Prophecy Provides Update on Tugalgatai Transaction

Vancouver, British Columbia, March 1, 2013: Prophecy Coal Corp. (“Prophecy” or the “Company”) (TSX: PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces further to the news release dated November 15th, 2012, the Company continues the discussion with Tethys and its representatives regarding the purchase of Tulgalgatai coal licenses (the “Licenses”).

Pursuant to the credit agreement (the “Credit Agreement”) between Prophecy and the Company’s creditor, Waterton Global Value, L.P. (“Waterton”), the expiry of the original purchase and sales agreement with Tethys constituted a default under the Credit Agreement. Waterton has agreed to waive the default, subject to (a) Prophecy setting aside $3.5 million in escrow for purchase of the Licences and repayment of the loan; (b) Prophecy agreeing to issue 2 million common shares to Waterton, subject to TSX exchange approval; and (c) Prophecy agreeing to pledge additional security to Waterton.

About Prophecy Coal

Prophecy Coal Corp. is a Canadian TSX listed company engaged in developing energy projects in Mongolia. The Company’s wholly-owned subsidiary Prophecy Power Generation LLC is advancing plans for a proposed 600 MW coal mine-mouth power plant, which has been permitted by the Mongolian government, adjacent to its Chandgana coal deposit. Chandgana Coal LLC, a Prophecy Coal Corp. wholly-owned private Mongolian subsidiary, is expected to supply 3.5 million tonnes of coal per year to Prophecy Power Generation LLC for 25 years. Chandgana Coal LLC controls over 1.2 billion tonnes of thermal coal in the measured and indicated categories, including two mining licenses containing 124 million tonnes of measured resource with a strip ratio of 0.7 to 1. A mineral reserve, which is the economically mineable part of a measured or indicated mineral resource demonstrated by at least a prefeasibility study, has not been estimated for the project. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Further detailed information on the Company can be found at www.prophecycoal.com.

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 National Instrument 43-101 Standards of Disclosure for Mineral Projects. Mr. Kravits has 34 years of USA and international relevant coal geology experience. He has been active in Mongolia since 2007.

ON BEHALF OF THE BOARD OF PROPHECY COAL CORP.

“JOHN LEE”
John Lee
Executive Chairman

For more information about Prophecy, please contact:

Bekzod Kasimov
Business Development Manager
1-888-513-6286
bekzod@prophecycoal.com

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.