Prophecy Coal (pcy-t) could start constructing its 600 megawatt (MW) Chandgana power plant in Mongolia by early 2013, positioning itself for a 2016 start.
The company recently received a thermal power plant license from the Mongolian government, which marks the first of its kind in terms of size.
The new power plant will be located 60 km from Underkhann city and 150 km from Baganuur city. The junior plans to construct transmission lines to connect the two cities through Chandgana, which it says will enhance the national Mongolian energy system.
“There has been an existing [power] deficit for some time and increased economic growth will exacerbate it, particularly in light of the decommissioning of some existing plants as the Chinese are shutting down coal mines that are unsound in terms of either safety or environmental reasons,” explained Chris Ackerman, the company’s investor relations representative.
“There is an understanding among all stakeholders that Mongolia, being one of the world’s fastest growing economies, needs additional power,” added Prophecy Coal’s chairman John Lee, in a press release.
The International Monetary Fund predicts the country will experience a 600 MW-plus deficit in power supply by 2016.
By January 2016, Prophecy plans to have its first 150-MW unit up and running.
The company’s nearby Chandgana coal property will feed the mine-mouth power plant.
Chandgana consists of two deposits – Chandgana Tal and Chandgana Khavtgai – sitting 9 km apart of each other in the Nyalga coal basin.
Tal is estimated to supply 2.4 to 2.8 million tonnes of coal each year to the power plant, while Khavtgai will add to production in the later years.
The company received a full mining license for Tal this February. The deposit hosts 141.3 million tonnes of measured coal.
Prophecy Coal has an exploration license on Khavtgai, which hosts 509.3 million tonnes of measured coal and 545.7 million tonnes of indicated coal.
The power plant will be constructed within 160 km of the Central Mongolian railroad, which will help bring in construction equipment.
But before the company starts building the plant, it will complete a prefeasibility and a bankable feasibility study. The studies will also provide a better estimate of the initial costs, which are currently pegged between US$600 million and US$800 million.
Following the receipt of the bankable feasibility, Prophecy Coal will start discussing a power purchase agreement with the Mongolian government, as well as apply for a transmission line construction license.
Currently, it is looking to secure project financing and is in talks with several international banks.
On news of the construction license, the company closed Nov. 21 flat at 53¢.
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