Western Coal Enters Into Exclusive Negotiations For Potential Business Combination With Walter Energy

Western Also Announces Sale of Shares by Audley to Walter

VANCOUVER, Nov. 18 /PRNewswire-FirstCall/ - Western Coal Corp. (TSX: WTN, WTN.WT and AIM: WTN) (the "Company" or "Western") announced today that it has entered into an exclusivity agreement with, and received a proposal regarding a strategic business combination (the "Combination") from Walter Energy, Inc. (NYSE: WLT) ("Walter"), a leading US producer and exporter of hard coking coal for the global steel industry.

If concluded, the Combination proposal contemplates a plan of arrangement transaction whereby Western shareholders would receive a mixture of cash and Walter shares valued at $11.50 per Western share. The proposed value represents a premium of 55.8% to Western's closing price yesterday of $7.38 on the Toronto Stock Exchange. The proposal values Western's equity at $3.3 billion, based on Western's 291.1 million common shares outstanding on a fully diluted basis (excluding common shares held by wholly-owned subsidiaries of the Company).   

The Combination would create one of the world's largest pure-play publicly-traded producers of metallurgical coal with geographically diversified assets in Canada, the US and the UK and with strong market positions in Asia, South America, North America and Europe. The combined company would have synergistic technical expertise in both open- pit and underground coal mining. The combined company's market capitalization and enhanced financial strength would position it well to execute on strategic growth plans.

Western expects to produce 6.1 million tonnes of coal for the fiscal year ending March 31, 2011, growing to 10 million tonnes for fiscal 2013. Walter, based in Tampa, FL, has stated that it expects to produce 6.6 million tonnes of coal in the calendar year 2010, growing to 8.6 million tonnes in the calendar year 2012. The vast majority of production for both companies is metallurgical coal.

Due Diligence Period

Walter's proposal is subject to due diligence and negotiation of definitive agreements. During the due diligence period, Western has agreed to work exclusively with Walter for a period of up to 14 days expiring December 1, 2010. If a definitive agreement is not reached, no penalties will be incurred by either party. The Combination would be subject to approval by shareholders of Western and regulatory authorities.

Walter's proposal is not binding on either party, except with respect to the exclusivity obligations. Western cautions that no definitive agreement has been entered into and accordingly no assurance can be given that the negotiations between Western and Walter will lead to a transaction that is consistent with Walter's proposal or to any transaction at all.

Western does not intend to make any further announcements or communications regarding this potential transaction until either a definitive agreement has been reached or discussions are terminated without such an agreement being reached.

Western has retained RBC Capital Markets as its financial advisor, Goodmans LLP as its Canadian legal advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP as its US legal advisor. Western's UK advisors are Trowers & Hamlins LLP (legal) and Cenkos Securities plc (Nominated Advisor).

Western has established a committee of its independent directors to consider the Walter proposal. Deloitte & Touche LLP is acting as independent financial advisor to the special committee.

Walter's agreement with Audley

Western also announced that it was informed today by its largest shareholder, Audley European Opportunities Master Fund Limited ("Audley"), that Audley has signed an agreement to sell approximately 54.5 million common shares of Western (representing approximately 19.8% of Western's 276.1 million basic common shares outstanding, excluding common shares held by wholly-owned subsidiaries of the Company) to Walter at a price of $11.50 per share, or total consideration of approximately $630 million, subject to adjustment in certain circumstances. Western is not a party to the share purchase agreement.

Under the share purchase agreement, the Western shares would be sold in two instalments. Upon the satisfaction of certain closing conditions, Walter would acquire approximately 25.3 million common shares for cash, with the balance to be acquired for cash or Walter stock immediately upon the combination of Western and Walter or, in any event, no later than April 30, 2011. The sale by Audley to Walter of 54.5 million common shares of Western is subject to the expiration or termination of the applicable waiting period under the US Hart-Scott-Rodino Antitrust Improvements Act and compliance with any other applicable competition laws.

Western has been advised that a copy of the share purchase agreement will be filed by Audley on SEDAR (www.sedar.com) and by Walter on EDGAR (www.sec.gov).

About Western Coal

Western Coal is a producer of high quality metallurgical coal from three mines in northeast British Columbia (Canada), high quality metallurgical coal and compliant thermal coal from four mines located in West Virginia (USA), and high quality anthracite and metallurgical coal in South Wales (UK). Other interests owned include a 24% interest in Mandalay Resources Corporation (MND: TSX), 40% interest in Xtract Energy (XTR: AIM), and a 20% interest in NEMI Northern Energy & Mining (NNE.A: TSX). The Company is headquartered in Vancouver, BC, Canada, and trades on the AIM and TSX stock exchanges under the symbol "WTN". More information can be found at www.westerncoal.com

Forward-Looking Information

This release may contain forward-looking statements that may involve risks and uncertainties. Such statements relate to the Company's expectations, intentions, plans and beliefs including, in particular, statements relating to a potential strategic business combination between the Company and Walter and the terms of any such transaction. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements as a result of various important factors, including, but not limited to: the Company's ability to negotiate a potential strategic business combination with Walter; the price, terms and conditions of any such transaction; the benefits of any such transaction and its impact on the Company's business; changes in commodity prices; strengths of various economies; the effects of competition and pricing pressures; the oversupply of, or lack of demand for, the Company's products; currency and interest rate fluctuations; various events which could disrupt the Company's construction schedule or operations; the Company's ability to obtain additional funding on favourable terms, if at all; and the Company's ability to anticipate and manage the foregoing factors and risks. Additionally, statements related to the quantity or magnitude of coal deposits are deemed to be forward looking statements. The reliability of such information is affected by, among other things, uncertainties involving geology of coal deposits; uncertainties of estimates of their size or composition; uncertainties of projections related to costs of production; the possibilities in delays in mining activities; changes in plans with respect to exploration, development projects or capital expenditures; and various other risks including those related to health, safety and environmental matters. Readers are referred to the documents filed by the Company on SEDAR.

SOURCE Western Coal Corp.