Western Canadian Coal plans to acquire Falls Mountain Coal

Close on the heels of completing a $40 million private placement of convertible debentures late last year, Western Canadian Coal (WTN-T, WTN-L) says it is set to acquire Cambrian Mining‘s (CGIIF-O, CBM-L) Falls Mountain Coal.

Cambrian is Western Canadian Coal’s largest shareholder and it purchased Falls Mountain Coal in June 2007. Falls Mountain owns the Willow Creek coal properties, a wash plant, and a rail load-out facility in northeastern British Columbia.

The acquisition would enable Western Canadian Coal to start producing PCI coal from Willow Creek as early as September and take advantage of record coal prices expected this year.

Reserves at Falls Mountain are made up of about 60% PCI coal and 40% hard coking coal.

The deal would provide capital cost savings of about $70 million in developing Western Canadian Coal’s Brule mine to its full capacity and boost its run-of-mine coal reserves by about 15.7 million tonnes, or 18%.

Western Canadian launched production of the ultra low-volatile pulverised coal injection (ULV-PCI) Brule mine at its Burnt River property in January 2007.

Acquiring Falls Mountain would produce synergies between the Brule mine and the Willow Creek mine that would cut operating, transportation and overhead costs, Western Canadian Coal said in a press release.

Willow Creek’s wash plant currently has an annual capacity of 2.2 million tonnes. With certain modifications, however, its annual capacity could grow to about 3 million tonnes and handle coal from both Brule and Willow Creek.

Western Canadian Coal expects to restart operations at Willow Creek in the second quarter of fiscal 2009 and plans to produce as much as 60,000 tonnes per month of PCI coal.

Operations at Willow Creek will start again in the second quarter of fiscal year 2009 and there are plans to initially produce up to 60,000 tonnes per month of PCI coal.

Cambrian, through its wholly-owned subsidiaries, holds about 48.4 million shares in Western, or about 42% of Western’s stock.

Western Canadian Coal churns out 3.1 million tonnes of high-quality metallurgical coal from two mines located in northeastern British Columbia.

It also holds interests in other coal properties in northern and southern British Columbia including a 50% interest in the Belcourt Saxon partnership, which was formed to explore and develop the Belcourt and Saxon group of properties in northern BC.

Western Canadian Coal currently trades at about $2.69 a share and has a 52-week trading range of 47 to $3.23. It has about 116 million shares outstanding.