Hillsborough Resources Limited

Hillsborough Resources Limited

October 16, 2006 09:08 ET

Hillsborough Resources Announces: Hillsborough, NEMI and Anglo Coal Canada Sign Definitive Asset Transfer Agreement

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 16, 2006) - Hillsborough Resources Limited (TSX:HLB) ("Hillsborough", or the "Corporation") is pleased to announce that further to the press release of July 11, 2006, it has now signed a definitive asset transfer agreement with NEMI Northern Energy and Mining Inc. (TSX:NNE) ("NEMI") and Anglo Coal Canada Inc. ("Anglo Coal"). Under the agreement, the north-eastern British Columbia metallurgical coal assets of Hillsborough, NEMI and Anglo Coal will be consolidated into a limited partnership (the "Coal LP") with Hillsborough and NEMI each receiving a 20% interest in the Coal LP and Anglo Coal receiving a 60% interest.

The agreement provides that NEMI will contribute its full interests in its coal assets, comprising 100% of the Trend coal property and related assets, including coal preparation plant and rail load-out, plus its 50% interest in the Belcourt Saxon limited partnership, in exchange for its 20% interest in the Coal LP plus approximately $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. Each of Hillsborough and Anglo Coal will contribute their respective interests in their coal assets, being the Horizon property group and the Murray River property group plus Hillsborough's Bickford property, with Anglo Coal crystallizing the full vesting of its interests in the Horizon and Murray River groups at the time of contribution for the consideration as outlined in its current coal projects agreement with Hillsborough. 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. It is anticipated that this $6.9 million will be fully funded by consideration to be received from Anglo Coal upon crystallization of its interests 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. These consideration payments were determined under an asset valuation method agreed between Hillsborough, NEMI and Anglo Coal, conducted in consultation with independent technical advisors.

Anglo Coal or an affiliate will be the operating manager of the Coal LP, and the Coal LP is expected to be financed from operating cash flows, cash calls to the partners or both, and with non-contributing partners subject to normal dilution provisions. The Coal LP agreement will incorporate other standard provisions such as transfer restrictions, rights of first refusal and minority interest protections.

The formation of the Coal LP and the contribution of assets into it (the "Transaction") is scheduled to occur prior to December 31, 2006, and is subject to a number of conditions including but not limited to approval of the respective boards of directors of Hillsborough and Anglo Coal and receipt of all regulatory and third party consents. In addition, NEMI has now voluntarily sought and obtained protection for itself under the Companies' Creditors Arrangement Act ("CCAA") in order to afford it the opportunity to preserve the going concern value of its assets as it works with Hillsborough and Anglo Coal to implement the Transaction. Closing of the Transaction will also therefore be subject to approval of NEMI's Plan of Compromise or Arrangement by NEMI's creditors as well as the Supreme Court of British Columbia (the "Court").

NEMI advises that it expects to continue its current operations in a normal manner including its capital expenditures until completion of the Transaction, and has been authorized by the Court to obtain a debtor-in-possession financing comprised of a $20 million credit facility to be provided by Anglo Coal. NEMI advises that it has temporarily suspended processing of coal through its coarse coal wash plant in order to accelerate construction and completion of its fines wash circuit, and that upon completion of this circuit (expected by December 2006) the Trend Mine will produce an 8.5% ash coal product which it expects to realize higher prices than its current Trend SM product.

Hillsborough Resources Limited is a coal mining company that operates the Quinsam underground thermal coal mine in Campbell River, British Columbia serving the local and west-coast U.S. cement industry. Near Tumbler Ridge in Northeast British Columbia, the Corporation has substantial metallurgical coal properties under development including the Horizon mine project, and is developing the Wapiti thermal coal mine to be the exclusive supplier commencing in 2010 for a power generation plant to be constructed and operated on the property by AESWapiti Energy Corporation. The Corporation also holds the Bingay Creek metallurgical coal property located in the Elk Valley region of Southeast British Columbia.

David J. Slater, President & Chief Executive Officer

This release may contain forward-looking statements regarding the Company's business or financial condition. All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Actual results could differ materially from those described in this news release as a result of factors including but not limited to the following: adverse exploration or development results; adverse due diligence findings; re-assessments of corporate or development objectives and requirements; additional technical developments and considerations; unexpected increases in the costs of producing coal, changes in international coal or transportation markets, a rapid change in the value of the Canadian dollar particularly with respect to the US dollar, a fundamental slow down in the North American, Asian or worldwide economies; and other factors. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.

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