The non-binding loan agreement with an unnamed international bank will provide funding for up to 85% of the plant’s construction contract.

The letter of intent from a shortlisted development contractor will represent a 20% equity investment in the project.

Both the loan and equity investment are contingent on authorization from the Mongolian government, credit approvals and due diligence preparation.

The 20% contractor investment will also require execution of a power purchase agreement and completion of the remaining 80% of the proposed plant’s financing.

The Vancouver-based miner said talks with the government regarding a power purchase deal were on track for approval before Chandgana’s planned construction kickoff in Q2 2013.

Chandgana is expected to generate 600 megawatts of electricity in the eastern province of Khentii using 3.5 million tonnes of coal per annum from the adjacent deposit.

Prophecy’s Chandgana mining subsidiary controls over 1.2 billion tonnes of thermal coal, measured and indicated, including two licenses containing 124Mt of measured resource.