Vancouver, British Columbia, August 7, 2012: Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) is pleased to debut Prophecy Power Corp. ("Prophecy Power"), the Company's wholly-owned Mongolian subsidiary focused on the power sector in Mongolia. Prophecy Power, formerly known as East Energy Corp, was incorporated in 2010 with the specific business objective of supplying power to Mongolia through the construction of the Chandgana Thermal Power Plant. Prophecy Coal's Chandgana LLC in parallel will develop the Chandgana coal project to ensure fuel supply to Prophecy Power.

Location

Prophecy Power's proposed 600 MW (150 MW x 4) mine mouth power plant complex is to be built next to Prophecy Coal's Chandgana coal deposit located in Central Mongolia, next to a paved highway, just 60 km from Undurkhann (east electricity grid connection leading to Cholbbalsan, and 120 km from Baganuur (west electricity grid connection leading to Ulaan Baatar).

Power Plant Licenses

Prophecy Power obtained approval of its Environmental Impact Assessment (EIA) from the Ministry of Nature and Tourism in November of 2010. In November 2011, the Ministry of Natural Resources and Energy granted a construction license for the 600 MW power plant. This license was the first of its kind ever granted in Mongolian history.

Directors and Management

Prophecy Power's Board of Directors consists of Chris Kwan, John Lee, and Bailikhuu Dambachultem.

Mr. Kwan is a lawyer with extensive experience with Power Purchase Agreements. Mr. Bailikhuu Dambachultem is an established Mongolian person whose previous posts included State Secretary and Advisor to numerous government agencies that manage power plants and other significant facilities in Mongolia. John Lee is the Chairman and CEO of Prophecy Coal and an entrepreneur with a home base in Ulaanbaatar. Mr. VP Sharma is appointed as Prophecy Power's advisor. Recently retired from a Director of Operations and Construction position with China Light and Power (CLP), Mr. Sharma is a Chartered Engineer with over 40 years in the Energy Industry.

Power Purchase Agreement ("PPA")

Since Prophecy Power obtained the construction license in November 2011, the Company has been in ongoing discussions with the Mongolian government to finalize a PPA in order to secure Mongolia's long-term energy supply, and enable project financing and construction to move forward. The Ministry of Natural Resources and Energy appointed a working group of over a dozen experts on the legal, technical and commercial aspects of granting a PPA to Prophecy Power. In the last six months, Prophecy Power has held numerous sessions with working group members to establish Prophecy's Chandgana project status as the first independent power plant in Mongolia. Technical discussions included understanding and overcoming concerns over grid connection and plant implementation. Commercial discussions revolved around establishing tariff structure (cost plus principle, and take-or-pay) as well as the setting of prices (with proper indexation of fuel, operation & maintenance, and equity) that are both affordable and lower than current Russian power imports, yet generate a fair equity return to Prophecy Power's investors and shareholders. Equity risk assessment included Mongolian sovereign ratings and early stage development in the independent power sector. Prophecy expects to make a formal tariff submission in August and expects a reply in 2012. In parallel, Prophecy Power has been in discussions with several private Mongolia companies regarding bi-lateral power purchase agreements. The current proposed mining projects (copper, molybdenum, and iron ore) and industrial development complex (cement and smelter) in Mongolia will, collectively, require up to 200 MW of power by 2016. This excludes the massive Oyu Tolgoi project. The remaining power supply from Prophecy Power's Chandgana Power Plant is expected to help meet the increasing energy demand created by ongoing expansion of Eastern and Northern Mongolia, and the capital city of Ulaanbaatar, as well as to replace Russian power imports.

Coal Supply Agreement

A coal supply agreement is in place whereby Chandgana LLC, another Prophecy wholly-owned Mongolian subsidiary, will supply 3 million tonnes of coal per year to Prophecy Power for 25 years. The initial coal price will be set with annual price adjustment based on diesel price, Mongolia's CPI and US' CPI. Chandgana LLC controls over 1.4 billion tonnes of thermal coal in measured and indicated categories, including a starter pit with 140 million tonnes of measured resource and a strip ratio of 0.5 to 1 which is ready to be mined. Upon the acquisition of the Tethys claims (refer to press release dated June 18, 2012) with a historic (non 43-101 compliant) resource estimate* of 2.3 billion tonnes, Chandgana LLC will control one of largest thermal coal basins in the world, with an ample supply of coal for a power plant of 4,200 MW or bigger.

Engineering, Procurement and Construction ("EPC") of Thermal Power Plant

In December 2011, Prophecy Power prepared a data room and distributed a request for proposal (RFP) to six carefully-selected EPC contractors. Site visits and technical sessions were conducted in Mongolia between January and May 2012. Prophecy received proposals from all six EPC contractors and in July, after extensive review and face-to-face meetings, Prophecy shortlisted three EPC contractors based on construction capability, equipment quality, time to deployment and price. Prophecy Power is currently in close discussions with the remaining candidates with respect to detailed design specifications, labor and parts requirements, Mongolian customs and import, and project timeline in order to formulate final quotes. Prophecy Power expects to finalize the EPC selection by October 1, 2012.

Project Financing and Financial Advisors

Prophecy Power is in active Project Financing discussions with a number of interested parties.

Financing structure is expected to be 30% equity and 70% debt. The 600 MW project will be implemented in two phases, with Phase 1 construction of 150 MW x 2 and the transmission lines planned to start in Q2, 2013 and be complete by early 2016. Phase 2 construction of 150 MW x 2 is planned to commence in 2014 and be completed in 2017.

Debt Financing

Prophecy Power has held preliminary discussions with China Export-Import Bank and Sinosure. There is a likelihood of Chinese financing predicated on a Chinese EPC and Chinese equity. Separately, Prophecy has approached EBRD and a number of major commercial banks active in Mongolia that have expressed interest in the Chandgana project. The risk-sharing provisions and investment returns detailed in the PPA will be an important factor in determining the financing arrangement.

Equity and Developer JV Financing

Prophecy has been introduced to a number of international power project developers ("Developers") since late 2011. Over ten Developers have executed Confidentiality Agreements and reviewed Prophecy Power's data room in looking to establish equity stakes in Prophecy Power and jointly construct, manage and operate the Chandgana Power Plant. Several Developers are at term sheet stage with Prophecy Power that will structure the sharing of Prophecy Power's expenses through various milestones such as PPA, financing close, and construction. The Developers have demonstrated genuine interests in partnering with Prophecy after learning more about Mongolia's acute power shortage after years of rapid growth, the Government's efforts toward liberalizing the energy sector, and the secured fuel supply from the Chandgana coal project. Prophecy's goal is to secure Developer sponsorship in 2012. Prophecy Power is also in discussions with EPC contractors to obtain funds through an equity stake and/or advanced credit line to ensure construction starts in 2013 as planned.

Financial Advisors

Prophecy has met with several first-tier investment banks with interests in mining and utilities operations. While the Chandgana project is currently considered "greenfield", it has advanced to a mature stage for financial advisory engagement in 2012.

Prophecy's Chairman and CEO John Lee states: "The Company is entering into an exciting phase with several important near-term catalysts. Our international team, consisting of members of eight different nationalities, has been working tirelessly to conclude/finalize EPC selection, PPA, Developer JV, and Financing. Just last week, India suffered the most extensive power blackout in history, during which 600 million people faced rail shutdown, traffic gridlock and dangerous daytime heat without air conditioning. In Mongolia, the citizens would face a serious threat without power in -40 degree winter conditions. We have been mandated by the Mongolian Energy Authority to supply power by 2016 and we intend to fulfil this important mission. "

Prophecy Power's Chandgana power project is the most mature thermal power project in Mongolia. Ground leveling work is to start in September in preparation for the pouring of foundation to commence in the spring of 2013.

* According to records reviewed by Prophecy, Tethys applied on March 15, 2011 to register a resource estimate of 2.33 billion tonnes of thermal coal for the Tugalgatai licenses with the Minerals Resource Council of Mongolia. The resources registered by Tethys are not NI 43-101 compliant.

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 developing 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.  

Mineral resources that are not mineral reserves do not have demonstrated economic viability.

ON BEHALF OF THE BOARD OF DIRECTORS Prophecy Coal Corp. "JOHN LEE"
John Lee
CEO/Chairman 

Chris Ackerman
Manager, Investor Relations
1-800-459-5583
cackerman@prophecycoal.com

*Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Mineral resources that are not mineral reserves do not have demonstrated economic viability. Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this release.  

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 potential mineralization, the estimation of mineral resources, the realization of mineral resource estimates, interpretation of prior exploration and potential exploration results, the timing and success of exploration activities generally, the timing and results of future resource estimates, permitting time lines, metal prices and currency exchange rates, availability of capital, government regulation of exploration operations, environmental risks, reclamation, title, and future plans and objectives of the company 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 failure to obtain necessary approvals in respect of the Transaction, unsuccessful exploration results, changes in project parameters as plans continue to be refined, results of future resource estimates, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, risks associated with operating in foreign jurisdictions, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays in receiving government approvals, unanticipated environmental impacts on operations and costs to remedy same, and other exploration or other risks detailed herein and from time to time in the filings made by the companies with securities regulators. Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral exploration and development of mines is an inherently risky business. 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 their businesses, investors should review their annual filings that are available at www.sedar.com.

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

This press release does not constitute an offer to sell or a solicitation to buy any of the securities in the United States.  The securities have not been and will not be registered under the United States Securities Act of 1933, as amended ("the U.S. Securities Act") or any state securities law and may not be offered or sold in the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.