Mr. John Lee reports

PROPHECY SECURES $10 MILLION LOAN TO ADVANCE ULAAN OVOO COAL MINE, MONGOLIA

Prophecy Resource Corp. has arranged a secured debt facility of up to $10-million with Waterton Global Value, L.P. Subject to certain drawdown conditions, the loan may be drawn down in three tranches as follows:

1. $2-million on the closing date, which occurred as at Sept. 1;
2. $3-million on the date Prophecy completes the acquisition of Northern Platinum Ltd. (see Stockwatch news dated July 16, 2010);
3. $5-million at such time as Prophecy completes an offtake agreement for the Ulaan Ovoo property.

John Lee, chief executive officer and co-chairman of Prophecy, stated: "We are pleased to have Waterton as a new stakeholder in Prophecy. The proceeds will fully finance Ulaan Ovoo's 2010 capital expenditure to production, which includes continuing road improvement, infrastructure upgrade at the mine site and at the rail station, fleet purchase and personnel recruits. We now also have a marketing budget to increase investor and community awareness throughout Mongolia, Asia and North America."

The loan is due by Aug. 31, 2011, and bears interest at 10 per cent per annum. A structuring fee of $50,000 and 1 per cent of the third tranche (if drawn down) is payable in cash. In conjunction with the closing of the loan, we will issue one million common shares to Waterton. In the event that the third tranche of the loan is drawn, the company shall issue a further one million common shares to Waterton. The shares issuable to Waterton will be subject to a four-month hold period.

Macquarie Capital Markets Canada Ltd. acted as financial adviser to the company with respect to the loan.