Mr. Bekzod Kasimov reports

PROPHECY COAL PROVIDES ULAAN OVOO MINE UPDATE

Prophecy Coal Corp. has provided the following update of its Ulaan Ovoo mine.

Since production was suspended in July, 2012 (see the company's Aug. 9, 2012 news release), management has examined all aspects of the Ulaan Ovoo mine, from mining and transportation to marketing and sales, with the goal of lowering production costs and increasing coal sales upon the potential resumption of mining at Ulaan Ovoo.

The company is actively discussing several potential coal sale and purchase agreements with the goal of resuming mining operations in third quarter 2013 and the ramping up of production throughout 2014. Ulaan Ovoo coal is marketed specifically to power plants, heat/boiler plants, cement factories, metallurgical plants, direct reduced iron plants and railway companies. Ulaan Ovoo coal (5,000 kilocalories per kilogram gross calorific value (GCV), less than 1 per cent sulphur, less than 10 per cent ash, less than 3 per cent rocks) is well suited for all these applications.

Coal prices in the region have been largely shielded from global economic weakness. Current benchmark premium gross as received 5,000 kcal/kg thermal coal pricing is exceeding $40 per tonne in Mongolia and $50/t at several delivery points in the Russian Republic of Buryatia (Buryatia). These prices represent a material increase year over year. The company is very encouraged by both the quantity requested by new and repeat customers, as well as current price trends.

The company projects that Russian sales through Zeltura and Sukhbaatar border crossings will account for over 50 per cent of the sales volume. In the past months, Prophecy has received written correspondence from Russian parties regarding the purchase of Ulaan Ovoo coal and/or the purchase of the Ulaan Ovoo mine itself.

The conditions for potential coal sales to Russia have improved in the following areas:

1. The Mongolian government has lowered the benchmark pricing used to calculate export royalties, while the average coal price has risen in Russia's Buryatia region.
2. Prophecy has had numerous meetings with Mongolian and Russian officials seeking the reopening of the Zeltura border crossing between Mongolia and Russia. The Zultura crossing is less than 20 kilometres from Ulaan Ovoo, and the reopening of the border would reduce transportation costs and potentially increase sales margins. The company has received support from and continues to work with officials from both governments to reopen the Zeltura border crossing.

History of Ulaan Ovoo

Prophecy has successfully delivered over 300,000 tonnes of Ulaan Ovoo coal to 28 customers, with a record of timely delivery and meeting or exceeding required coal quality specifications. Below is a brief chronologic history(i).

First half 2013:  Sold 45,000 tonnes from stockpile, 106,000-tonne stockpile remains, $55-million invested to date

First half 2012:  Production curtailed in July due to low prices and lack of market penetration

2012:  Produced 165,000 tonnes (first half), sold 131,000 tonnes (including 2,400 tonnes to Russia)

2011:  Produced 205,000 tonnes, sold 127,000 tonnes (including 6,000 tonnes to Russia)

First half 2011:  Capex $40-million invested to date

Since 2010, the company has invested over $55-million at Ulaan Ovoo. This includes road and bridge construction, mining vehicles, mining camp, prestripping, and other infrastructure and community improvement.

Qualified person

Christopher Kravits, LPG, CPG, is a qualified person as defined under National Instrument 43-101 standards of disclosure for mineral projects. Mr. Kravits is not considered independent of Prophecy given the large extent that his professional time is dedicated solely to, and his position as manager of mining with Prophecy Coal Corp. Mr. Kravits has reviewed and approved the technical and scientific disclosure within this news release.

(i) Mineral resources that are not mineral reserves do not have demonstrated economic viability.

We seek Safe Harbor.