Mr. John Lee reports

PROPHECY COAL CORP. ANNOUNCES ANNUAL RESULTS AND OUTLOOK FOR 2014

Prophecy Coal Corp. has released its annual results for fiscal 2013, as disclosed in its annual financial statements and management's discussion and analysis, with the following highlights and outlook for 2014.

Ulan Ovoo

During the year, the company sold approximately 125,000 tonnes of coal with total sales revenue of approximately of $3.3-million. In addition, the company earned approximately $1.3-million in revenue from leasing and renting out its excess equipment and staff while mining operations were suspended during the year. As the company is in the precommercial production stages, proceeds from the sale of coal are not recorded as revenue but rather are offset against capitalized deferred exploration costs.

Since resuming operations, the company has estimated its average cash cost per tonne, including transportation and administration expenses, at approximately $29.50 (U.S.) per tonne and has experienced domestic average sales prices of approximately $36 (U.S.) per tonne for coal with gross calorific value of greater than 5,000 kilocalories per kilogram. On the other hand, average sales prices for coal with GCV less than 5,000 kcal/kg was $20.50 (U.S.) per tonne. However, approximately 60 per cent of the company's sales in 2013 consisted of sales of coal with GCV greater than 5,000 kcal/kg, of which approximately 80 per cent was sold during the fourth quarter of 2013.

Furthermore, domestic market prices for coal with GCV greater than 5,000 kcal/kg range from $30 (U.S.) to $50 (U.S.) per tonne, dependent on quantity and point of delivery. In addition, the company's neighbouring market in the Russian regions realize sales prices for coal with GCV of 4,500 kcal/kg to 5,000 kcal/kg ranging from 1,800 rubles to 2,200 rubles per tonne ($50 (U.S.) to $60 (U.S.) per tonne), dependent on point of delivery.

Russia

In 2014, the company sold and successfully delivered a coal shipment from Sukhbaatar to a Russian customer. Management also recently visited a number of Russian coal end-users with the goal of establishing continuous shipments to Russia in 2014. The Zeltura Road feasibility study concerning the road from the Ulan Ovoo mine to the Zeltura border has just been completed ahead of schedule, and the study is currently under management's review and will soon be submitted to the Mongolian Ministry of Road and Transportation. Given that the mine is just 17 kilometres from the Zeltura border (as opposed to approximately 120 kilometres from the mine to Sukhbaatar), reopening of the Zeltura border would reduce transportation costs and potentially further facilitate increasing coal sales to Russia.

If the feasibility study is accepted by the Ministry of Road and Transportation, road upgrades can begin and are expected to take up to four months based on preliminary tenders received. The company will advise if and when the feasibility study is accepted.

Concurrently, the company is working with the Ministry of Finance on creating a customs clearing zone at the Ulan Ovoo mine to facilitate Russian exports. The company is pleased with the overall progress, and appreciates the support from Mongolian and Russian authorities.

2014 outlook

Since resuming operations at Ulan Ovoo, management is primarily working toward improving mining practices in the areas of safety, cost containment and coal quality improvement. With these mandates and since near-surface oxidized coal was removed in 2011 and 2012, the company has been able to consistently mine higher-grade thermal coal with GCV greater than 5,000 kcal/kg. With consistent, effective and efficient mining practices, management expects that approximately 90 per cent of the coal mined at Ulan Ovoo will be greater than 5,000 kcal/kg in 2014 as was projected in the Wardrop prefeasibility study. As such, the company is transitioning to supplying to a market for coal of GCV greater than 5,000 kcal/kg which realizes premium pricing, both in the company's domestic and neighbouring market, Russia.

The company has only commenced penetrating the premium thermal coal market in this region, and believes there is potential to further expand sales with minimal competition in northern Mongolia and its neighbouring Russian region. Furthermore, during the year, the company invested in a coal screener to enable the provision of specific sizes of coal which realize premium pricing in all markets. In addition, subsequent to year-end, the company also invested in a coal dryer to support maintaining lower moisture levels in order to consistently produce coal with GCV greater than 5,000 kcal/kg to also support capturing greater market share where premium prices are realized. As such, the company is focusing its efforts on controlling its mining practices and marketing efforts to become primarily a provider of coal greater than 5,000 GCV where premium pricing can be obtained. Any remaining lower grades of coal inventory will be used to produce briquettes for domestic home heating. The price for a comparable briquette product is approximately $50 (U.S.) per tonne in Ulan Bator.

Chandgana

After extensive submissions and discussions, the Mongolian Cabinet approved the Chandgana power plant project as a concession project in January, 2014. Subject to negotiations, a concession project may be entitled to stable tax rates, favourable value-added tax and customs duties, as well as other forms of government subsidies, endorsement and support; all of which can enhance bankability and lead to better financing options for the project.

2014 outlook

The company actively pursues the remaining agreements required to proceed with project financing of the Chandgana power plant project. Prophecy also continues to actively consider the project financing options which include either debt, equity or a combination thereof in addition to joint ventures with international power project developers. While the company is pleased with the overall progress and appreciated support from various Mongolian authorities, it cannot offer certainty or a definitive time frame to conclude the concession agreement with the Ministry of Economic Development or the power purchase agreement with the Ministry of Energy.

We seek Safe Harbor.