Prophecy Provides Update on Closing of $1.14 million Final Tranche of Private Placement

Vancouver, British Columbia, May 31, 2013: Prophecy Coal Corp. (“Prophecy” or the “Company”) (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) provides the following update on the private placement which was the subject of its February 7 and April 16, 2013 news releases (the “Placement”).

Prophecy expects shortly to close a second and final tranche of the Placement, which will involve the issuance of 8,142,857 units (each a “Unit”) of the Company for aggregate consideration of $1,140,000. Each Unit consists of one common share (a “Share”) and 0.75 common share purchase warrant (a “Warrant”), at a purchase price of $0.14 per Unit. Each whole Warrant is exercisable for one common share of Prophecy at a price of $0.18, expiring two years from the date of issue. It is anticipated that the final tranche closing will happen during the week of June 2-June 8, 2013.

The Company amended the Placement to include an additional warrant (“Adjustment Warrant”) in each Unit sold in the final tranche. Each Adjustment Warrant may be exercised for no additional consideration for a period of 12 months following the closing of the final tranche of the private placement, for a fraction of a common share of Prophecy. The fraction will be calculated by first dividing the Unit subscription price of $0.14 by the market price (subject to a floor market price of $0.105) at the time of exercise, then subtracting one (1) from that resulting number to determine the fraction. Market price is defined as the 20 day moving average price for the Company’s common shares. The Adjustment Warrants must be exercised in their entirety and may not be exercised in part, and the holder of Adjustment Warrants may not sell any securities of the Company within 20 days prior to exercise. Adjustment Warrants may also only be exercised to the extent that the holder continues to hold the shares and warrants comprising the Units of which the Adjustment Warrants formed part.

On April 16, 2013, the Company announced that it had completed the closing of a first tranche of the Placement, raising $613,560 through the issuance of 4,382,571 Units. The Company has applied to the TSX for approval to issue Adjustment Warrants to subscribers who purchased units in the first tranche closing of the Placement. If approved by the TSX, the issuance of these Adjustment Warrants will be subject to disinterested shareholder approval, which will be sought at the Company’s next shareholders’ meeting.

Upon closing of the final tranche, in total the Company will have raised $1,753,560 through the issuance of 12,525,428 Units in the Placement (exclusive of the Adjustment Warrants). The Placement was reduced from the originally announced 60 million Units due to the prolonged Chinese regulatory approval process required by NewMargin Prophecy Coal Limited, which is at arm’s length to the Company, to invest in Canada, and adverse market conditions, resulting in an amendment to NewMargin Prophecy Coal Limited’s original subscription of 40 million Units. Insiders purchased 1 million Units of the placement.

Finder’s fees of 6% were paid in connection with a portion of the first tranche of the Placement. All securities issued in connection to the Placement are subject to a 4 months and one day hold period from the date of security issuance.

About Prophecy Coal

Prophecy Coal Corp. is a Canadian company listed on the Toronto stock exchange engaged in developing energy projects in Mongolia. Prophecy’s wholly-owned subsidiary Prophecy Power Generation LLC is advancing plans for a proposed 600 MW coal-fired mine-mouth power plant, which has been licensed by the Mongolian government, adjacent to its Chandgana coal deposit. Chandgana Coal LLC, another Prophecy wholly-owned Mongolian subsidiary, has contracted to supply 3.6 million tonnes of coal per year to Prophecy Power for 25 years. Chandgana Coal LLC controls a significant coal resource. This includes the two Chandgana tal mining licenses containing 124 million tonnes of measured resource with an average strip ratio of 0.7 to 1 and the Khavtgai uul license containing 509 million tonnes measured and 539 million tonnes indicated resource with a strip ratio of 2.2 to 1. Substantially all of Prophecy’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

PROPHECY COAL CORP
ON BEHALF OF THE BOARD

“JOHN LEE”

Executive Chairman

For more information about Prophecy, please contact

Bekzod Kasimov
Manager, Business Development
+976 – 99012672
+1-888-513-6286
bekzod@prophecycoal.com
www.prophecycoal.com

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

Mr. Christopher Kravits, LPG, CPG, is a qualified person as defined under National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”). Mr. Kravits is not considered independent of Prophecy Coal given the large extent that his professional time is dedicated solely to, and his position as Manager of Mining with, Prophecy Coal Corp. Mr. Kravits has reviewed and approved the technical and scientific disclosure within this news release.

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.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this news release, 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 in this news release, Prophecy has made several assumptions that it believes are appropriate, including, but not limited to assumptions that: all required third party contractual, regulatory and governmental approvals will be obtained for the development, construction and production of Prophecy’s properties and the Chandgana Power Plant; 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.

In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion or incorporation by reference of forward-looking statements in this news release should not be considered as a representation by Prophecy or any other person that Prophecy’s objectives or plans will be achieved. Forward-looking statements in this news release include, without limitation, statements regarding the permitting, feasibility, plans for development and production of Prophecy’s Chandgana Power Plant, including finalizing of any power purchase agreement; the likelihood of securing project financing; estimated future coal production at the Ulaan Ovoo coal mineral property and the Chandgana coal mineral properties; and other information concerning possible or assumed future results of operations of Prophecy.

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; the availability and timeliness of various government approvals and licences; the feasibility, funding and development of the Chandgana Power Plant; 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 in this news release 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 of this news release or to reflect the occurrence of unanticipated events, except as expressly required by law.