Canadian thermal coal mining company Prophecy Coal has announced that its wholly-owned Mongolian subsidiaries Prophecy Power Generation (PPG) and Chandgana Coal have entered into a Coal Supply Agreement (CSA).

Under the new deal, Chandgana Coal will supply 3.6 million tons of coal per annum, at a price of $17.70 per ton for a period of 25 years.

PPG is developing a 600MW mine mouth Chandgana power plant project. As per the agreement, PPG will purchase a minimum of 2 million tons on a ‘take or pay’ basis, by paying the customary breakup fees.

The coal delivery, under the CSA, is expected to begin in the second half of 2016, subject to PPG signing a Power Purchase Agreement, and obtaining all the required governmental approvals and project financing.

According to independent directors at Prophecy, the coal supply from Chandgana Coal, which has licenses to mine Chandgana Tal coal project next to the proposed power plant site, represents a practical and cost-effective solution for commissioning a power plant by 2016.

The Chandgana Tal mining licenses comprise an estimated 124 million tonnes of coal resources, all in the measured category.