MONGOLIA - Prophecy secures Ulaan Ovoo offtake

Prophecy Coal has sold 22,100 tonnes of thermal coal from its Ulaan Ovoo mine to a local Mongolian manufacturing plant. The initial sales contract has been signed with the direct reduced iron (DRI) manufacturer to meet shortfalls from current suppliers. However the buyer has indicated it would like to increase supply from Prophecy to 300,000 tonnes annually, which would make up a third of its annual coal purchases.

Prophecy’s high quality thermal coal (NAR 5100 kcal/kg) is ideal for DRI, which is also known as sponge iron. DRI is produced from direct reduction of iron ore in the form of lumps, pellets or fines by a reducing gas produced from burning coal. The coal must be lumpy and of high calorific value, however temperature does not have to reach blast furnace levels, hence coking coal is not required. The process was developed to overcome some of the high costs and difficulties of conventional blast furnaces.

There is currently high demand for DRI product as it is one of the chief raw materials in steel-making due to its higher qualities and advantages compared to scrap irons and pig irons. Some prices quoted in China are more than US$300/tonne.

Prophecy’s chairman John Lee says, “As we move past the mine establishment phase at Ulaan Ovoo, we anticipate steadily decreasing operating cost and increasing sales quantity and price. Our goal is to make Ulaan Ovoo operations cashflow positive in the near-term without relying on Russian or Chinese export markets.”

The Canadian-listed company continues to make progress on opening the Zeltura border crossing which is 10km from the Ulaan Ovoo mine in northern Mongolia, in order to facilitate coal exports to Russia.

Prophecy’s proposed 600MW mine-mouth power plant adjacent to the Chandgana coal deposit has also received approval from the Mongolian government, with negotiations on financing and construction management under way.

www.prophecycoal.com