Wilson Creek (Proposed Transaction)

All information in this press release relating to Wilson Creek is the sole responsibility of Wilson Creek.

Wilson Creek is a Somerset County, Pennsylvania based metallurgical and thermal coal producer. Wilson Creek will, at closing, operate three active open pit mines and plans to develop a further four open pit mines and two underground mines.  Current production is at an annualized rate of 240,000 raw tons of coal from the three existing mines, with projected capacity reaching up to approximately 2 million raw tons of coal annually in 2013 (subject to upgrading resources to reserves) from a total of nine mines, including those currently operating and those in the permitting stage and under development and under option (including the Pittsburgh Seam property).

Wilson Creek is a newly formed Pennsylvania limited liability company owned by seven individuals resident in Somerset County, Pennsylvania to consolidate their ownership of Northern Appalachian coal mining assets. Wilson Creek’s mining leases and options provide Wilson Creek with control over resources of 81 million tons of recoverable coal (comprised of 5 million tons of proven and probable reserves, 74 million tons of measured and indicated resources and 2 million tons of inferred resources), including 71 million tons of indicated resources attributable to the Pittsburgh Seam property, of which 14 million tons are considered to be metallurgical coal.  In relation to the Pittsburgh Seam property, Wilson Creek has an option to acquire 100% of Westpenn Coal Inc. at a price of $20 million (payable over 4 years) to acquire 11.5 million tons of metallurgical coal and 50.5 million tons of thermal coal respectively of the total 71 million ton resource.

Wilson Creek has undertaken the construction of a coal cleaning plant with expected capacity of approximately 2 million tons of clean coal annually upon completion and commissioning, expected to be in the first quarter of 2011.

The mineral reserve and resource estimates have been prepared under the supervision of Dennis Noll of Earthtech Inc., a qualified person, as such term is defined in National Instrument 43-101 – Standards of Disclosure for Mineral Projects.  Dennis Noll is independent of Wilson Creek.  A technical report prepared in accordance with National Instrument 43-101 in respect of Wilson Creek’s material properties will be filed and referred to in the Filing Statement.

The reserve and resource data contained in the press release was calculated based on the following information:

Reserves

The data relating to proven and probable reserves referred to above (5.2 million tons) is based on the following projected rates and costs (and assumes that the reserves consist of 88% metallurgical coal and 12% thermal coal):

1. Production rate:  up to 780,000 tons of raw coal annually
2. Mine life:  up to 10 years
3. Cash Operating costs:  US$57 per clean ton
4. Average coal price realized: $110 per clean ton, weighted average, taking into consideration 88% metallurgical at $100 for 2010 / $130 for 2011 / $120 for long term; 12% thermal at $50 for 2010 / $53 for 2011 / $57 for long term over production of reserves
5. Projected cumulative cash flow from 5 million tons of reserves:  US$275,000,000 (calculated based on projected coal price realized, less projected operating costs) (5.2M tons @ $110/ton – 5.2M tons @ $57/ton)
6. Capital expenditures:  US$40,000,000

The above information is provided to support the disclosure of reserve data only.  Capital costs used to determine the categorization of 5 million tons as reserves include equipment costs, cost of development and sustaining capital, but do not, for the purpose of the above disclosure only, include the capital costs associated with the coal cleaning plant.  Operating costs do not include any capital costs or expenses not directly attributable to production.  Cash flow analysis of reserves assumes usage of company-owned cleaning plant, which is currently under construction. The reserves estimate is based on the following drill hole data:

Proven reserves consist of three active coal surface mines with reserve footprints ranging from 26 to 76 acres. Data points consist of air rotary drilling, core drilling, and channel sampling in active cuts. Measurement density ranges from 3 acres per data point to 5 acres per data point.

Probable reserves consist of four proposed coal surface mine sites and one underground mine coal site. The probable reserve footprints for the surface mines range from 22 to 48 acres and the probable reserve footprint for the underground mine is 936 acres.  Data points consist of air rotary drilling and core drilling for the surface mine sites and core drilling for the underground mine site.  Measurement density for the surface mine sites ranges from 1 to 2 acres per drill hole for the surface mine sites and 29 acres per drill hole for the underground mine site.

Resources

The resources estimate is based on the following drill hole data:

Measured resources consist of 28 acres of area on a permitted, active surface mine site that was excluded from the proven reserve category, a 28 acre surface mine site, and 702 acres of an additional seam to be added to the underground mine site categorized as a probable reserve. Data points for the surface mine sites consist of air rotary drilling, core drilling, and channel sampling in active cuts.  Core drilling was performed at the underground mine site and this data is shared with the seam proposed to be mined as a probable reserve.  Measurement density for the surface mine sites ranges from 3 to 5 acres per data point for the surface mine sites and 23 acres per drill hole for the underground mine site.

Indicated resources consist of 1 acre and 5 acres, respectively, of areas on two of the surface mine sites that were excluded from the probable reserve category, a 20 acre surface mine site, which needs more drilling to assess its reserve potential, and 11,702 acres associated with a proposed underground mine.  Data points for the surface mine sites consist of air rotary drilling and core drilling.  Core drilling was performed at the underground mine site. Measurement density for the surface mine sites ranges from 1 to 6 acres per data point for the surface mine sites and 148 acres per drill hole for the underground mine site. 

An audited balance sheet of Wilson Creek as at June 30, 2010 and alternative financial information for the periods ended December 31, 2009 and June 30, 2010 for Wilson Creek in respect of the two operating mines which were in operation prior to June 30, 2010 have not yet been completed and will be included in the Filing Statement prepared in connection with the Acquisition Transaction.