Anglo closes coal deal with Hillsbororough

Vancouver – Anglo Coal, a division of diversified miner Anglo American (AAL-L), has secured a foothold in Western Canada’s coal industry through a newly inked formal agreement with Hillsborough Resources (HLB-T).

Anglo Coal produces about 90 million tonnes of coal annually from mines in South Africa, Australia, Venezuela, and Colombia. Hillsborough is a small producer that operates the Quinsam thermal coal mine on Vancouver Island, and the Crossville underground thermal coal mine in Tennessee. The company is developing metallurgical and coking coal projects in northeastern and southeastern British Columbia, and plans to acquire a coal project in Oklahoma.

The agreement covers nine of 11 coal properties held by Hillsborough in northeastern B.C., grouped into two project areas. One is the Horizon group, comprising three blocks on the Five Cabin property, and two other properties. The most advanced is the Horizon block at the Five Cabin property, where mine-planning and pit-design are in progress. The Murray River group includes the Southridge area of the Five Cabin property, and six other properties.

Hillsborough will continue to develop the properties, focused initially on the Horizon mine area, with the help of a previously announced $4.5-million bridge loan provided by Anglo late last year. That financing was converted into a 3-year-term loan agreement, secured against the property.

Anglo will have the right during the 3-year-term to convert the loan and accrued interest into a 60% interest in the Horizon group. The mine would then be developed as a joint venture, with the partners contributing their respective proportionate interests.

Another component of the newly executed agreement gives Anglo Coal “immediate responsibility” to manage ongoing exploration and development of the Murray River group properties. By funding the first $5 million of exploration within three years, Anglo Coal can earn a 51% interest. This can be increased to 60% by boosting the spending to $8 million within another three years.

After a production decision is reached, Hillsborough can elect to fund its remaining interest on its own, or with the project loans from, or arranged by, Anglo Coal. The Vancouver-based coal producer will retain a mine-gate royalty of 1% over all the properties.