Coal miner Western Canadian Coal Corp. (TSX, AIM:WTN) is mulling a merger with a major shareholder to help it cope with the ongoing economic uncertainty.
The Vancouver-based company said its independent directors and those of Cambrian Mining plc (AIM:CBM) have reached an agreement in principle in respect of certain key terms for Western's possible acquisition of Cambrian.
Cambrian, a London-based diversified mining group with interests in metallurgical coal, thermal coal, gold and antimony (a metallic chemical element), holds 72.3 million Western shares and $34 million of convertible debt and loans in the Vancouver company.
Under the proposal, holders of ordinary shares of 20 pence each in Cambrian will receive 0.75 common shares in Western for each Cambrian share held.
The proposal values the entire issued ordinary share capital of Cambrian at approximately 28.8 million British pounds (approximately $51million).
For Cambrian, the merger would be an important step towards becoming a fully-fledged operating entity, said Mark Burridge the company's CEO.
John Hogg, Western's president and CEO, said the inclusion of Cambrian's West Virginia hard coking and thermal coal sales into U.S. markets will help diversify Western's metallurgical coal international markets.
"Considering the combined management talents and financial strength that each company brings, we believe this will create a stronger platform to grow both organically and through further acquisitions," said Hogg.
The business combination, which is subject to several conditions, would give the enlarged company 100% ownership of three coal mines and two wash plants in northeastern B.C. and two coal mines and two wash plants in West Virginia.
The combined entity would have future coal production potential of up to 10 million tonnes per annum from existing assets.