NEMI and Aviva to merge (November 03, 2008)

Vancouver — NEMI Northern Energy & Mining (NNE. A-V, NNEMF-o),and Australian-listed Aviva (AVA-a) are merging to create a growth-oriented international coal and energy group.

The proposed merger would see Aviva shareholders receive 0.59 of a NEMI share for each Aviva share. When the merger is complete, NEMI will change its name. The merged company will maintain its primary listing on the TSX and will apply for a listing on the Australian Securities Exchange as well as the Botswana Stock Exchange.

If all goes according to plan, ownership in the new company will be almost equally divided between NEMI shareholders and Aviva shareholders. The merged venture will have roughly $25 million in the bank.

The boards of directors of both companies are unanimously recommending that shareholders vote in favour of the merger. The two companies have been in talks for several months, but the recent market turmoil resulted in significant and volatile share price movements for both, making it hard to negotiate a deal. The agreed merger ratio stemmed from a mutual understanding that the combination brings together two equals, and is largely in line with the trailing 30- day volume-weighted average prices as of Oct. 17, when NEMI closed at 43 and Aviva at A32.

“Despite the current market difficulties, I’m confident in the fundamentals of the merger and the capabilities of our combined team,” said Pat Devlin, president and CEO of NEMI, in a release.

NEMI is a 20% owner in the Peace River Coal partnership, with Anglo American (AAUK-Q, AAL-l) holding 66% and Hillsborough Resources (HLB-T, HLSRF-o) 14%. The partnership owns the Trend metallurgical coal mine in northeastern B. C., which achieved production in January.

Aviva’s most advanced asset is the Coolimba power project, a 400- megawatt integrated energy development in Western Australia. The development is to be fuelled by Aviva’s nearby coal deposit, where it has defined 72 million tonnes of thermal coal reserves. The A$1-billion project will be built on an old mine site and the site has water and infrastructure available.

In September, Aviva secured a development partner for the Coolimba project. AES Corp. (AES-n) brings with it experience building five circulating fluidized bed (CFB) generating plants, which are the planned generators at Coolimba.

Aviva is also earning a 90% interest in the Mmamantswe project in Botswana. Earlier this year, the company defined an initial inferred resource of 1.3 billion tonnes of low-sulphur coal and drill programs are continuing. Aviva is proposing a 1,000-megawatt integrated power station powered by 12 million tonnes of coal annually, with the coal mine producing an additional 8 million tonnes each year for external sales.

Mmamantswe sits just 12 km from the border with South Africa and 250 km from Johannesburg. The South African power utility, Eskom, is seeking up to 780 million tonnes of coal supply over 40 years for its new power stations as well as 4,500 megawatts of independent power generation. Aviva recently submitted an expression of interest to Eskom to supply power.