(EnergyAsia, May 10 2012, Thursday) — Having invested more than C$30 million to expand and upgrade its Mongolian Ulaan Ovoo mine in just over a year, Toronto Stock Exchange-listed Prophecy Coal said it has become the largest independent supplier of coal to the country’s power plants. (US$1=C$1).

Supported by new and expanded roads, bridges, mining fleet, camp, pre-stripping and other infrastructure and community improvement projects at the mine, Prophecy said it has sold and delivered some 188,915 tonnes of thermal coal since September 2011 including 8,055 tonnes to Russia, 23,543 tonnes to local private companies, and 157,317 tonnes to Mongolian government-owned power plants.

It has contracts to deliver an additional 228,388 tonnes in 2012, the bulk to be used for generating electricity at the Darhan and Erdenet power plants. It has set a target to sell 300,000 tonnes of coal this year.

In an update to shareholders, Prophecy said it has stockpiled approximately 130,000 tonnes of coal at Ulaan Ovoo. The mine holds measured reserves of 174 million tonnes and indicated reserves of 34 million tonnes, while its Chandgana mine hosts a measured resource of 650 million tonnes and an indicated resource of 539 million tonnes.
 
In recent months, the company said it has experienced a steady increase in both demand and realised sale price for its coal.

While it has received commitment and interest “for a substantial quantity of Ulaan Ovoo coal” from Russian buyers, Prophecy said it is postponing sales pending the opening of the Zeltura border crossing and a revised export royalty scheme from the General Department of Taxation of Mongolia.

The company is paying export royalties based on a government-set benchmark coal price which is nearly three times higher than the company’s actual sale price. Prophecy said it is optimistic that progress will be made on both royalty and border opening fronts to improve the margin on sales.

John Lee, Prophecy’s chairman and CEO, said:

“Ulaan Ovoo produces highly desirable thermal coal of NAR 5,100 kcal/kg quality to fulfill the regional demand of the thermal coal market. The coal inventory levels at Mongolian power plants this past winter were down to only a few days, which created a national emergency.

“We are committed to delivering our quota to Mongolian power plants in 2012, while continuing to work with the Mongolian government on the 600 MW Chandgana Power Purchase Agreement to address the long-term energy needs of this rapidly developing country and at the same time, provide a stable return to our shareholders.”