Prophecy gets go-ahead at Ulaan Ovoo

Vancouver – After months of government delays, Prophecy Resource (PCY-V, PRPCF-O) has finally been given the green light for production at its Ulaan Ovoo coal project in Mongolia.

A Ministry of Mineral Resources and Energy team visited the mine site on Oct. 4 for a final permit inspection and “drew satisfactory conclusions” accoding to Prophecy.

While this is the last step before production, the company has clarified that despite reports to the contrary, it has not officially commissioned the mine and still awaits actual receipt of the mine permit. The Ministry has told Prophecy that receipt of the permit is ‘imminent’.

In the meantime, the Ministry has approved the production of 10,000 tonnes of coal for a trial run at power stations in Darkhan and Erdenet, two of Mongolia’s largest cities.

The Coal will be shipped by truck to the Sukhbaatar rail station on the Trans-Mongolian Railway, located on the Russian border 120 km east of Ulaan Ovoo. The company has already secured an annual railway capacity of 1.5 million tonnes of coal through the station and completed a study that considered trucking coal to the station then shipping it by rail to Vladivostock via the Trans-Siberian railway.

The Ulaan Ovoo deposit has an established resource of 208.8 million measured and indicated tonnes of thermal coal. The deposit is considered bituminous and runs at 5,204 kcal/kg, 12.46% ash and 0.4% sulphur.

In May Prophecy signed an agreement with Australia’s Leighton Group to produce 250,000 tonnes of coal from the project in 2010. With the delayed permitting it is not clear how much coal will actually be produced in 2010, but Leighton and Prophecy have over 50 staff on-site and equipment that could allow production of 120,000 tonnes a month.

Work to prepare the site had started before the latest announcement, with over 2 million tonnes of waste already removed to expose the large coal seam. The Ulaan Ovoo deposit is a single coal seam, 45 to 80 metres thick with an average strip ratio of 2:1.

Prophecy also controls the massive Chandgana coal project near Mongolia’s capital, Ulan Bator. Two deposits, 9 km apart, contain a combined 1.2 billion tonnes of measured and indicated coal resource.

Besides its coal holdings, the company also controls several nickel projects in Canada.

Prophecy’s share price climbed 11¢ or 20% on the news to close at 66¢. The company has a 52-week share price range between 7¢ and $1.19 and 126 million shares outstanding or 160 million fully diluted.