Western is offering one of its shares for every 1.8 NEMI shares, representing a 29% premium for the target company’s shares.

"We are delighted to have arrived at this mutually beneficial combination,” said Western chief Gary Livingstone.

“We believe the merger creates a stronger company with a proven management team, high quality reserves and low-cost, long-life operations with access to under-utilised rail and port facilities and that significant cost synergies will be derived from merging the two companies."

The combined anticipated production of both companies will enable the new entity to reach the strategic goal of producing 5 million tonnes per year of hard coking coal by 2007. At that output, the company will achieve a critical mass that will enable it to be a significant supplier to global coal customers, it said.

The deal will see the hard coking coal reserves and operations at NEMI's Trend property combined with Western's Burnt River and Wolverine operations.

The combined entity will have more than 85Mt of proven and probable coal reserves and 98Mt of measured and indicated resources.

Additionally, the company would control 100% of the Belcourt and Saxon properties in northeastern British Columbia.

Western said the combination provided the opportunity to accelerate development of these properties, which are currently being evaluated under a joint venture arrangement between the two companies.