This week the independent directors of Western Canadian Coal Corp. and the independent directors of Cambrian Mining plc reached an agreement in principle in respect of certain key terms for the possible acquisition by Western of the whole of the issued and to be issued ordinary share capital of Cambrian (the "Proposal"). Under the Proposal, the acquisition may be effected by means of a scheme of arrangement or takeover offer (either, an "Offer").
SUMMARY OF PROPOSAL
Under the Proposal holders of ordinary shares of 20 pence each in Cambrian ("Cambrian Shareholders" and "Cambrian Shares") will receive 0.75 common shares in Western ("Western Shares") for every 1 Cambrian Share held.
The Proposal values the entire issued ordinary share capital of Cambrian at approximately 28.8 million pnds stlg and each Cambrian Share at 24.375 pence based on the closing price of one Western Share of 32.5 pence on 23 December 2008, being the last dealing day prior to this announcement. This represents a premium of approximately 47.7 per cent to the closing price of a Cambrian Share of 16.5 pence on 15 December 2008, being the last dealing day prior to the commencement of the Cambrian offer period under the UK Takeover Code.
Cambrian currently holds 72.3 million Western Shares and CDN$34 million of convertible debt and loans in Western.
Mark Burridge, CEO of Cambrian commented: "This is an important step for Cambrian Shareholders in our transformation to become a fully-fledged operating entity. A business combination with Western offers the opportunity to combine two sets of quality assets and personnel, creating a company with the ability not just to survive the current economic climate but also to build shareholder value for the long term."
John Hogg, President and CEO of Western Canadian Coal Corp. commented:
"The merger of Western and Cambrian is a transaction that creates a financially strong company with a diversified base of coal assets. The inclusion of the West Virginia high quality hard coking and thermal coal sales into the US markets will help diversify Western's metallurgical coal international markets. Considering the combined management talents and financial strength that each company brings, we believe this will create a stronger platform to grow both organically and through further acquisitions. This will create an enlarged company that can better endure the current economic uncertainty and position itself for future growth and potential for the enlarged company to achieve more together than each company would on its own."
RATIONALE FOR THE PROPOSAL
The proposed business combination would result in a company with a diversified portfolio of assets, including:
- 100% ownership of three coal mines and two wash plants in North Eastern British Columbia (Canada) with reported production for the year ended 30 June 2008 of 2.8 million tonnes of metallurgical coal;
- 100% ownership of two coal mines and two wash plants in West Virginia (USA) with reported production for the year ended 30 June 2008 of 0.4 million short tons of metallurgical coal and 0.6 million short tons of thermal coal;
- The combined entity has future coal production potential of up to 10 million tonnes per annum from existing assets;
- 50.6% interest in Energybuild Group plc (AIM: EBG), an AIM traded company with reported production for the year ended 30 June 2008 of 0.1 million tonnes of thermal coal and sized coal in Wales (UK);
- 20% interest in NEMI Northern Energy & Mining Inc. (TSX: NNE.A);
- 100% ownership of a gold and antimony mine in Victoria (Australia) with reported production for the year ended 30 June 2008 of 7,550 ounces of gold and 920 tonnes of antimony; and
- 45% interest in Xtract Energy Plc, an AIM traded company which identifies and invests in a diversified portfolio of early stage energy sector technologies and businesses.
PRE-CONDITIONS OF THE PROPOSAL
The making of any offer under the Proposal is subject to, inter alia, the following pre-conditions:
(i) the satisfactory completion of confirmatory due diligence (including technical, legal, tax and financial) by the boards of both Cambrian and Western on each other's respective assets;
(ii) the refinancing of the existing indebtedness of the Cambrian group with Investec, to Western's satisfaction;
(iii) Western and/or Cambrian (as the case may be) obtaining any consents required under any existing contractual arrangements or otherwise (including shareholder, regulatory and bank consents), to Western's satisfaction;
(iv) irrevocable undertakings to support and/or to accept any such offer in a form satisfactory to Western being received in respect of not less than a percentage to be agreed between Western and Cambrian of the issued share capital of Cambrian;
(v) each Cambrian director providing an irrevocable undertaking in a form satisfactory to Western, in respect of his or her shareholdings, to support and to accept any such offer;
(vi) a unanimous recommendation from the Cambrian Board that Cambrian Shareholders accept any such offer; and
(vii) since 30 June 2008, and save as otherwise disclosed prior to the date of this letter, no event, change or condition having occurred or become known to Western where that would have or could be reasonably expected to have a material adverse effect on the business, assets, liabilities, trading or financial position, profitability or prospects of Cambrian.
The Board of Western reserves the right to:
(i) vary the form and/or mix of consideration in respect of any such offer that may be made;
(ii) waive any of the pre-conditions to the making of any such offer;
(iii) (with the consent of the Panel) apply additional pre-conditions to the making of any such offer; and
(iv) structure any transaction to implement any such offer by way of a scheme of arrangement or a takeover offer.
The pre-conditions must be satisfied or waived before an offer can be made.
This announcement does not amount to a firm intention to make an offer and, accordingly, there can be no certainty that any offer will be made even if the pre-conditions are satisfied or waived.