http://www.prophecyresources.com/pdf/chen_2011_03_11.pdf

Letter # 508

March 11, 2011

Update:

This morning Japan is struck by a 8.9 scale earthquake. And Saudi "Day of rage" turned out to be nothing. Oil dropped below 100 now, which is very good for the market. As I mentioned many times, I'd like to see oil around 80-90, even I am holding a lot of oil stocks. It is good for the market in the long run. The market is trying to rebound. Today's market breath is much better. GDX turned green, which is a very good sign for gold and silver. I hope we will have a decent close today. Remember small cap always follows the main market and lags the main market. I usually not worry about catching the exact bottom. The key indicator to watch is oil and Mideast. I had an interesting discussion with CEO John Lee from Prophecy Resource Corp. (PCY.v)this morning. They already started to ship coal to Russia/Mongolia border. They expect to make the first sale later this month and currently negotiating with a few buyers. Right now the China/Mongolia border coal spot price rose from 35 to 55/ton. They expect the coal spot price to rise at the Russia/Mongolia border as well. Their cost is about 20/ton with about 2.5/ton royalty to the government. They are selling to the highest bidder. In the mean time they are working on selling the coal directly to the Russia seaport which will carry international price of 110. But they need to secure port right etc, which could take months.

Their new spin off Pacific Coast Nickel Corporation (NKL.v) is expected to have a major resource update in early May and they will start drilling in April. They are also expecting a license from the Mongolia government for their second coal mine/power station soon. That's a giant mine and a potential world class asset.

Over all are quite positive. I feel this company has a lot of value inside may take time to gradually come out. I added a few shares this morning.

Regards,

Chen