Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
TSX-V junior Prophecy Coal was trading up 6% by early afternoon on Thursday after jumping 11% earlier in the day on news that the Mongolian government has given the go-ahead for a power plant at the mouth of its Chandgana mine.
Prophecy – which also controls a Yukon platinum explorer – has more than 1.4 billion tonnes of surface minable thermal coal resources at Chandgana and its producing mine Ulaan Ovoo for which it recently signed offtake agreements in Russia. There is renewed interest in Mongolian coal assets and earlier this week an Australia-based firm exploring in the fast-growing country was sold for a 800% profit a mere 18 months after its IPO.
Shares in Prophecy Coal Corp (TSX-V: PCY) rose a brisk 6% to 70c by early afternoon Thursday morning with 670,000 shares changing hands on the Toronto venture exchange where the company is worth near $140 million.
MINING.com reported on Tuesday Thailand’s Banpu is taking over the ASX-listed junior Hunnu for $400 million or $1.80/share – Hunnu went public in February 2010 at 20c.
Hunnu could turn out to be the first of many firms with Mongolian coal assets to attract bidders with Ivanhoe Mines’ SouthGobi and Prophecy Coal talked about as likely targets and a way in for smaller investors who are not be able to participate in Tavan Tolgoi’s $3 billion IPO slated for next year.
As a bonus for investors Prophecy Coal holds a 45% interest in Prophecy Platinum (TSX-V: NKL) which was spun off earlier in the year and is advancing a project in Yukon, Canada.
Press Release: Mongolian Government Endorses Chandgana Power Plant Project
VANCOUVER, BRITISH COLUMBIA, September 15, 2011 – Prophecy Coal Corp. (“Prophecy”) (TSX-V: PCY)(OTC-QX: PRPCF)(Frankfurt: 1P2) (the “Company”) announces today that its Chandgana Power Plant Project (“Project”) has been officially endorsed by the Mongolian Ministry of Natural Resources and Energy. The Mongolian Energy Regulatory Authority (“ERA”), in charge of power plant license issuance, has received the endorsement and is expected to issue a final response to Prophecy’s license application in Q4, 2011.
The request for licensing of “Construction of Energy Buildings and Installations”, submitted by East Energy Development LLC, a wholly-owned Mongolian subsidiary of Prophecy, in April, 2011, was determined to be in full conformity with Clause 2 of Article 12, Energy Law. The company has undergone a rigorous power plant permitting process, which included Environmental Impact Assessment approval by The Mongolian Ministry of Nature and Environment, and support from the Mongolian Scientific and Technical Council. The power plant will be built right next to Prophecy’s permitted Chandgana Tal Coal Project.
Results from the Power Plant Feasibility Study by Evonik Industries and the Chandgana Tal Mine Study by Leighton Asia are expected in Q4 2011. In parallel, Prophecy has been in discussion with a number of potential Engineering, Procurement and Construction (EPC) contractors with the goal of finalizing EPC selection expeditiously after the power plant license is obtained.
Prophecy’s cash position and equity holdings total over US $90 million as of September 1, and the company expects to fully fund the Chandgana project studies through to project financing.
Prophecy appreciates the support from the Mongolian Ministry and the community at large. The company looks forward to making the Chandgana Power Plant a reality and helping satisfy Mongolia and the region’s energy needs.
About Evonik
As the fifth largest producer of power in Germany, Evonik Steag operates nine coal-fired power plants. Outside Germany Evonik is contributing to the public power supply in the Philippines, Colombia and Turkey with three coal-fired power plants. The range of services of Evonik Steag covers the entire value chain of energy production from fuel to residue. Its core competencies include the planning, financing, construction and operation of highly efficient power plants for fossil fuels. For more information, visit www.evonik-steag.com.
About Prophecy Coal
Prophecy Coal Corp. is a Canadian listed company engaged in developing energy projects in Mongolia. The company has over 1.4 billion tonnes of surface minable thermal coal resources on two coal properties in Mongolia. Prophecy Coal’s Ulaan Ovoo coal mine is in production and Chandgana mine mouth power plant is currently being permitted. Prophecy Coal is the controlling shareholder of Prophecy Platinum Corp (TSX-V: NKL). Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Flyover image of Chandgana Khavtgai courtesy of the company.
