Prophecy Power Submits Power Purchase Agreement Proposal, Expects Decision in 90 Days

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 09/06/12 -- Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX: PCY)(OTCQX: PRPCF)(FRANKFURT: 1P2) is pleased to announce that Prophecy Power Generation LLC ("Prophecy Power"), a wholly owned subsidiary of Prophecy, has formally submitted its Power Purchase Agreement proposal to the Mongolian government.

The proposed Power Purchase Agreement ("PPA") details the terms under which Prophecy Power would be prepared to supply power to Mongolia's National Transmission Grid Co. Highlights of the PPA include:

--  Designated concrete-pour date of April 2013 and 1st phase operational
    date of Q1 2016(i);

--  A long term power off take contract to ensure 24/7, uninterrupted
    dispatch power supply to the Mongolian grid;

--  A competitive tariff that is lower than Mongolia's wind farm tariff;

--  Capacity and energy charge components in the tariff to cover fixed and
    variable costs respectively;

--  A levelized tariff designed to meet anticipated project debt service;
    and

--  Tariff indexation based on US CPI, Mongolia wage index, and oil price
    index. i.e. a pricing structure that is responsive to changed inputs and
    which will provide long term project viability.

(i) subject to conditions including but not limited to financing availability.

Prophecy Power has Mongolia's leading 600MW mine-mouth, thermal power plant project, with a construction license awarded by the Mongolian government in late 2011. Since fuel supply typically accounts for 60% of a power plant's operating cost, Prophecy Power has the comparative cost advantage by sourcing coal from the Chandgana coal project, held by Prophecy's wholly owned Chandgana Coal LLC. The Chandgana coal project includes three coal licenses with a measured and indicated coal resource of 1.2 billion tonnes. In the initial phase, the coal for the power plant will be sourced from two mining licenses containing a measured and indicated resource of 131 million tonnes with a strip ratio of 0.5:1 and a starter pit. An NI 43-101 Preliminary Economic Assessment study is underway in connection with the coal project.

The PPA will be the cornerstone to attract and finalize joint venture power plant developer interest, and solidify project financing.

Prophecy expects to receive a formal reply within 90 days.

John Lee, Chairman and CEO of Prophecy Coal commented: "Both Prophecy and the Mongolian government working group have been working hard for several months to reach this point. All of us have high expectations for the Chandgana project. Everyone here at Prophecy and our government counterparts is quite excited."

Prophecy expects to provide an update regarding EPC selection, JV discussion, and Project Financing in due course.

The technical contents of this news release have been reviewed and approved by Christopher M. Kravits, P.Geo, who is a Qualified Person as defined in NI 43-101. Mr. Kravits has 34 years of US and international relevant coal geology experience. He has been active in Mongolia since 2007.

About Prophecy Coal

Prophecy Coal Corp. is a Canadian listed company engaged in developing energy projects in Mongolia. The Company's wholly-owned subsidiary Prophecy Power is advancing plans for a proposed 600 MW mine-mouth power plant, which has been permitted by the Mongolian government, adjacent to its Chandgana coal deposit. Negotiations on financing, power purchase agreement and construction management are underway. Substantially all of the Company's resources are not mineral reserves, hence they do not have demonstrated economic viability.

Further information on Prophecy Coal can be found at www.prophecycoal.com.

ON BEHALF OF THE BOARD OF PROPHECY COAL CORP.

JOHN LEE, CEO/Chairman

Forward-Looking Statements: This news release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, including, without limitation, statements regarding future plans and objectives of the companies are forward-looking statements that involve various risks and uncertainties. Although Prophecy believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Forward-looking statements are based on a number of material factors and assumptions. Factors that could cause actual results to differ materially from those in forward-looking statements include general economic, regulatory, market or business conditions, and other risks detailed herein and from time to time in the filings made by the companies with securities regulators. Mineral exploration and development of mines is an inherently risky business and large infrastructure projects such as power plants require huge amounts of capital which may not be available to Prophecy on terms which will allow its shareholders to realize a reasonable return or on any terms at all. Accordingly the actual events may differ materially from those projected in the forward-looking statements. For more information on Prophecy and the risks and challenges of its business, investors should review filings that are available at www.sedar.com.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

Contacts:

Prophecy Coal Corp.

Chris Ackerman

Manager, Investor Relations

1-800-459-5583
cackerman@prophecycoal.com
www.prophecycoal.com