that maybecome apparent either during, or at any time after this Presentation. This Presentation contains or incorporates by reference “forward-looking information” which means disclosure regarding possible events, conditions,acquisitions, or results of operations that is based on assumptions about future conditions and courses of action and includes future oriented financial information with respect to prospective results of operations, financialposition or cash flows that is presented either as a forecast or a projection, and also includes, but is not limited to, statements with respect to the future financial and operating performance of the Company any of itssubsidiaries and other considerations as set out in more detail in the documents filed by the Company with the Toronto Stock Exchange. Often, but not always, forward-looking statements can be identified by the use ofwords such as “plans”, “proposes”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or variations (including negative variations) of such words and phrases, orstate that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which maycause the actual results, performance or achievements of the Company and/or its current and proposed subsidiaries to be materially different from any future results, performance or achievements expressed or implied bythe forward-looking statements. Forward-looking statements contained herein are made as of the date of this Presentation and the Company disclaims any obligation to update any forward-looking statements, whether asa result of new information, future events or results or otherwise. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein. In addition, investors arecautioned that this presentation may contain information about mineral properties adjacent to or near the Company’s properties and in which the Company has no right or interest. Mineral deposits on such adjacent or nearproperties are not indicative of the mineral deposits, if any, which may be found on the Company’s properties. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Neither the TSXnor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release. Certain statements contained in this Presentation, includingstatements which may contain words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions, and statements related to matters which are not historical facts, are forward-lookinginformation within the meaning of securities laws. Such forward-looking statements, which reflect management’s expectations regarding Prophecy’s future growth, results of operations, performance, business prospectsand opportunities are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements of the Company to be materiallydifferent from any future results, performance, or achievements expressed or implied by such forward-looking statements. Forward-looking statements in this Presentation include, without limitation, statements regardingthe development and production of the Company’s Chandgana Power Plant and other information concerning possible or assumed future results of operations of Prophecy. Material risks and uncertainties which couldcause actual results to differ materially from such forward-looking statements include, but are not limited to, exploration, development and production risks, risks related to the Company not having a history of mineralproduction, risks related to the development of the Chandgana Power Plant, risks related to the uncertainty of mineral resource and mineral reserve estimates, the cyclical nature of the mining industry, risks related to theavailability of capital and financing on acceptable terms, commodity price fluctuations, currency exchange rate and interest rate risks, risks associated with operating in foreign jurisdictions, uninsured risks, regulatorychanges, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays in receiving government approvals, and unanticipated environmental impacts onoperations and costs to remedy same. Assumptions underlying our expectations regarding forward-looking statements or information contained in this Presentation include, among others, that all required third partycontractual, regulatory and governmental approvals will be obtained for the development, construction and production of the Company’s properties, there being no significant disruptions affecting operations, whether due tolabour disruptions, currency exchange rates being approximately consistent with current levels, certain price assumptions for coal, prices for and availability of diesel, parts and equipment and other key supplies remainingconsistent with current levels, production forecasts meeting expectations, the accuracy of the Company’s current mineral resource and reserve estimates, labour and materials costs increasing on a basis consistent withthe Company’s current expectations and that any additional required financing will be available on reasonable terms. Although Prophecy has attempted to identify important risks and factors that could cause actual actions,events or results to differ materially from those described in forward-looking statements, there may be other factors and risks that cause actions, events or results not anticipated, estimated or intended. Accordingly, readersshould not place any undue reliance on forward-looking statements as such information may not be appropriate for other purposes. We disclaim any intention or obligation to update or revise any forward lookingstatements, whether as a result of new information, future events or otherwise, except as required by law. 37
Total Electricity Consumption 6000 5000 4000 Billion kWh 3000 2000 1000 0 2007 2008 2009 2010 2011 2012E Source: China Electricity Council 38