Mr. John Lee reports

PROPHECY COAL CORPORATE UPDATE

Further to its news releases of April 16, 2013, May 31, 2013, and June 6, 2013, Prophecy Coal Corp. has issued an aggregate of 4,460,857 common shares upon the exercise of an aggregate of 12,525,429 adjustment warrants, including 1,460,857 common shares issued on the exercise of 4,382,572 adjustment warrants issued to subscribers under the company's first tranch closing of its unit private placement announced on April 16, 2013, and 2,714,286 common shares issued on the exercise of 8,142,857 adjustment warrants issued to subscribers under the company's second closing of its unit private placement announced on June 6, 2013. The terms of the adjustment warrants are disclosed in the company's May 31, 2013, news release. The company also announced that it has amended the terms of 18,358,000 previously issued stock options held by officers, directors, employees and consultants to reduce the option exercise price to 28 cents per common share.

Further, the company has cancelled a total of 5,435,000 incentive stock options held by officers directors, employees and consultants and reissued a further 5,435,000 options exercisable at 28 cents per common share and expiring June 18, 2017, to the option holders.

In addition, the company announced that it had received shareholder approval for the issuance of 2,027,500 bonus shares to certain directors, officers, employees and service providers of the company, of which 1,013,750 have been issued and a further 1,013,750 are anticipated to be issued in January, 2014. The issuance of the bonus shares was initially approved by the company's board of directors in January, 2013.

Shareholders of the company approved the issuance of the first tranch adjustment warrants, bonus shares, reissued options and the amendments to the amended options at the company's annual and special general meeting held on July 30, 2013. A copy of the company's management information circular dated effective June 26, 2013, providing details of the resolutions passed at the meeting is available under the company's profile at SEDAR.

We seek Safe Harbor.