Western Canadian Coal completes first $30 million of financing and enters into an agreement to acquire Falls Mountain Coal


    VANCOUVER, Dec. 3 /CNW/ - Western Canadian Coal Corp (TSX: WTN and WTN.DB
and AIM: WTN) ("Western" or "Company") is pleased to announce, further to its
news release on November 22, 2007, that the Company has completed C$30 million
private placement of convertible debentures ("Debentures") with Audley
European Opportunities Fund ("Audley"). The Company is in the process of
closing on the private placement of up to an additional C$10 million. An
announcement will be made upon completion. The Company is also pleased to
announce a conditional agreement to acquire Falls Mountain Coal Inc. ("FMC")
from Cambrian Mining PLC ("Cambrian"), and Cambrian's agreement to waive its
right to repayment of a C$5 million convertible loan facility out of the
proceeds of the Debentures (together, the "Proposals").

    Western closes the Debentures:

    The Debentures were issued by way of private placement, are unsecured,
will bear interest at 8.5% per annum, payable semi-annually from May 31, 2008,
and will mature November 30, 2010. The Debentures are convertible into common
shares of the Company ("Common Shares") at any time prior to their maturity at
a conversion price of C$0.75 per share. The Debentures are not redeemable by
Western prior to maturity. The Debentures have been approved by the Toronto
Stock Exchange ("TSX"). At the closing of the C$30 million placement, the
Company has issued warrants to Audley Capital Management Limited ("Audley
Capital") to purchase up to 4.24 million Common Shares at a price of C$0.75
per share. These warrants can be exercised at any time prior to November 30,
    Under the terms of the investment by Audley, Mr. Julian Treger, Managing
Partner, will be joining the Board of Directors of the Company.
    The proceeds of the issue will be used for working capital requirements
at the Company's Wolverine coal mine, general corporate purposes and to reduce
the current level of the principal and interest due under its existing bank
debt. The Company's bank debt will be reduced from C$35 million to C$27.5
million. The Company has also renegotiated covenants in its lending agreements
to ensure compliance with these covenants going forward.
    The Company is confident that following receipt of the proceeds of the
private placement, the Company will satisfy the ongoing listing requirements
of the TSX.
    With the additional financing, the Company believes over subsequent
reporting periods, that it will be able to adjust, as permitted by Canadian
generally accepted accounting principles ("GAAP"), the previous write down of
the future tax asset and classification of the debt from long-term to
short-term liabilities.

    Western conditionally agrees to acquire Falls Mountain Coal Inc.
    from Cambrian:

    As announced on April 27, 2007, Cambrian and Western entered into an
agreement ("Master Agreement") setting out the relationship between the two
companies with respect to the acquisition of FMC and to the operation,
management and maintenance by Western of the Willow Creek mine. The companies
now have conditionally agreed to the transfer of Falls Mountain Coal Inc. from
Cambrian to Western. FMC owns the Willow Creek coal wash plant, rail load out
facility and coal properties in northeast British Columbia, Canada.

    Western's Brazion Group of assets, which includes the Brule Mine, is
located close to FMC's Willow Creek assets. Significant operational and
product mix synergies exist between the operations:

    -  FMC's Willow Creek coal wash plant would be used to process
       the Brule Mine's ultra-low volatile (ULV) PCI coal,
       eliminating the need for Western to construct a wash plant and
       rail load out facility;
    -  Brule and Willow Creek will exhibit saleable coal reserves of
       approximately 35 million tonnes;
    -  Potential for 2.2 million tonnes per year of coking coal and
       PCI at Brule and Willow Creek; and
    -  Owning FMC, including its wash plant, is expected to unlock
       approximately 21 million tonnes of reserves at Brule that may
       not otherwise be developed.

    Key features of the Willow Creek coal properties include:

    -  The potential to be a low cost coal operation with estimated
       cash costs to be in the low $60s per tonne;
    -  Approximately 8 million tonnes of reserves of high quality
       hard coking coal, with superior coal qualities that earn a
       premium price in the market place; and
    -  Approximately 7 million tonnes of ULV-PCI coal. Combined with
       Brule, this will make Western one of the world's top exporters
       of this type of high value coal.

    Work currently underway at Willow Creek includes application of the
necessary permits to restart the operation, engineering of a connector road
between the Brule Mine and Willow Creek and a drilling program. Drilling
program results to date have broadly confirmed the geology that was expected
at the Willow Creek deposit. Willow Creek could start operations as soon as
nine months from now.
    Mr. John W. Hogg, President and Chief Executive Officer of Western
Canadian Coal Corp. states, "This is an important day for the Company. The
pieces are coming together to build a long-term sustainable business: we
recently signed a long-term coal contract for a three year supply of hard
coking coal at the rate of 350,000 tonnes per year and have signed several
memorandum of understandings and letters of intent for the supply of hard
coking and PCI coal for three to five year terms with major steel mills in
Asia and Europe, we've started to see the productivity improvements expected
at our Wolverine mine, we now have the financing in place to bridge us to the
higher coal prices next year, we're receiving the benefits of the recent
weakening of the Canadian dollar, and with the addition of Falls Mountain Coal
we have a tremendous asset base of high quality metallurgical coal upon which
to grow."
    Mr. Hogg adds, "The closing of the private placement relieves the
pressures we were facing with our financial obligations. The agreement with
Cambrian for Falls Mountain Coal, with cash savings of approximately $45
million from reduced capital spending and revenue enhancements and the access
to high quality coal reserves, makes a lot of sense for the Company. All the
recent initiatives undertaken by the Company, will position us to take even
better advantage of higher expected metallurgical coal prices going forward."
    Mark Burridge, CEO of Cambrian, commented: "Cambrian is pleased to have
worked with Western to ensure that its debenture offering is successful and to
achieve clarity over the future of FMC. The investment made by Audley and
other investors will help Western meet it financial obligations and look to
the future with its focus on production and profitability. In addition, the
transfer of Falls Mountain Coal will allow Western to take advantage of the
synergies that exist between the Willow Creek facilities and the Brule Mine,
while being in a well funded position. Cambrian looks forward to working more
closely with Western going forward."

    Western will purchase from Cambrian FMC for consideration of
C$28,111,347, which will be satisfied by:

    -  the issue of 18,740,898 new common shares in the Company
       ("Common Shares") with a value of C$14,055,674 at C$0.75 per
       Common Share (being the conversion price of the Company's
       recently issued convertible debentures) to Cambrian upon
       completion of the transfer of FMC; and

    -  the deferred payment of C$14,055,673 on or before September
       30, 2008. This payment shall be made by Western in cash unless
       the Company is unable to meet this obligation, in which event
       the payment will be settled by the issue of 9,000,000 new
       Common Shares to Cambrian.

    If the total market value of the 9,000,000 new Common Shares as
calculated using the volume weighted average closing prices of the Company on
the TSX over the ten trading days immediately preceding their issue is less
than C$14,055,673, the Company will pay to Cambrian this difference on or
before December 31, 2008.
    Completion of the sale of FMC is conditional on the parties acquiring all
necessary consents and approvals, including shareholder approval, regulatory
approval, consents of the relevant lenders to the Company and Cambrian and
approval by Cambrian's Board of Directors. Both parties have agreed to obtain
such approvals by March 31, 2008.
    In the event that a material adverse change occurs in the operations or
the financial condition of Western between today and the Company's shareholder
approval, then Cambrian may withdraw from this agreement and no shareholder
meeting will be held.
    The conditional FMC transfer agreement reached is not in substitution for
those options for disposition of FMC that were in the Master Agreement, which
will shall remain in effect unless and until all conditions to the completion
of the sale of FMC have been satisfied.

    Cambrian waives repayment of C$5 million loan out of the proceeds
    of the Debentures:

    Cambrian announced on September 18, 2007 that it had agreed to make
available to Western a convertible loan facility of C$5 million (the "Loan").
In support of Western, and as a result of Western's agreement with Audley and
other investors, Cambrian has agreed to waive its right to repayment of the
Loan out of the proceeds of the Debenture issuance, to set the interest rate
on the Loan at 8.5% per annum over the term of the Loan and to waive the
C$125,000 fee that was due for payment on August 1, 2008. The waivers and
other amendments are conditional on the conversion rate set out in the Loan
agreement being reset, subject to regulatory approval, to match the conversion
price of the Debentures that were issued on November 30, 2007.
    The Loan is secured against Asset Backed Commercial Papers ("the Paper")
held by Western. Cambrian has also agreed to release that security to the
extent that Western needs to secure any third party financing with the Paper
or in the event of a sale of the Paper to a third party.
    Certain elements of the Proposals are deemed to be related party
transactions under the AIM Rules. The independent directors of the Company,
having consulted with the Company's nominated advisor consider that the terms
of the Proposals are fair and reasonable as far as the independent
shareholders of the Company are concerned.
    Currently, Cambrian through its wholly-owned subsidiaries, owns
approximately 48.4 million Common Shares, or approximately 42% of the
outstanding Common Shares. Upon closing of the transfer of FMC, assuming
Cambrian is issued 18,740,898 Common Shares and has converted the principal of
the Loan, the total Common Shares outstanding in the Company would be
141,408,805, with Cambrian owning approximately 73.7 million shares,
representing 52% of the common shares outstanding in the Company.
    Assuming full conversion of the $40 million of debentures, the exercise
of Audley's warrants, and the transfer of 100% of FMC to Cambrian, in
consideration for which Cambrian is issued with 27,740,898 Common Shares, and
Cambrian converts the principal of the Loan, an aggregate of 91,980,898 Common
Shares of Western will be issued. This will then result in the total number of
issued Common Shares outstanding being 207,972,138, of which Audley together
with Audley Capital would hold 44,240,000 Common Shares directly, representing
approximately 21% of the total number of then outstanding Common Shares and
Cambrian together with its wholly owned subsidiaries will hold approximately
82.7 million Common Shares, representing approximately 40% of the total number
of then outstanding common shares.

    About Audley

    Audley is an investment fund advised by Audley Capital Advisors LLP,
which holds approximately 29% of the common shares of Cambrian Mining plc.

    About Cambrian

    Cambrian is a diversified mining house that manages and supports
operations in coal and gold/antimony mining. It also has extensive exposure to
energy projects and related technologies, from oil shale assets through to
alternative energy projects, as well as exposure to traditional oil and gas
exploration and development.
    Cambrian has been instrumental in the past three years in supporting the
development of a number of mines and moving them into production. These
include: the Augusta gold and antimony mine in Victoria, Australia; the 2.4
million tonnes per annum Wolverine hard coking coal mine in Western Canada;
the Dillon and Brule PCI mines in Western Canada as well as underground
metallurgical coal and underground and surface thermal coal mines in West
Virginia, USA.
    Cambrian, through its wholly-owned subsidiaries, currently holds
approximately 48.4 million common shares of Western, representing
approximately 42% of Western's issued and outstanding shares. Mr. John Byrne,
Chairman of Western, is also Chairman of Cambrian and holds approximately 7.2%
of the outstanding shares of Cambrian. Mr. John Conlon, a director of Western,
is also a director of Cambrian and holds approximately 1.0% of the outstanding
shares of Cambrian.

    About Western Canadian Coal

    Western Canadian Coal Corp. produces 3.4 million tonnes of high quality
metallurgical coal from two mines located in the northeast of British
Columbia. The company also has interests in various coal properties in
northern and southern British Columbia and a 50% interest in the Belcourt
Saxon Limited Partnership, which was formed to explore and develop the
Belcourt and Saxon group of properties in northern BC. Currently, these
properties provide the company with an estimated 25 years of coal reserves.

    Cautionary Statements

    The information in this news release contains certain forward-looking
statements that involve substantial known and unknown risks and uncertainties,
which are beyond Western's control, including the price of coal, risks
relating to the exploration and development of coal deposits, and other risk
factors outlined in Western's Annual Information Form available on SEDAR at
www.sedar.com. Western's actual results and performance could differ
materially from those expressed in, or implied by, such forward-looking
statements and, accordingly, no assurance can be given that any of the events
anticipated by the forward-looking statements will transpire or occur or, if
any of them do, what benefits Western will derive from them.
    This press release is neither an offer to purchase securities nor a
solicitation of an offer to sell securities.

For further information:

For further information: David Jan, Manager, Investor Relations &
Corporate Development, (604) 608-2692, djan@westerncoal.com

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