Chandgana (Power Plant)

    Technical Reports

    Several technical reports have been prepared for the Chandgana Coal properties and are listed below. These reports were prepared in accordance with the CIM Standards referenced in NI 43-101 and disclosed according to NI 43-101 and have been filed under the Company’s profile on SEDAR.

    Power Project Overview

    PProphecy Power Generation LLC (“PPG”), a wholly-owned subsidiary of Prophecy Development Corp. (“Prophecy”), is developing the Chandgana coal-fired power plant project (“Chandgana Power Plant”) which includes the construction of a 600 MW coal-fired mine-mouth power plant consisting of four 150 MW units (4X150 MW) in two phases. Both phases are proposed to be 300 MW (2X150 MW). The proposed power plant will be located 300 km east of the capital city of Ulaanbaatar next to the Chandgana Tal coal deposit, on which Chandgana Coal LLC (“Chandgana Coal”) (another wholly-owned subsidiary of Prophecy) controls mining licenses covering the deposit. The Detailed Environmental Impact Assessment (“DEIA”) for the Chandgana Power Plant was approved in November 2010 and a construction license was granted in November 2011 to PPG. In March 2013, Prophecy secured a land use right covering 532.4 hectares of land to be used for Prophecy’s proposed Chandgana Power Plant from the Morun soum government. Prophecy has attained many milestones making for significant progress in bringing the project forward (Table 1).

    Table 1: Chandgana Power Plant Progress

    Milestones

    License / Approval Completion Date Status
    Power Plant Detailed Environmental Impact Assessment Nov 2010 v Received
    Chandgana Coal Mining License Jan 2011 v Received
    Power Transmission Line EIA Approval Aug 2011 v Received
    600 MW Chandgana Power Plant Construction License Nov 2011 v Received
    Chandgana Coal EIA Approval Nov 2011 v Received
    Power Purchase Agreement Sep 2012 Submitted
    Firm EPC Bids Sep 2012 v Received
    Chandgana Coal Preliminary Economic Assessment Nov 2012 v Received
    Project Finance Debt Term Sheet Jan 2013 v Received
    Geotechnical Study Feb 2013 v Received
    Chandgana Power Plant Land Use Approval Mar 2013 v Received
    Permits for Water & Power Supplies to Site During Construction Mar 2013 v Received
    Preliminary Mobilization Work Apr 2013 Started
    Electricity Tariff Proposal from the Working Group * May 2013 v Received
    Coal Supply Agreement June 2013 v Received
    Application for Concession Aug 2013 Submitted
    Project Qualified Under Concession Feb 2014 v Approved
    Invitation from Ministry of Economic Development to Negotiate on Concession Agreement #7/2055 Oct 2014 v Received
    Ministry of Industry Established Working Group Aiming to Expedite Chandgana Concession Agreement Jan 2015 v Approved
    600 MW Chandgana Power Plant EPC Agreement Dec 2015 v Signed

    *-Electricity tariff proposal from the working group designated by the Mongolian Ministry of Energy.

    The total capital investment necessary to complete the 600 MW Chandgana Power Plant is expected to be approximately US$1 billion. The proposed investment for Phase 1 (2X150 MW) is estimated to be US$600 million and is to be completed within 3 years from the start of construction. Prophecy recently executed an engineering, procurement and construction (“EPC”) agreement for the whole 600 MW Chandgana Power Plant project. Also, Prophecy has identified equity and debt investors that are ready to invest and start the project once a bankable Concession Agreement and Power Purchase Agreement (“PPA”) including tariff are finalized with the already-established Mongolian government-appointed working group.

    Mongolia currently imports approximately 20% of its electrical power from Russia and China. Prophecy is proposing to build a new, modern power plant to provide a stable 25-year power supply to Mongolia through 100% private funding and with no up-front payment or subsidies from the Mongolia government. Prophecy is offering a fixed, long-term tariff that is lower than those of imported electrical power to assist Mongolia to save money, create employment and establish its energy independence. The Chandgana Power Plant and Chandgana coal mine are expected to employ over 765 full-time skilled local staff, cause the start of many new support businesses, and revitalize Khentii province.

    Prophecy believes having a new mine-mouth power plant located in a rural area (as opposed to a power plant located in the capital city of Ulaanbaatar) is the solution to Mongolia’s power shortage, eliminates costly coal and ash transportation, preserves the capital city’s limited water resources and reduces the severe air pollution in the city.

    In addition to working with the Mongolia government and its people to fulfill its growing domestic energy demand, Prophecy with its experienced partners, look forward to future steps to expand the Chandgana Power Plant in order to transform Mongolia into a net exporter of electricity to its neighboring countries. There is sufficient land and coal resources that with the infrastructure in place from the Chandgana Power Plant, expansion is possible.

    Project Location

    The project will be located in Murun Soum, Khentii Province, in east central Mongolia. The location is 300 km east of the capital city of Ulaanbaatar and 55 km west of Undurkhaan city at an average elevation of 1,250 m (Map 1). The available infrastructure is good with paved highway bordering the site, a rail terminal 155 km west, and communications.

    Map 1: Location of the Proposed Chandgana Power Plant



    Click to enlarge

    The project will be located on the land use right adjacent to the Tsaidam Nuur mining licenses and 10 km from the Khavtgai Uul exploration license, all held by Chandgana Coal LLC (Map 2). The Tsaidam Nuur licenses contain an estimated 124.4 million tonnes (“mt”) of coal all in the measured category. The power plant and related support facilities will be located within the land use right close to the mining licenses in order to minimize coal transportation and enable sharing of infrastructure (Map 1).

    Map 2: Location Map of Power Plant Land Use Right and Chandgana Coal LLC Licenses

    Coal Overview

    The Chandgana Coal Project is located in Khentii Aimag in east central Mongolia. The project includes three coal licenses that are contiguous to or near the site of Prophecy’s planned Chandgana Power Plant.

    The project is within the Nyalga Coal Basin and consists of exploration and mining licenses which host a measured resource of 0.633 billion tonnes and an indicated resource of 0.539 billion tonnes of thermal coal (total over 1.17 billion tonnes*). The licenses are held by Chandgana Coal LLC (“Chandgana Coal”), a wholly owned subsidiary of Prophecy Development Corp. All the licenses have favorable geological characteristics including thick coal seams, thin overburden, few discontinuities, and good coal quality. These suggest the major mining conditions are potentially favorable and the coal is best suited for coal-fired thermal power plants.

    *see “Updated Technical Report on the Coal Resources of the Chandgana Khavtgai Coal Resource Area, Khentii Aimag, Mongolia” prepared by Kravits Geological Services LLC, with effective date of September 28, 2010 (the “Khavtgai Uul Report”), prepared in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves (the “CIM Standards”) referenced in National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and disclosed according to NI 43-101 and “Technical Report Coal Resources and Preliminary Economic Assessment Coal Mine Component Chandgana Tal Coal Project, Khentii Province, Mongolia” prepared by John T. Boyd Company, with reissue date of February 2014 (the “Chandgana Tal Report”), prepared following the CIM Standards and disclosed according to NI 43-101. The Khavtgai Report is authored by Christopher M. Kravits CPG, LPG of Kravits Geological Services, LLC, who was an independent Qualified Person under NI 43-101 at the time of the report. The principal Qualified Person for the Chandgana Tal Report is Robert J. Farmer, who is an independent Qualified Person under NI 43-101. Both reports are filed under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) and may be found on the Company’s web site.

    Prophecy intends for Chandgana Coal to mine the coal from the licenses to fuel the 600MW Chandgana Power Plant now under development by Prophecy Power Generation LLC (“PPG”), a wholly owned subsidiary of Prophecy. During May 2013, Chandgana Coal executed a Coal Supply Agreement (“CSA”) with PPG. Per the CSA, Chandgana Coal will supply 3.6 million tonnes of coal annually, at a price of US$17.70 per tonne with normal adjustments for a period of 25 years. PPG has committed to purchase a minimum of 2 million tonnes on a “take or pay” basis, with customary breakup fees payable by PPG. The initial coal delivery date is anticipated to be during the second half of 2020, subject to PPG signing a Power Purchase Agreement with the Mongolian Government, obtaining the remaining governmental approvals, and accessing project financing.

    Coal Highlights

    • Large coal resource including 0.633 Bt measured and 0.539 Bt indicated*.
    • Thick coal seams with thickness ranging from 30 to 60 meters.
    • Coal seams are shallow with depth ranging from 0 to 267 meters.
    • Coal has moderate rank and grade with medium ash and calorific value and low total sulphur.
    • Coal quality is well-suited to fuel the proposed Chandgana mine mouth power plant.
    • Licenses include the coal subcrop making direct access to the coal seam possible.
    • There are no environmental or cultural restraints to mining.
    • Close proximity to infrastructure including 150 km from existing rail and 45 km north of the proposed Choibalsan Mongolian Railway extension, maximum 16 km from paved highway, electrical power will be supplied from the adjacent proposed Chandgana Power Plant, and existing cellular communications.

    Chandgana Coal Resources

    The Nyalga Coal Basin contains significant thermal coal resources of good quality. Chandgana Coal controls key portions of the basin. Chandgana Coal’s resources are held in two properties – Chandgana Tal consisting of two mining licenses (MV-010126 and MV-016767) and Khavtgai Uul consisting of one exploration license (XV-011654).

    Figure 1: Geologic Sections of Licenses and Picture of Chandgana Tal Pit

    Map 1: Chandgana Coal Licenses

    Coal Resources

    Chandgana Coal Resources (Tonnes)
    Chandgana Tal Khavtgai Uul Chandgana (Total)
    Measured 0.124 Billion 0.509 Billion 0.633 Billion
    Indicated 0.539 Billion 0.539 Billion
    Total M&I 0.124 Billion 1.048 Billion 1.172 Billion

    The Chandgana Tal property contains 0.124 billion tonnes of measured resource. The Khavtgai Uul property contains 0.509 billion tonnes of measured and 0.539 billion tonnes of indicated resource. Detailed Resource/Grade Table

    The coal of both Chandgana properties has been sampled and assayed in detail. The coal is of sub-bituminous C to B rank (ASTM) and moderate grade with medium ash and gross calorific value and low total sulfur so is well suited for use in coal-fired thermal power plants such as that planned at Chandgana. The average in-place coal quality (as-received basis) for the major coal seam at Chandgana Tal is: total moisture 40.9 wt %, ash 10.8 wt %, gross heating value 3,306 kcal/kg, and total sulfur 0.61 wt %. The average in-place coal quality (as-received basis) for the Khavtgai Uul property is slightly better: total moisture 36.5 wt %, ash 10.1 wt %, gross heating value 3,636 kcal/kg, and total sulfur 0.59 wt %.

    Table 2: Coal Quality of the Chandgana Properties

    Chandgana Coal Quality
    Chandgana Tal Khavtgai Uul
    Total Moisture (wt%) 40.9 (arb) 36.5 (arb)
    Ash (wt%) 10.8 (adb) 10.1 (arb)
    Heating Value (kcal/kg) 3,306 (adb) 3,636 (arb)
    Total Sulfur (wt%) 0.61 (adb) 0.59 (arb)

    Benefits of Chandgana Mine Mouth Power Plant Project:

    Contribution to air pollution reduction: Various studies have linked Ulaanbaatar’s air pollution to respiratory conditions and miscarriages in women. By locating the Chandgana Power Plant far outside the city there will be no emission of gaseous and particulate pollutants from an additional power plant contributing to the existing air pollution.

    Elimination of coal transportation: The Chandgana Power Plant is proposed to be built next to the Chandgana coal mine, 300 km east of Ulaanbaatar. This would avoid having to transport 2 to 4 mt of coal (more than 100 wagons per day) into congested Ulaanbaatar had the Chandgana Power Plant been built there. Eliminating such coal transportation also means reduced power plant operating cost, since coal is a major component (upwards of 30%) of operation expenses.

    Conservation of water: Water will be conserved in two ways. Water would be used efficiently by extracting from the mine and then used by the power plant through a zero discharge water system. Also, locating outside Ulaanbaatar avoids diverting precious water resources (up to 6 mt per year/16,000 tonnes per day) from the city. A water scarcity problem is projected to emerge in 2015 in Ulaanbaatar, and intensify from 2020 onwards. Power Plants #3 and #4 today consume 20% to 25% of the city’s clean water. A new power plant would take water away from about an additional 800,000 residents annually.

    Energy independence: The Chandgana Power Plant project would reduce expensive electrical power imports from Russia and China and be a major stride toward Mongolian energy independence. Mongolia is importing approximately 200 MW (20% of its consumption) from Russia and China and that number could increase substantially over time if new domestic power plant construction does not start.

    Save money from importation of power: The electricity tariff proposed by PPG, with exemption from income tax, dividend tax, value added tax (“VAT”), and customs duty, if the concession agreement (“CA”) is approved would be less than the tariff on imported power.

    Relief on power supply shortage: The Chandgana Power Plant is expected to begin supplying power to the Mongolian power system in 2021, if construction begins in 2018. The Mongolian gross domestic product (“GDP”) has roughly doubled every five years since 2000. The current installed capacity is about 800 MW with demand expected to increase a minimum of 676 MW by 2017 for the central and southern regions (Map 3) and double by 2020.

    Map 3: Mongolia Power Demand

    Stabilization of power grid: The Mongolian government will award contracts for construction of new overhead transmission lines (“OHTL”) connecting Bagaanuur to Choibalsan and Bagaanuur to Choir. The Chandgana Power Plant will connect to the Bagaanuur to Choibalsan OHTL. This connection would increase the stability of the Mongolian power grid by providing a strategically located power supply capable of supplying the Central Electricity System (“CES”) and the East Electricity System (“EES”) during peak demand and emergencies.

    Good location: The proposed location of the Chandgana Power Plant is centrally located between Ulaanbaatar (300 km away), Choir (150 km away, further to South Gobi) in southern Mongolia and Choibalsan (120 km away) in eastern Mongolia. Therefore, it has the flexibility to potentially provide electrical power to any of these areas without significant line loss.

    Project readiness: The Chandgana Power Plant project has been under development for four years and all major work needed prior to construction has been completed including the construction license, detailed environmental impact assessment, land use rights, mining licenses and EPC agreement. The project can be constructed at a competitive cost and within a short construction time frame of approximately 36 months. Construction can start after obtaining other approvals, signing of the Concession Agreement, Power Purchase Agreement, Tariff Agreement and completion of financing.

    Extension to coal-to-gas and coal-to-liquid projects: Chandgana is located next to a highway, has plenty of land, and over 1 billion tonnes* of coal resource in the basin. If the Chandgana Power Plant becomes operational, it would be a natural progression to develop coal-to-gas and/or coal-to-liquid projects.

    *see “Updated Technical Report on the Coal Resources of the Chandgana Khavtgai Coal Resource Area, Khentii Aimag, Mongolia” prepared by Kravits Geological Services LLC, with effective date of September 28, 2010, prepared in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves (the “CIM Standards”) referenced in National Instrument 43-101, Standards of Disclosure for Mineral Projects (“NI 43-101”) and disclosed according to NI 43-101 and “Technical Report Coal Resources and Preliminary Economic Assessment Coal Mine Component Chandgana Tal Coal Project, Khentii Province, Mongolia” prepared by John T. Boyd Company, with reissue date of February 2014, prepared following the CIM Standards and disclosed according to NI 43-101.

    Private sector investment and local benefits: The development of the Chandgana Power Plant project would be funded by the private sector boosting foreign direct investment in Mongolia and Khentii province. Once in operation, the Chandgana Power Plant and Chandgana mine are expected to employ approximately 765 full-time skilled local staff, cause the start of many new support businesses, become the largest revenue generator in Khentii province and double Khentii province’s GDP.

    Small footprint: All activities including mining, transportation, power production, support activities, and supply to the electrical grid will occur within the mining licenses and land use right. Housing for on-duty staff and the water supply system will be located on the site. Also, infrastructure and facilities will be shared between the power plant and the mine. This small footprint minimizes land disturbance, makes for efficient use of the land and minimizes environmental and social impact.

    Project History and Status

    Prophecy initiated obtaining the required licenses and permits for the power plant in early 2010. During November 2010, the Company received approval of its DEIA.

    Prophecy submitted a feasibility study in early 2011 and during November 2011 received the first 600 MW power plant construction license in Mongolian history. The mine-mouth power plant will be supplied with coal from the Chandgana Tal coal deposit, for which the Company secured a mining license in January 2011.

    During late 2011 and early 2012 Prophecy received requests for consideration to construct the power plant from Asian EPC firms. Prophecy shortlisted the field during June 2012 to request tenders from three Chinese EPC firms. After a rigorous evaluation process, SEPCO2 was eventually selected as the main EPC contractor to build and complete the Chandgana Power Plant based on price, performance, experience and time for completion. The EPC Agreement was signed on December 18, 2015 with SEPCO2. The agreement was the result of over one year of investigative and research work conducted by both Prophecy and SEPCO2 according to the set of detailed Owner’s Technical Specifications & Requirements (“OTSR”) developed by experienced Prophecy consultants that considered operating variables such as: coal quality and supply, operating temperatures, auxiliary heat consumption, water consumption, environmental limits and power output, and incorporated detailed cost and performance optimization considerations including shortest transportation routes by most cost-effective transportation carrier, and offers from insurance providers and local construction material and fuel suppliers. The binding EPC contract was prepared by an international law firm and includes specific project performance requirements and completion guarantees.

    During May 2012, a Cooperation Covenant with the Mongolian Energy Authority (EA) was executed and during August 2012 the draft PPA was submitted to the National Electrical Transmission and Grid Company (“NETGCo”), the only authorized power purchasing company in Mongolia. During September 2012, under the auspices of the Mongolian Ministry of Energy, Prophecy submitted a separate Power Generation Tariff Application to the Mongolian Energy Regulatory Commission. The proposed PPA details the terms under which PPG would supply power to the NETGCo. The tariff proposed in the PPA is less than the cost of imported electricity from Russia and China and Mongolia’s wind farm tariff. The PPA incorporates capacity and energy charges to cover fixed and variable costs with foreign currency exchange protection and indexation to mitigate increases in the cost of supplies, labor, and fuel.

    During March 2013, the Company secured a land use right to 532.4 hectares of land to be used for Prophecy’s proposed Chandgana Power Plant from the Morun soum government. The DEIA for the project was earlier approved by the Mongolian Ministry of Nature and Environment and supported by the Mongolian Scientific and Technical Council. The power plant is designed to satisfy Mongolian environmental standards and World Bank Standards applicable to new power plant projects.

    In June 2013 PPG signed a Coal Supply Agreement (“CSA”) with Chandgana Coal. As per the CSA, Chandgana Coal will supply 3.6 mt of coal annually, at a price of US$17.70 per tonne (which does not include VAT) for a period of 25 years. The CSA coal price is competitive to Mongolian domestic thermal coal prices. PPG has committed to purchase a minimum of 2 mt on a “take or pay” basis, with customary breakup fees payable by PPG. The Chandgana Tal deposit contains 124 mt of measured coal resource* and is sufficient for approximately 30-40 years of the proposed power plant operation.

    *The Chandgana Tal resource estimate is based on the reissued John T. Boyd Co. technical report. The full citation is in the Benefits of Chandgana Mine Mouth Power Plant Project section.

    In July 2013, PPG submitted a concession application to the Ministry of Economic Development (“MoED”). The signing of the CA for the Chandgana Power Plant is important since the scope of the CA includes government guarantee of the proposed Chandgana Power Plant’s revenue, a key requirement for international project financing.

    In February 2014, the Chandgana Power Plant was approved by the Mongolian government under amendment to Resolution #317 to be included in the list of concession projects. In October 2014, PPG received an official invitation letter (#7/2055) from the MoED to directly negotiate the conditions of the Chandgana Power Plant CA on an exclusive basis under the Mongolian Concession Law Article 15. Upon request by the MoED, PPG submitted a full set of documents (key ones including: the Feasibility Study, CA, PPA, Tariff Proposal, CSA, EPC Proposal, EPC contract, Bank Term Sheet, Equity Investor MOUs, and Land Use Permit) totaling well over 1,000 pages for review.

    In February 2015, PPG was notified that a working group (the “PPG Working Group”) was appointed by the Invest Mongolia Agency on behalf of the Mongolian government, to negotiate key documents with PPG on the Chandgana Power Plant. Since then, PPG, along with its proposed partners and EPC contractor have held several official meetings with the PPG Working Group and the Minister of Energy to expedite the signing of the CA.

    The Company is currently working with NETGCo and the PPG Working Group on finalizing the PPA.

    Project Financing

    The Company is in active discussions with international investment banks currently involved in Mongolian projects, large-scale organizations currently engaged in international energy production projects and private equity firms.

    SEPCO2 (with whom Prophecy signed the EPC agreement) has extensive international project financing experience for power plant projects in developing countries in the Middle East and Africa, and has expressed confidence in arranging debt financing for the Chandgana Power Plant. In 2014, SEPCO2 provided Prophecy with a bank financing term sheet for the project which must be updated for 2016, based on a 12-year term with 85% of the total value of the EPC Agreement advanced at the London Interbank Offered Rate + 5%.

    Further on December 22, 2015 Prophecy signed a non-binding Joint Development Agreement (“JDA”) with a Chinese partner (the “Strategic Partner”) to invest in the Company’s power plant project. The Strategic Partner has established a presence in Mongolia and represents the overseas investment subsidiary of a large-scale Chinese state-owned power generation group. The Strategic Partner had previously executed a Memorandum of Understanding and Exclusivity Agreement with Prophecy.

    Under the JDA, the companies will create a consortium, whereby the Strategic Partner will provide legal, financial and technical experts to assist Prophecy to negotiate and finalize the CA, PPA and Tariff Agreement with the relevant Mongolian Ministries and Agencies. Upon satisfactorily completing these agreements, the Parties intend to enter into an investment arrangement that will result in the Strategic Partner owning a minimum 51% stake in the Chandgana Power Plant. Following the signing of the JDA and EPC contract with SEPCO2, Prophecy has requested the Mongolian Energy Ministry to expedite the signing of the CA and PPA.

    To achieve project financial close, first the Mongolia government, represented by the Invest Mongolia Agency and Energy Ministry must approve the Chandgana Power Plant CA and PPA. Thereafter, a consortium of equity and debt partners could proceed to arrange project financing at the best terms available.

    Fuel and Water Supplies

    Approximately 3.6 mt of coal per year will be required to meet the proposed Chandgana 600 MW power plant fuel demand. Prophecy’s Chandgana coal resource is found in two properties-Chandgana Tal and Khavtgai Uul. The Company’s existing Chandgana licenses host a measured resource of 650 mt and an indicated resource of 540 mt of thermal coal**. The initial fuel supply for the power plant will be the coal from the adjacent Chandgana Tal deposit, which contains 124 mt of measured coal resource and is sufficient for approximately 30-40 years of power plant operation.

    **-Chandgana consists of two properties-Chandgana Tal and Khavtgai Uul (formerly Chandgana Khavtgai). Chandgana Tal holds 124.4 mt of measured resource. Khavtgai Uul holds of 509 mt of measured and 539 mt of indicated resource. Full citations are in the Benefits of Chandgana Mine Mouth Power Plant Project section.

    The raw water supply will be ground water obtained from dewatering the mine pit and wells. Current indications are that sufficient water is available from ground water at the site but a study will be conducted to prove this. Water from the Murun and Kherlen Rivers are considered back-up sources. A study was performed to assess these rivers as sources and found the deliverability and quality of the Kherlen River water acceptable.

    A water treatment plant will be constructed at the beginning of the construction period to supply potable water for the power plant construction site and for the coal mine. This will later become the long term potable water supply for the power plant and the mine. This supply, the use of a closed-circuit air-cooled cooling system, and various practices will help the power plant attain the goal of becoming a zero discharge facility.

    Transmission Lines

    The Chandgana Power Plant is proposed to be located between the CES connection at Baganuur and the EES connection at Undurkhaan, 50 km east of Chandgana. Construction of OHTLs and support facilities will bring electrical power to the CES connection and EES connection and so connect both systems.

    The CES is the largest power generation and transmission system in Mongolia. It has a basic transmission grid of 220 kV and 110 kV OHTLs. A 220 kV OHTL ring system connects the principal generation and load centers of Ulaanbaatar, Darkhan and Erdenet and there are additional 220 kV connections with load centers at Baganuur and Choir. The Baganuur sub-station is linked with Power Plant #4 in Ulaanbaatar by a 220 kV two circuit OHTL approximately 130 km long and with the Choir sub-station by a 220 kV one circuit OHTL 180 km long line. During peak load periods, electricity is imported from the Russian Federation in order to meet and regulate the electrical power demand of the system. The Chandgana Power Plant will be connected to the OHTL to be constructed between Baganuur and Undurkhan. This connection will enable Chandgana to supply electrical power to the CES and EES.

    The current OHTLs in the CES have the capacity to transmit the additional load from the proposed Chandgana Power plant. The line transmitter from the CES to the Baganuur sub-station is rated AC 300 with its heat maximum current of one circuit being 710 A or 255 MW and that for two circuits is 1420 A or 510 MW. The maximum capacity of one circuit is 130 MW and of two circuits is 260 MW.

    From Baganuur sub-station the power could be transmitted to Choir to supply industrial users in the South Gobi area such as Oyu Tolgoi (“OT”), Tavan Tolgoi (“TT”), and others. The line transmitter from the the Baganuur sub-station to the South Gobi area is rated AC 240 and the transmitter’s peak maximum current of one circuit is 605 A or 217 MW. The maximum capacity is 96 MW.

    Map 4: Electrical Power Distribution

    http://www.prophecydev.com/wp-content/uploads/2013/06/Transmission-line-Chandgana.jpg

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    Qualified Person and Update Date

    The technical content of this web site page and the related documents and other information listed herein were reviewed and approved by Christopher M. Kravits, CPG, LPG, who is a Qualified Person within the meaning of NI 43-101. Mr. Kravits is a consultant to the Company and serves as its Qualified Person and General Mining Manager.

    This web site page was last updated, reviewed and approved by Christopher M. Kravits April 20, 2016.

    Cautionary Note Regarding Forward-Looking Statements

    Certain statements contained on this page, including statements which may contain words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, or similar expressions, and statements related to matters which are not historical facts, are forward-looking information within the meaning of applicable securities laws. Such forward-looking statements, which reflect management’s expectations regarding Prophecy’s future growth, results of operations, performance, business prospects and opportunities, are based on certain factors and assumptions and involve known and unknown risks and uncertainties which may cause the actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. These estimates and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies, many of which, with respect to future events, are subject to change and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by Prophecy.

    In making forward-looking statements as may be included on this page, Prophecy has made several assumptions that it believes are appropriate, including, but not limited to assumptions that: there being no significant disruptions affecting operations, such as due to labour disruptions; currency exchange rates being approximately consistent with current levels; certain price assumptions for coal, prices for and availability of fuel, parts and equipment and other key supplies remain consistent with current levels; production forecasts meeting expectations; the accuracy of Prophecy’s current mineral resource estimates; labour and materials costs increasing on a basis consistent with Prophecy’s current expectations; and that any additional required financing will be available on reasonable terms. Prophecy cannot assure you that any of these assumptions will prove to be correct.

    Numerous factors could cause Prophecy’s actual results to differ materially from those expressed or implied in the forward looking statements, including the following risks and uncertainties, which are discussed in greater detail under the heading “Risk Factors” in Prophecy’s most recent Management Discussion and Analysis and Annual Information Form as filed on SEDAR and posted on Prophecy’s website: Prophecy’s history of net losses and lack of foreseeable cash flow; exploration, development and production risks, including risks related to the development of Prophecy’s Ulaan Ovoo coal property; Prophecy not having a history of profitable mineral production; the uncertainty of mineral resource and mineral reserve estimates; the capital and operating costs required to bring Prophecy’s projects into production and the resulting economic returns from its projects; foreign operations and political conditions, including the legal and political risks of operating in Mongolia, which is a developing jurisdiction; title to Prophecy’s mineral properties; environmental risks; the competitive nature of the mining business; lack of infrastructure; Prophecy’s reliance on key personnel; uninsured risks; commodity price fluctuations; reliance on contractors; Prophecy’s minority interest in Prophecy Platinum Ltd.; Prophecy’s need for substantial additional funding and the risk of not securing such funding on reasonable terms or at all; foreign exchange risks; anti-corruption legislation; recent global financial conditions; the payment of dividends; and conflicts of interest.

    These factors should be considered carefully, and readers should not place undue reliance on the Prophecy’s forward-looking statements. Prophecy believes that the expectations reflected in the forward-looking statements contained on this page and the documents incorporated by reference herein are reasonable, but no assurance can be given that these expectations will prove to be correct. In addition, although Prophecy has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. Prophecy undertakes no obligation to release publicly any future revisions to forward-looking statements to reflect events or circumstances after the date when information on this page is published or to reflect the occurrence of unanticipated events, except as expressly required by law.