Western Canadian Coal to acquire Falls Mountain

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 to start producing pulverized coal injection (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’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 began producing ultra low-volatile PCI coal from the Brule mine at its Burnt River property in January 2007.

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

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

Processing coal at Willow Creek’s facilities means that Western Canadian Coal does not need to build a wash plant and load-out facility at Brule.

Operations at Willow Creek will start again in the second quarter of fiscal year 2009 with 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 B. C. It also holds interests in other coal properties in northern and southern B. C., including a 50% interest in the Belcourt Saxon partnership.