Prophecy Coal Announces Extension and Re-Pricing of Warrants

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 10/16/12 -- Prophecy Coal Corp. (TSX: PCY)(OTCQX: PRPCF)(FRANKFURT: 1P2) ("Prophecy" or the "Company") announces that it intends to extend the expiry date of the 2012 Warrants (as defined below) by three years, from October 28, 2012 at 4:00 p.m. (Vancouver time) (the "Current Expiry Date") to October 28, 2015 at 4:00 p.m. (Vancouver time) and re-price the exercise price of the 2012 Warrants from $0.66 to $0.18, subject to the approval of the Toronto Stock Exchange. No other provisions of the 2012 Warrants will be amended, and none of the 2012 Warrants are held directly or indirectly by insiders of the Company.

The 2012 Warrants were issued as part of a private placement completed by the Company on October 28, 2010, pursuant to which the Company issued 3,831,511 units at a subscription price of $0.53 per unit. Each unit consisted of one flow through common share and one common share purchase warrant (each a "2012 Warrant"), with each 2012 Warrant common entitling the holder to purchase, subject to adjustment, one common share at a price of $0.66 until the Current Expiry Date.

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 Generation LLC is advancing plans for a proposed 600 MW mine-mouth power plant, which has been permitted by the Mongolian government, adjacent to its Chandgana coal deposit. Substantially all of the Company's resources are not mineral reserves, hence they do not have demonstrated economic viability. The Company cautions the Chandgana project is in Mongolia and requires substantial capital to develop.

Further information on Prophecy Coal can be found at www.prophecycoal.com.

ON BEHALF OF THE BOARD OF PROPHECY COAL CORP.

John Lee, CEO/Chairman

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 of 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.

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.

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.

Contacts:

Prophecy Coal Corp.

Chris Ackerman

Manager, Investor Relations

1-800-459-5583
cackerman@prophecycoal.com
www.prophecycoal.com