Western Canadian Coal and Cambrian discuss merger

Western Canadian Coal (WTN-T, WTN-L) and Cambrian Mining (CBM-L) have reached an agreement in principal that would see the two coal producers merge.

Under the deal, Western would pay about $51.4 million (28.8 million British pounds) for all of Cambrian’s shares – a 47.7% premium above Cambrian’s closing share price on Dec. 15.

Cambrian already holds a 43% interest in Western.

From Western’s end, the combined company would have three coal mines and two wash plants in North Eastern British Columbia – the Willow Creek coal mine, which was temporarily suspended at the end of November due to uncertainty in the demand for metallurgical coal, the Wolverine mine and the Brule mine, both of which are still in operation.

These operations produced 2.8 million tonnes of metallurgical coal over the year ending June 30, 2008 and have about 15 years worth of reserves.

Western also has a 50% joint venture interest in the Belcourt-Saxon properties. A feasibility study is expected to be completed shortly and the company says the project has the potential to produce 5 million tonnes of coal per year.

Western would add Cambrian’s two coal mines and wash plants in West Virginia which produced 400,000 tons (362,874 tonnes) of metallurgical coal and 600,000 tons (544,310 tonnes) of thermal coal over the same yearly period.

Cambrian also brings its 50.6% interest in Energybuild Group (EBG-L), which produced about 100,000 tons of thermal coal and sized coal in Wales over the year ended June 30, 2008, a 20% interest in NEMI Northern Energy and Mining Inc. (NNE.A-T), a gold and antimony mine in Victoria state, Australia, that produced 7,550 oz. gold and 920 tonnes of antimony and a 45% interest in Xtract Energy (XTR-L), which identifies and invests in a diversified portfolio of early stage energy sector technologies and businesses.

The deal is subject to a long list of preconditions including due diligence by both boards, the refinancing of the existing indebtedness of the Cambrian Group with Investec to Western’s satisfaction and