Under the deal, Chandgana Coal will supply 3.6 million tonnes of coal per annum to the 600 megawatt mine-mouth Chandgana power facility project at a price of $17.70/t for 25 years.
Prophecy said the CSA coal price was competitive with Mongolian domestic thermal coal prices and subject to annual indexing.
PPG will buy a minimum of 2Mt on a “take or pay” basis.
The coal delivery date is anticipated to be in the second half of 2016, subject to the signing of a power purchase agreement and needed approvals.
Should Prophecy be successful in obtaining financing for the power plant project, it will retain various ownerships of both PPG and Chandgana Coal.
“The signing of the CSA marks the accomplishment of another key project milestone,” the miner said.
“The CSA has been approved by Prophecy's independent directors, who after studying various coal supply options to the proposed Chandgana power plant project concluded that the coal supply from Chandgana Coal, with existing licenses to mine the coal from Chandgana Tal project adjacent to the proposed Power Plant site, represents a practical and cost effective solution to meet commissioning of [our] power plant targeted for 2016.”
The mining licenses for Chandgana Tal encompass an estimated 124Mt of coal resources, all in the measured category with an average in-place gross calorific value of 3306 kcal/kg.
The mine, which is projected to be surface open pit, will be about 2km from the proposed power plant site.
Prophecy said the average waste-to-ore strip ratio over the life of the mine was estimated at 0.70:1.