Anglo Coal consolidating in B.C.

Coal properties in north-eastern B.C. saw some consolidation as Hillsborough Resources (HLB-T) NEMI Northern Energy and Mining (NNE-T) and Anglo Coal Canada agreed to combine their metallurgical coal assets into a Coal limited partnership (LP) with Anglo Coal at the helm.

Hillsborough and NEMI will each take a 20% interest in the Coal LP, while Anglo Coal takes a 60% stake.

In Toronto on Oct. 16, NEMI shares were down 7.5% or 3 to 37 on roughly 290,000 shares. Hillsborough shares were unchanged at 57 on roughly 12,000 shares.

The deal will see NEMI contribute its full interests in its coal assets including all of the Trend coal property, plus its 50% interest in the Belcourt Saxon limited partnership, in exchange for its 20% interest in the partnership and roughly $83 million in consideration consisting of cash and payments as well as additional consideration in the form of a carry of up to $18 million for all cash calls required of the Coal LP partners until December 31, 2007.

Hillsborough and Anglo Coal are putting in their respective interests in the Horizon property group and the Murray River property group plus Hillsborough’s Bickford property.

Hillsborough will contribute its 40% interest in the Horizon group, 30% interest in the Murray River group and 100% interest in Bickford, plus $6.9 million of the cash and payments consideration to NEMI, in exchange for its 20% interest in the Coal LP.

But the $6.9 million is to come from Anglo Coal once it gains interest in the Horizon and Murray River groups. Anglo Coal will contribute its 60% interest in the Horizon group and 70% interest in the Murray River group plus the balance of the cash and payments consideration to NEMI, in exchange for its 60% interest in the Coal LP.

The new partnership is scheduled to take shape before Dec. 31, if it meets the approval of the boards of Hillsborough and Anglo Coal’s boards of directors, and is expected to be funded from operating cash flows.

NEMI also announced it has received protection under the Companies’ Creditors Arrangement Act (“CCAA”) so that it can hold on to its assets while working with Hillsborough and Anglo Coal to finish off the deal.

In addition NEMI announced that Anglo Coal had forwarded it a further $5 million loan to keep operations running in a normal manner until the deal is completed.