Eurasia Capital is raising the target price of Prophecy Resource Corp. from C$0.70 a share to C$1.25 a share.

We raise the target price of PCY from C$0.70/share to C$1.25/share based on the revaluation of Ulaan Ovoo, Chandgana and the Wellgreen properties. We update the valuation of Ulaan Ovoo on the news that receipt of the mine permit is imminent and the company can begin coal production. Using DCF method, we obtain US$92.1 mn. for Ulaan Ovoo. 

PCY is making significant progress on development of Chandgana and is partnering with international and local business groups. PCY’s strategic partners will assist the company with obtaining necessary permits and licenses and finance the construction of the power plant. The company expects to sign strategic partnership agreements by the end of this year. We project a long term coal production of 4.8mn tonnes at Chandgana which will be supplied to local power plants. Our DCF valuation of Chandgana yields us a valuation of US$89.3 mn.

We update the valuation of the Wellgreen property based on positive drill results. According to the management, the potential ore at the Wellgreen property is in the range of 77 – 254 mn tonnes at 0.26 to 0.38 % nickel, 0.26 to 0.36% copper, 0.55 to 0.85 g/t platinum and palladium. Based on comparable valuation, we conservatively apply a US$1/t to the Wellgreen’s historical resources of 55mn tonnes  and reach a valuation of US$55mn.

We estimate PCY’s NAV at US$261.6 mn or US$1.24/share and set the 12-months target price at C$1.25/share. This represents an upside of over 60% to current PCY’s share price of C$0.78 (01.11.2010). We therefore maintain our BUY recommendation. We use fully diluted shares outstanding of 209.5 mn which includes possible future capital raisings to develop Ulaan Ovoo mine.

About Prophecy Resource Corp.
Prophecy Resource Corp. is an exploration and production company listed on the Toronto Venture Exchange with market capitalization of C$82mn. Prophecy Resource Corp. is focused on developing coal assets in Mongolia, and PGM, nickel, copper and vanadium mines in Canada. www.prophecyresource.com

About Eurasia Capital
Eurasia Capital is a Hong Kong-based pan-regional investment bank with focus on Mongolia, China, Russia and Central Asia.  The Firm offers cross border M&A and advisory, capital raising, sales & trading and research services to its international and regional clients including government agencies, major energy and resource companies, sovereign wealth funds, private equity groups and global portfolio investors. www.eurasiac.com

To access Eurasia Capital’s report on Prophecy Resource Corp. published on 02.11.2010 please click the below link.