Prophecy Development Corp. said Oct. 16 that it executed a lease agreement with a private Mongolian company over the Ulaan Ovoo coal mine in Mongolia, which was put on standby in 2014.

The private company will undertake mining operations at Ulaan Ovoo and will pay Prophecy Development a production royalty of US$2/tonne of coal shipped from the site.

Prophecy Development received US$100,000 in cash as a nonrefundable advance royalty payment covering the first year of the three-year lease agreement, with another US$150,000 and US$200,000 due on the first and second anniversaries of the lease, respectively.

The advanced royalty payments can be credited towards the production royalty payments as the lessee starts selling coal from Ulaan Ovoo.

The Mongolian company is preparing to restart and operate Ulaan Ovoo using its own equipment, supplies, housing and crew and will also pay all related government taxes and royalties.

Prophecy Development's vice president of business development, Bekzod Kasimov, said the Ulaan Ovoo production royalty is expected to provide the company with "a passive income stream" as it continues to advance the Gibellini vanadium project in Nevada.