WESTMORELAND COAL COMPANY (Exact Name of Registrant as Specified in Charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 23, 2013 WESTMORELAND COAL COMPANY (Exact Name of Registrant as Specified in Charter) Delaware (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) 9540 South Maroon Circle, Suite 200 Englewood, CO (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (855) (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c))

2 Item 1.01 Entry into a Material Definitive Agreement. Acquisition of Canadian Coal Operations On December 24, 2013, Westmoreland Coal Company (the Company ) and its Canadian subsidiary, Westmoreland Canada Holdings, Inc. ( Westmoreland Canada ) entered into an Arrangement Agreement (the Arrangement Agreement ) with Sherritt International Corporation ( Sherritt ) and Altius Minerals Corporation ( Altius ), among others, pursuant to which the Company will acquire two Sherritt subsidiaries, Prairie Mines & Royalty Ltd. ( PMRL ) and Coal Valley Resources Inc. ( CVRI ). PMRL and CVRI own a total of eight mines located in Alberta and Saskatchewan, Canada, seven of which are operating surface mines and one of which is in reclamation (the Canadian Mines ). The purchase price of $435.0 million shall be made up of $293.0 million of cash consideration and the assumption of $142.0 million of capital leases, subject to certain adjustments provided for in the Arrangement Agreement, relating to, among other things, working capital, indebtedness, pension plan funding and coal inventory (the Purchase Price ). The Arrangement Agreement includes customary representations, warranties, conditions and covenants. Contemporaneously with the acquisition of the Canadian Mines, the Company will transfer royalty interests relating to the Canadian Mines (the Royalty Interests ) to Altius, pursuant to the Arrangement Agreement and a Royalty Interest Transfer Agreement entered into among PMRL and several of its subsidiaries that will hold the Royalty Interests until such time as they are transferred to Altius (the RITA ). The Company also entered into a side letter agreement with Sherritt relating to the transfer of the Royalty Interests that provides, among other things: (i) the Company will acquire the Canadian Mines, even if the Royalty Interests are not sold to Altius; (ii) if the Royalty Interests are transferred back to Sherritt because Altius does not acquire them, the Purchase Price will be reduced by approximately $16.8 million; and (iii) if the transactions contemplated by the Arrangement Agreement are determined to be taxable transactions as a result of the transfer of the Royalty Interests back to Sherritt, any taxes owed will be paid by Sherritt. Among other approvals required before closing, the Arrangement Agreement requires approval under the Competition Act and under the Investment Canada Act and a court order from the Court of Queen s Bench of Alberta. In addition, one of the assets being acquired by Altius pursuant to the Arrangement Agreement includes a 120 day right of first refusal period. If the holder of the right of first refusal does not indicate its intent to either acquire such asset or allow such asset to be sold to Altius earlier, the closing of the Arrangement Agreement could be delayed until the 120 day exercise period has expired. The Arrangement Agreement provides that Sherritt will indemnify the Company after the closing, subject to certain limitations and indemnity caps and deductibles, for losses incurred by the Company attributable to: (i) a breach or inaccuracy of representations or warranties made by Sherritt under the Arrangement Agreement and related documents; (ii) failure to perform any covenant or agreement made by Sherritt under the Arrangement Agreement or related documents; (iii) certain matters relating to the pre-closing reorganization of Sherritt; (iv) environmental releases at the Obed Mine; (v) specified environmental releases at the Coal Valley mine; and (vi) a breach or inaccuracy of any representation or warranty made by Sherritt to Altius. The Company has agreed to indemnify Sherritt against any losses attributable to a breach of the Company s representations and warranties or a failure to perform any covenant or agreement made by the Company under the Arrangement Agreement. With respect to the Obed Mine indemnification, such indemnification is not subject to the indemnity caps or deductibles and, pursuant to a Cooperation Agreement entered into between Sherritt and the Company, both parties will cooperate in the clean-up and remediation of the Obed Mine release, all at Sherritt s expense. The Arrangement Agreement may be terminated prior to closing by mutual written agreement of the parties. Either the Company or Sherritt may terminate as to the transfer of the entities holding the Canadian Mines based on uncured breaches by the other party. The parties may also terminate if the closing has not occurred by June 30, 2014, unless such date is extended by agreement of the parties. If Altius or Sherritt terminate the agreement with respect to the transfer of Royalty Interests, the Company and Sherritt will nonetheless remain obligated to close the transaction with respect to the transfer of the entities holding the Canadian Mines. Sherritt has agreed to deal exclusively with the Company regarding the sale of the Canadian Mines and is prohibited from soliciting or otherwise pursuing other offers to directly or indirectly acquire the Canadian mines. BMO Capital Markets and Deutsche Bank Securities Inc. are acting as financial advisors to Westmoreland, and affiliates thereof and have provided committed financing. BMO Capital Markets has also provided an opinion to the Board of Directors of Westmoreland that the consideration to be paid by Westmoreland in connection with the Transaction is fair from a financial point of view to Westmoreland. There can be no assurance that the transactions contemplated by the Arrangement Agreement will be consummated or that the anticipated benefits of the transaction will be realized. 2

3 The foregoing description of the transaction agreements is not complete and is qualified in its entirety by reference to the definitive agreements which will be filed with the Securities and Exchange Commission. The above description of the transaction agreements has been included, and the transaction agreements will be filed, to provide shareholders with information regarding material terms of such agreements. They are not intended to provide factual information about the parties or their respective subsidiaries or affiliates. The representations, warranties, and covenants contained in the transaction agreements: were made only for purposes of those agreements and as of specific dates; were solely for the benefit of the parties to those agreements; and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made by each contracting party to the other for the purposes of allocating contractual risk between them that differ from those applicable to shareholders. Shareholders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of the parties or any of their respective subsidiaries, affiliates or businesses. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the agreements, which subsequent information may or may not be fully reflected in public disclosures by the parties. Accordingly, shareholders should read such representations and warranties, not in isolation, but only in conjunction with the other information about the parties and their respective subsidiaries or affiliates that the respective companies include in reports, statements and other filings they make with the Securities and Exchange Commission. Amendment of Power Purchase Agreement On December 23, 2013, the Company, via its Westmoreland Partners subsidiary, entered into a Consolidated Power Purchase and Operating Agreement for Roanoke Valley Units 1 and 2 (the Facility ) with Virginia Electric and Power Company, operating in North Carolina as Dominion North Carolina Power (the Consolidated Agreement ) for the provision to sell exclusively to Dominion North Carolina Power all of the Facility s net electrical output and dependable capacity from both the Unit 1 and Unit 2. The Consolidated Agreement amends, restates and consolidates in their entirety the prior agreements governing the sale of electricity from the Facility. The Consolidated Agreement restructures the remaining five years of the ROVA I and ROVA II contracts to allow the energy component of the contract to be supplied from outside sources. The Consolidated Agreement, which terminates March 2019, still provides for a one year right of first refusal for the purchase of the Facility and maintains the pre-existing security requirements, which may be met by a letter of credit. The foregoing description of the agreement is not complete and is qualified in its entirety by reference to the definitive agreement which will be filed with the Securities and Exchange Commission. Item 7.01 Regulation FD Disclosure In accordance with General Instruction B.2 of Form 8-K, the following information, including Exhibit 99, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall such information and Exhibit deemed incorporated by reference in any filing under the Securities Act of 1933, except as such shall be expressly set forth by specific reference in such a filing. On December 24, 2013, the Company issued a press release announcing its execution of the Arrangement Agreement and related matters. A copy of the press release is furnished as Exhibit 99.1 to this Report. On December 24, 2013, beginning at 10:30 a.m. Eastern Time, the Company hosted a conference call with investors to discuss various business updates. The conference call was made available to the public via conference call and webcast. The transcript of the conference call is attached hereto as Exhibit A presentation of the Sherritt Acquisition Overview is also attached as Exhibit Item Financial Statements and Exhibits 3

4 (d) Exhibits Exhibit No. Description 99.1 Press Release dated December 24, Transcript of Conference Call from December 24, Sherritt Acquisition Overview dated December 24,

5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. WESTMORELAND COAL COMPANY Date: December 30, 2013 By: /s/ Jennifer S. Grafton Jennifer S. Grafton General Counsel and Secretary 5

6 EXHIBIT INDEX Exhibit No. Description 99.1 Press Release dated December 24, Transcript of Conference Call from December 24, Sherritt Acquisition Overview dated December 24,

7 NEWS RELEASE Westmoreland Announces Transformational Acquisition of Sherritt s Coal Operations Exhibit 99.1 WESTMORELAND COAL COMPANY 9540 South Maroon Circle, Suite 200 Englewood, Colorado (855) Telephone Englewood, CO - December 24, Westmoreland Coal Company (NasdaqGM:WLB) announced today that it has entered into an agreement to acquire the Prairie and Mountain coal mining operations of Sherritt International Corporation ( Sherritt ) for approximately $435 million. These operations include seven producing thermal coal mines in the Canadian provinces of Alberta and Saskatchewan, a 50% interest in an activated carbon plant and a Char production facility. This is an historic event for Westmoreland. The acquisition of Sherritt s coal operations represents a transformational opportunity to acquire seven producing coal mines, which are highly complementary to our existing operations and expertise, said Keith E. Alessi, Westmoreland s Executive Chairman. This acquisition will more than double our business. It greatly diversifies our customer base and expands our operations into Western Canada, widely considered to be one of the most attractive mining jurisdictions globally. The combined business will be the sixth largest North American coal producer, as measured by 2012 production. Additionally, the activated carbon and Char activities, although small in proportion to the coal business, represent value-added product streams and provide an expansion in the industrial environmental market and entrance into the consumer market. We hope to expand these relationships. We look forward to welcoming the Prairie and Mountain workforces into our family, continued Alessi. From our diligence, we know they share our corporate values of safety, environmental stewardship and superior production. Westmoreland has an outstanding record of working cooperatively with our represented workforces and we anticipate similar relationships with the Sherritt represented workforces. Additionally, we look forward to partnering with our new power generation customers in Western Canada to provide low cost electricity to the region. We also look forward to working with all of our other customers and joint venture partners. We anticipate forging strong relationships with the various provinces, communities and with the First Nations. We appreciate the positive relationship we have had with Sherritt management and advisors throughout this process and look forward to working with them through this transition.

8 Robert P. King, Westmoreland s President and Chief Executive Officer also noted, This acquisition significantly enhances our asset portfolio and positions Westmoreland as the leading mine mouth coal producer in North America. Furthermore, the Mountain operations and associated port capacity adds attractive optionality to our business model allowing us to deliver premium thermal coal into high growth Asian markets. The Prairie operations consist of six operating surface mines located within the Canadian provinces of Alberta and Saskatchewan and control of the mining rights to approximately 654 million tons of coal as of December 31, In 2012, the Prairie operations being acquired delivered approximately 22 million tons of low-sulfur thermal coal to domestic utilities. The Mountain operations consist of one operating surface mine, located in Alberta, that produced approximately 4.0 million tons of low-sulfur, thermal coal in 2012, primarily for the export market, and one surface mine currently in reclamation. The Mountain operations hold an aggregate reserve of approximately 22 million tons of coal as of December 31, The transaction also includes a Char production facility which sells to barbeque briquette producers and a 50% partnership interest in an Activated Carbon plant with Cabot Corporation. The Char plant produced 130,000 tons of Char in 2012 and the Activated Carbon plant produced 14,500 tons of activated carbon in For the last twelve months ended September 30, 2013 ( LTM ), Sherritt s estimated U.S. GAAP Prairie and Mountain operations revenue were $736 million USD. Investment Highlights The acquisition of Sherritt s coal operations will significantly increase Westmoreland s scale, provide a platform for future growth and enhance Westmoreland s asset portfolio. Annual production of approximately 27 million tons doubles the production of the Company. A combined reserve base over Prairie and Mountain operations of over 675 million tons provides long term sustainability and security of supply for customers. The Prairie mines provide fairly predictable cash flows which are consistent with Westmoreland s existing business model. The Mountain operations provide an entry point into the export market and strategic access to port facilities. Asset diversification into Western Canada provides entry into one of the world s most favorable mining jurisdictions.

9 Sherritt s coal operations are highly complementary with Westmoreland s core surface mining competencies, existing mine mouth business model and customer partnering expertise. Operations are safe and environmentally responsible. Combination creates one of the largest dragline fleets in North America. Operations have good relationships with employees and unions. Workforce and management teams are highly experienced. Operations strategically located adjacent to customer generating facilities. Operations have long term contracts with investment grade utilities. Contracts are structured to provide stable and predictable revenues. Opportunities have been identified to further optimize the mining operations based on Westmoreland s experience, synergies and economies of scale. On a combined basis, the pro forma company s estimated LTM U.S. GAAP revenue would have been approximately $1.3 billion. The acquisition is expected to be financially accretive to Westmoreland on a free cash flow basis. BMO Capital Markets and Deutsche Bank have provided Westmoreland with fully-committed financing that will enable Westmoreland to fund the full purchase price, the reclamation bonding obligations and transaction expenses. Transaction Details The acquisition includes typical closing conditions, including certain regulatory approvals. As part of the transaction, Sherritt will undergo a pre-closing reorganization and sell its existing portfolio of coal and potash royalties and reserves (the Royalty Portfolio ) to Altius Minerals Corporation. Also, under the terms of the arrangement agreement, Sherritt will indemnify Westmoreland against all past and future liability stemming from the Obed Mine impoundment release. The purchase price for the Prairie and Mountain operations is subject to customary adjustments including working capital. The transaction has been unanimously approved by Westmoreland s Board of Directors and is expected to be completed during the first quarter of Closing of the acquisition is subject to customary conditions, including the receipt of relevant regulatory approvals, including Investment Canada Act and Competition Act approval. There can be no assurance that the transaction will be completed or that the anticipated benefits of the acquisition will be realized. Westmoreland s Advisors BMO Capital Markets and Deutsche Bank Securities Inc. are acting as financial advisors to Westmoreland, and affiliates thereof and have provided committed financing. BMO Capital Markets has also provided an opinion to the Board of Directors of Westmoreland that the consideration to be paid by Westmoreland in connection with the Transaction is fair from a financial point of view to Westmoreland. Holland & Hart, LLP and Gowlings Lafleur Henderson LLP are acting as legal counsel to Westmoreland.

10 Conference Call Westmoreland will hold a conference call on December 24, 2013 at 10:30 a.m. EST to review the acquisition. To access the conference call by telephone, dial (877) Please connect approximately 15 minutes prior to the beginning of the call to ensure participation. The conference call will be archived for replay until January 7, To access the archived conference call, dial and enter the Conference ID #: About Westmoreland Coal Company Westmoreland Coal Company is the oldest independent coal company in the United States. The Company s coal operations include sub-bituminous coal mining in the Powder River Basin in Montana and Wyoming, and lignite mining operations in Montana, North Dakota and Texas. Its power operations include ownership of the two-unit ROVA coal-fired power plant in North Carolina. For more information, visit Cautionary Note Regarding Forward-Looking Statements and Canadian Information This release may contain forward-looking statements. Forward-looking statements can be identified by words such as anticipates, intends, plans, seeks, believes, estimates, expects and similar references to future periods. These statements involve known and unknown risks, which may cause our actual results to differ materially from results expressed or implied by the forward looking statements. These risks include factors such as the uncertainty of negotiations to result in an agreement or a completed transaction, the uncertain nature of the expected benefits from the actual or expected acquisition, the uncertain nature of the announced acquisition, the ability to complete such transactions, risks associated with the integration of acquired assets, risks associated with the our industry or the economy generally, and other such matters discussed in the Risk Factors section of our 2012 Annual Report on Form 10-K and subsequent quarterly reports filed on Form 10-Q. The forward-looking statements in this release speak only as of the date of this release. Although we may from time to time voluntarily update our prior forward looking statements, we disclaim any commitment to do so except as required by securities laws. In addition, Canadian reserve reporting and IFRS auditing standards differ from the standards applicable to public reporting companies in the United States. As such, the numbers reported herein may differ in immaterial amounts from the final numbers that will be reported following the IFRS to GAAP financial statement conversion process. # # # Contact: Kevin Paprzycki (855)

11 Exhibit 99.2 Transcript of Westmoreland Coal Company Investor Conference Call December 24, 2013/10:30 a.m. EDT Presenters Robert King - Chief Executive Officer Kevin Paprzycki - Chief Financial Officer Doug Kathol - Executive Vice President Presentation Operator Good morning, ladies and gentlemen. Welcome to Westmoreland Coal Company's call to discuss its announcement this morning to acquire the mining operations of Sherritt International. At this time, all telephone participants are in a listen-only mode. Following the formal presentation, instructions will be given for the question and answer session which will be conducted by telephone. Web participants wishing to ask a question will need to dial in by telephone to the audio portion of the call. (Operator instructions). As a reminder, this conference is being recorded today and a replay will be made available as soon as practical on the investor portion of the Westmoreland website through June 24, Management's remarks today may contain forward-looking statements based on the company's projections, current expectations and assumptions regarding its business, the economy and other future conditions. Because forwardlooking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The company's actual results may differ materially from the projections given and results discussed in any such forward-looking statements. For a summary of risk factors and other information regarding forward-looking statements, please refer to the company's Form 10-K for fiscal year 2012 as well as the company's Form 10-Q for the third quarter of Any forward-looking statements represent the company's views only as of today and should not be relied upon as representing its views as of any subsequent date. While the company may elect to update forward-looking statements at some point in the future, it specifically disclaims any obligation to do so even if its estimates change, and therefore, you should not rely on these forward-looking statements as representing the company's views as of any dates subsequent to today. 1

12 Mr. Keith Alessi, Executive Chairman of Westmoreland Coal Company will be delivering today's remarks along with Mr. Robert King, Chief Executive Officer and Mr. Kevin Paprzycki, Chief Financial Officer. Thank you, Mr. Alessi. Please begin. Thank you. Good morning to everybody joining us on this day before Christmas. Obviously, we're here today to talk about a couple of really good pieces of news for Westmoreland Coal Company. We see that there are some new folks on the line that we haven t normally talked to, some of our new business partners. We're delighted to chat with them as well. Also joining us on the call this morning is Doug Kathol, our Executive Vice President. We'll certainly have the question and answer period here at the end of the remarks. It was not but two years ago that we had a call with investors. It was two years ago yesterday, that we announced the acquisition of the Kemmerer Mine from Chevron. We described at that time to our shareholders and our bondholders what a positive acquisition we felt that was and how we felt that we could not only operate that mine effectively and efficiently, but work to reduce costs for our customers in that region. Over the last two years, that story has played out exactly as we described at the time of the acquisition. It's proven to be a very sound investment. It's outperformed all the expectations we had going in and we've of course had people asking us since that time, well, what are you going to do next? We've talked on virtually every conference call about the fact we've been looking at other assets that we see fit our business model and Bob King is going to talk about those in a bit, but if we were to draw up a portfolio of assets that perfectly fit our business model, that being the mine mouth operations, the Sherritt Assets in Canada would have fit that bill. We've been in conversations now for the better part of the year to acquire these assets and we're very pleased to announce this morning the information that you saw in the press release, and we're not going to go back through the press release. You can read some of the highlights there. We'd like to add a little bit more color to it. Certainly, the day before Christmas, Christmas Eve, is not the day you would pick normally to make this kind of announcement, but those of you who have been around deals know that deals have their own life and their own timing and at the eleventh hour things come up and this just happens to be how it fell on the calendar so, we're delighted to be chatting here this morning. Similarly, the transaction that we announced yesterday with Dominion Power coincidentally fell yesterday. These were not reliant upon each other. They were totally different situations. They just both came to final culmination at the same time. What we really like about this transaction, it's clearly transformative. It doubles our business. It looks exactly like the business we already have, very good mines, well equipped, great work forces, great customers, and interestingly, if you were to leave Montana or North Dakota from our mines and go directly north, these are the next groups of mines you'd run into once you got north of the border. They're mining pretty much the same geology as we are. 2

13 This combined entity would make us the sixth largest coal producer in North America. We would be the largest, we believe, operator of draglines in North America. It would give us 27 draglines out of what we think are about 110 in North America. It plays to our expertise as dragline operators, as low-cost providers. We feel that in partnership with our customers and our employees in the new Canadian operation that we can work to be even more efficient and help drive down cost of electricity for consumers in the provinces that are served. We couldn't be more excited about this suite of assets. It's just a really great group of mines and great groups of people and we've been exposed to the folks not only at the mines but in the administrative offices in Edmonton, obviously as well as the folks in Toronto from Sherritt. They're just first-class people all around and they ve been super cooperative through this whole process. I'm going to let questions at the end of our comments, Kevin is going to talk about some of the numbers, but I have to issue a couple of disclaimers here. Canadian accounting principles and Canadian measurement of reserves differ from U.S. GAAP. So, some of the numbers that you see in our press release here today are loose translations. There's not going to be any material changes from those, but it will require a full conversion to U.S. accounting principles and SEC on reserves and Bob will talk about that. We think these are pretty conservative numbers on reserves based on the way we account for them down here. So, that process will be ongoing. The other thing that s obviously missing and we're getting a lot of calls on, is well, what's your capital structure going to look like after this? Until we have an offering memorandum and/or a prospectus on the street, we can't speak to that. What we can say is that we're going to look at the market. We obviously have some thoughts and assumptions which we probably cannot share with you as we sit here this morning, but this deal is going to close based on the fully financed arrangements that BMO and Deutsche Bank have provided the company with and we'll certainly be evaluating what all of our opportunities are. We're not going to be evasive here this morning, but on the other hand, we're not going to trip ourselves up in terms of any SEC disclosures without having the appropriate documents for people to be looking at. So, hopefully you'll understand if we don t go down that path. But we can give you very broad brush view on how we view the transaction. We see this very similar to the Kemmerer transaction, where we levered up in the short term and quickly de-levered over about a 24-month period of time. Obviously, the numbers are much larger here than with Kemmerer. Those are my comments on this transaction. Let me briefly talk about the ROVA transaction. Kevin will also talk a little bit about that. Those of you who have followed us for some time know that ROVA has really been the Sword of Damocles hanging over our head. 3

14 It's a power plant that we own and we have under-market coal contracts that are expiring. If we were unable to restructure the agreement with Dominion, the economics of that power plant would go radically upside down. All the models that bond holders have seen, all the rating agency presentations have assumed that the plant would be, worst-case scenario, shut down, because we obviously, we were not going to run it at a negative. We've been able to restructure that agreement to allow us to operate at a positive EBITDA and profitability here over the next five years, at which time that contract runs out and the plant would be unencumbered. From a contract standpoint, we'd have an opportunity to monetize that asset, and I'll let Kevin talk to the magnitude of that. So, we're a pretty excited group, pretty tired group. People have been working around the clock here for the last several days. I'm going to turn it over to Bob to comment a bit on the assets themselves. Kevin will comment a little bit on a high level on the financials. He'll kick it back to me and then we'll open it up for questions. Bob. Robert King - Chief Executive Officer Thank you, Keith. As Keith said, this coal business aligns perfectly with our business model and our core competencies, and one of our major core competencies is providing low-cost fuel to our utility customers. We work very closely with our customers to ensure that we are all on the same page and that we're all marching in the same direction and we look forward to establishing relationships with our new business partners in that regard. As part of this transaction, we're acquiring seven active coal mining operations. These include the Paintearth, Sheerness, Boundary Dam, Bienfait, Poplar River, Genesse and Coal Valley Mines. In addition, we're getting a mine which is presently in reclamation which is called the Obed Mine. Annual production from these operations is about 26 million tons a year, which basically doubles our production. Along with this, we're also getting an estimated 676 million tons of coal reserves, and as Keith cautioned, these reserves are basically calculated based on Canadian standards and are reported in Sherritt's 2012 Annual Information Form. We believe that with these reserves, that overall for Westmoreland, this will get us over a billion tons of cumulative reserves. Right now, we're reporting about 550 million tons of reserves for Westmoreland. Also included in this transaction are a couple of other businesses that we're pretty excited about. One of them is a char production facility which supplies char to barbeque customers and the other one is a 50% interest in an activated carbon plant with Cabot Corporation in providing activated carbon for things like mercury reduction in power plant gasses and stuff like that. So, we're really excited about the potential for diversification that these businesses may provide. 4

15 Total number of employees coming as part of this is about 1,560. We're definitely looking forward to welcoming them on board and into the Westmoreland family. We've spent a lot of time and diligence looking at these assets and these operations, and from our perspective, our perspective based on that diligence is that these operations are very well managed, they're safe operations, which is fundamentally important to us as our number one core value. And they're environmentally responsible, which is another one of our core values - being environmentally friendly and a good partner with the communities around which we operate. The workforce and management teams are highly experienced. These guys are really good miners, and they're going to really fit well within our organization. The operations also appear to have very good relationships with the employees and unions, and that s another one of our values - basically treating people right, and that goes across the board to all of the relationships that we have with all of our related parties. So, we're also looking forward to establishing contact with the unions and having a dialog with them about how we operate and how we respect what it is they do and what their role is in this. If you look at the prairie operations, the geology and mine methods are very similar to our Texas, Montana and North Dakota operations. The geology is not very complex and utilizes relatively simple dragline mining methods with pretty straightforward reclamation techniques. We have a lot of experience with these kinds of mines as do they, and collectively, we believe that both organizations are going to bring mining practices and experience to the table that can be utilized across the entire combined organization. From a strategic and economic point of view, the prairie operations are strategically located adjacent to customer generating facilities just like we have in the U.S. They have long-term contracts with investment grade utilities. The contracts are structured to provide stable and predictable revenues. This looks exactly like Westmoreland's core business. This is what we do, and that s why these assets are so exciting to us. When you look at the Mountain Division and specifically the Coal Valley Mine, the mountain geology and the mining methods actually look very similar to our Kemmerer operation in Wyoming. The geology is somewhat more complex with dipping seams and requiring more complex mining methods and reclamation methods. But again, we have very good experience with this kind of mining and don t see anything here that would give us any pause. The Mountain operations and the associated port capacity also adds attractive optionality to our core business and provides an entry into what we expect to be a growing export market. That s one of the things as we look out in the future with regard to opportunities that we think this acquisition provides us sort of an intro into those kinds of markets. With that, I think that s basically everything I have to say about the operations for now, and I'm going to turn it over to Kevin and he can talk about numbers a little bit. 5

16 Kevin Paprzycki - Chief Financial Officer Thanks, Bob. Good morning, everyone. When you look at the preliminary combined company, we would have sales between 52 and 53 million tons a year, and again, that represents about a doubling of our business. We're currently estimating similarly that our combined pro forma revenues would also double to around a level of $1.3 billion of revenue per year. Again, I just want to emphasize some caution on that. As Keith mentioned, the revenue estimates are subject to translation for both currency and final accounting standards conversion from IFRS and to U.S. GAAP which we're diligently working on. This transaction fits perfectly into the M&A goals that we've discussed in past calls. First and maybe most importantly, we believe that this will be accretive on a cash flow basis. Second, the shared operations provide incredibly stable and predictable cash flows. Very much like Westmoreland's base business, it's long term, cost-protected contracts, with highly rated customers. We believe that the increase in scale and diversity combined with these stable, predictable cash flows should be a very credit positive step for us, especially when you consider our solution for ROVA which I'll discuss shortly. In terms of the amount of transaction detail we can give you at this point, we're looking at a purchase price of around $435 million [$US] and we'll have the ability to assume $142 million [$US] of capital leases from the seller. Our remaining consideration, bonding collateral requirements, and transaction fees are at present all planned to be financed with our committed financing. We expect this transaction to be a whole lot like the Kemmerer acquisition we did two years back. Except that we're in a much better position both from the liquidity and the leverage situation than we were when we did the Kemmerer transaction. When we did the Kemmerer deal, we took pro forma leverage up to the maximum we could under our senior note indenture and that resulted in about a 3.6 net leverage ratio. And as Keith mentioned, in two years, we've taken out over a full turn of leverage to the point where at the end of Q3, we're sitting below at 2.5 net leverage ratio, right at With the current committed financing we have from BMO and Deutsche Bank, we expect to take our net leverage ratio back up into the range, and again after which probably in a similar timeframe to Kemmerer, we expect to similarly de-lever. As Keith said, longer term, we recognize that this could provide us an opportunity to move towards an optimal capital structure, but right now, we're relying on the committed financing from BMO and Deutsche Bank. I'm going to shift gears a little bit and talk about the financial perspectives of the ROVA transaction and hopefully provide some color that was not in yesterday's release. We're very pleased with the financial outcome here. Over the past three years, ROVA has generated between $10 million and $11 million of free cash flow (annually). With the restructuring that we've put in place and current market power prices, we expect to average somewhere between $7 million and $8 million of free cash flow going forward (annually). 6

17 Some years, the cash flow is higher. Some years will be lower depending on the timing of major maintenance. We'll also benefit from the remainder of the below-market coal contracts. Overall, we've removed the risk of having to procure market coal, which could have increased our cost between $25 million and $30 million and that would have flipped ROVA's free cash flow negative upwards of $20 million a year. So, this has been a negative concern or a negative overlay from the rating agencies, and we feel we successfully addressed this concern in exchange for a pretty minimal reduction in our free cash flows. That s all I had, and now, I'll hand it back over to Keith. People are always asking us where we are cash wise. Kevin, the current projection is in the mid-60s for cash on the balance sheet at either end, is that correct? Kevin Paprzycki - Chief Financial Officer Yes. I always like to keep a little bit of cushion back, but we're probably somewhere in the low to mid-60s right now that we're targeting at year end. So, we're sitting in a fairly liquid position. Some of that cash will be used as a down payment on this transaction. This transaction has a number closing conditions. It needs to go through regulatory approval in Canada, which we expect will take several months and we'll be filing the appropriate documentation for that just after the first of the year. One thing that particularly for those of you who may not know us well, and we're the Westmoreland Coal Company. This is our core competency. This is the only business we're in, coal. And while these assets were non-core for the prior owner, they're very much in the sweet spot of our growth strategy, so we're very, again, excited to get these assets on board. The last thing I'd like to talk about just briefly without this sounding like an Academy Award's presentation, we had some great advisors in this thing. BMO was an outstanding partner throughout this process. A team was led by Jonathan Rose and Tom Dale, Greg Jones, Hadi Kazmi, and the rest of their team; they just did an unbelievable job supporting the company; Dan Chu over at Deutsche Bank, Amy Bowler over at Holland and Hart, the lawyers and Bob Hagerman at Gowlings in Canada and the staffs of both companies, Sherritt and Westmoreland. For all of our shareholders and bondholders, you d have been really proud of the work that the team did on your behalf. I'm real excited about it. As far as integration goes, I will be heading up north of the border here next week once people get back from vacation and make initial greetings to folks. Doug Kathol who's on the call here and I are both dual U.S.-Canadian citizens. I've done business across the border as has he, as have numerous other people in our corporate offices. We intend to run this as an independent operation, but we'll obviously want to leverage competencies both ways. I'm sure there are some things they do better than us and there are some things we do better than them. We're big fans of shared information and platforms and best practices and we look forward to optimizing those opportunities. 7

18 With that, that s the end of our formal presentation. I'd like to open it up for any questions folks may have. Operator (Operator Instructions) Our first question comes from David Olkovetsky of Jefferies & Company. Please go ahead. David Olkovetsky - Jefferies <Q>: Hi, good morning everybody. Congratulations, it sounds like a really interesting transaction. The first question I have relates to, and I apologize... the pro forma capital structure. Can we go through what you anticipate that will look like? I understand you said you have committed financing, but what are your expectations? We indicated in my disclaimers up front, since we do not have an offering memorandum nor a prospectus on the street, we can't speak to what the ultimate capital structure might look like. But, all the information that we've been giving you in terms of pro forma leverage and what not is on the assumption that the bridge would be in place. We'll have what we consider to be the most optimal capital structure once we've had an opportunity to file the appropriate documents. We don t want to trip ourselves up with any SEC issues on this call today. David Olkovetsky - Jefferies <Q>: Gotcha, then this may fall under the same category of disclaimers, but can you guys give us a sense for what the EBITDA generation was from these assets in the LTM period or-you mentioned in the press release that you anticipate that it will be free cash flow positive or that it will be free cash flow accretive. You can kind of extrapolate there on some of the information we did, but we have to get this stuff all convertedthat s a non-gaap measure and we have to first get the IFRS stuff converted to GAAP and then make the non- GAAP reconciliation. So, we intentionally have not published the number, but the purchase price is under our four times maximum leverage that we're bound under our agreement. So, that will give you the ceiling, but it's something below there. David Olkovetsky - Jefferies <Q>: That was going to be my follow-up question. Are there any covenants that you might be coming up against with that transaction? No. 8

19 David Olkovetsky - Jefferies Okay, perfect. I will turn it over, thank you. Operator Thank you. Our next question comes from Lucas Pipes of Brean Capital. Please go ahead. Lucas Pipes - Brean Capital <Q>: Congratulations everybody and happy holidays. My first question is on the contract structure. So, are these by and large similar to the U.S. contracts or are there slight differences? If you could maybe just walk us through it, how this looks like, also the term, how long these contracts are for the ones that you're acquiring, I'd really appreciate that. Bob, on a high level, could you give a summary? Robert King - Chief Executive Officer These contracts are generally longer than the ones we have in the U.S. and run anywhere from 2019 sort of timeframe through Some of them, generally longer and very similar though with regard to the components of the contracts relative to cost recovery and those sort of aspects. I should have mentioned, on our investor relations tab on the website after this call wraps up, we're going to have an IR deck that really charts and graphs in some color that we may have missed in our talk here today. Lucas Pipes - Brean Capital <Q>: Okay, that s very helpful. In terms of the customers, are there-i'm not as familiar with regulatory changes in Canada. Is there anything on the horizon or are these also low cost... power plants or are there any material differences to your current customers in the U.S.? Robert King - Chief Executive Officer These customers are key to the grid in Western Canada, and they are, by nature of the mine mouth model, low-cost producers of electricity. Lucas Pipes - Brean Capital <Q>: Very helpful and then lastly, if I may, and I appreciate you taking my questions. With that export business, has that been close to 4 million tons per year recently and do you have a sense for the economics back at the mine for exports to Asia, and then also, what port are you utilizing on the Western Canadian coast? Robert King - Chief Executive Officer I'm going to let Doug answer that one. 9

20 Doug Kathol - Executive Vice President The numbers have been historically at four million. We may expect a slight reduction. Predominantly, they go through Westshore Terminal in Vancouver with some of the production going through Ridley. Lucas Pipes - Brean Capital <Q>: Could you comment on the net backs at the mine or what you say is the function of the new capital price, what's a good way to model that price going forward? Robert King - Chief Executive Officer It definitely depends on the international settlement pricing and obviously transportation and everything else. Right now, that market is a little flat, but we anticipate that it will be improving over time. Lucas Pipes - Brean Capital Great, well congratulations again and happy holidays everybody. Operator Our next question comes from Brian Taddeo of Robert W. Baird. Please go ahead. Brian Taddeo - Robert W. Baird <Q>: Good morning, happy holidays. I just have a quick one. Just going back to the customers of the offtake plants for the mines. Are there any environmental issues tied to any of the plants? In the U.S., lots of concerns or questions always about having to retrofit plants or shut them down. Any issues with these? Robert King - Chief Executive Officer As part of our due diligence, we did do and had consultants weigh in on what these plants look like from the standpoint of their mine lives and their criticality to the grid. Our analysis indicates that these are all long-lived plants, that they ll be around for a while and that there are no impending environmental issues associated with them. Brian Taddeo - Robert W. Baird <Q>: A couple of other quick ones. Can you talk a little bit about potential synergies here? Any estimates, a ball park as to the synergy you think you could get out of this deal? No, we're not in a position to talk about that at this point, and due to the cost-plus nature of the contracts, a lot of the efficiencies we might get at mine level would be shared with customers. So, we'll be a better position to talk about that post closing of the deal, but at this point we're just looking at it as a stand-alone business we bolt together and we'll figure it out as we move forward. We have a successful history of doing that, but I'm not comfortable going on further than that at this point. Brian Taddeo - Robert W. Baird <Q>: Understood, just one last one. Any conversations with the rating agencies at this point for this one given the scale differential, etc.? Any comments from them yet? 10

21 Well, this is what I can tell you about the rating agencies-there were basically, when we did the original bond deal and of course you know that one pretty well, there were three or four issues that the agencies had. One was the fact that the first time we did the bond deal, we had not been the public marketplace with debt. That s changed. In fact, we did a tag on when we did Kemmerer so we have a nice three-year history of doing exactly what we said we were going to do. They were concerned when they first rated us that we didn t have long-enough reserve lives. We addressed that by adding significant reserves over the last three years. They questioned our ability to handle an acquisition, which we did very successfully when we did Kemmerer, and more importantly, they ve always been very concerned about the ultimate resolution of ROVA and we always had represented that this is the kind of resolution we would get at ROVA, but we felt it had to wait until the time was right and now that has occurred. So, as you may recall, we were the only coal company last year to get an upgrade. We're hopeful that they'll look very favorably upon all the things we've done, and now, the increased business, because they also were concerned about our diversification, the heavy concentration on small number of customers when all of a sudden, we have a much more diverse customer base. That should eliminate any negatives that they associated in the rating process with that. So, we think everything is aligned very nicely for the agencies. We've addressed absolutely every single item that they had concerns about with the exception there's still the WML debt down below the existing bonds, but that amortizes off and we think that's really relatively a moot point now in the whole scheme of things. Brian Taddeo - Robert W. Baird <Q>: If I could, just one last one on ROVA actually. Now, that you ve adjusted the contracts with Dominion, is there still an effort or push to sell off that facility now that you can service the contract with market power? I don't think that you should look at a monetization until the end of the term. That s not high in our list of priorities. The cash flows that it will generate over the next five years are plenty satisfactory to us to keep it going. Although it's non-core, monetization is the ultimate objective. There's not the pressure there would have been at some previous points in our history. Brian Taddeo - Robert W. Baird Understood, thank you very much. Have a great holiday. Operator Thank you. The next question comes from Frank Duplak of Prudential Financial. Please go ahead. 11

22 Frank Duplak - Prudential Financial <Q>: Morning guys, congrats. I just want to make sure I have this right. The purchase price is $435 plus assumed leases or including assumed leases? It includes them. Frank Duplak - Prudential Financial I just wanted the clarification, thank you. Operator Thank you (Operator instructions). The next question is from Matt Farwell of Imperial Capital. Please go ahead. Matt Farwell - Prudential Financial <Q>: Thank you guys, congratulations. Again, just a continuation of the last question. Are there any other assumed liabilities in the purchase price or is the remainder in the form of cash? Kevin Paprzycki - Chief Financial Officer The remainder will be in the form of cash and that s what we're going to rely on the committed financing for. There's bonding collateral built into that number as well as these. So, the math doesn t tie out it totally, but that will include fees and bonding collateral. Matt Farwell - Prudential Financial <Q>: Things like reclamation obligations and OPEB? Yes. Bob, why don t you talk about Obed? That s probably good that we chat about that briefly. Robert King - Chief Executive Officer As part of this agreement with Sherritt, we have been indemnified against all issues associated with the Obed incident, and Sherritt will be reimbursing us for any and all costs associated with mitigation of the issues that results from that. We did diligence on that and we're comfortable that the agreement that we have with Sherritt to coordinate our activities and to jointly determine how we're going to deal with the issues and respond appropriately. We think we have that covered. Matt Farwell - Prudential Financial <Q>: Okay. Can you just clarify what you mentioned earlier in the call in terms of, you mentioned some net leverage numbers? I think you said you're at total net leverage right now of about 2.47 and you think that the transaction will take you to pro forma net leverage of 3.6 to 3.7? 12

23 Yes. And we also indicated we expect to bring it down similarly over the first 24 months, probably bring it down about a turn. Matt Farwell - Prudential Financial <Q>: Okay. Then the other comment in the release with this transaction would be free cash flow accretive. I guess it didn t give us much since this implies that its free cash flow positive? We can't give you much until we can translate numbers into U.S. GAAP and non-u.s. GAAP measurements, mainly EBITDA and talk more about preferred capital structure. There will be more information on this out as we move along. Matt Farwell - Prudential Financial Okay. Well thanks for the updates and we ll look forward to integrating this acquisition next year. Operator Thank you. The next question is from David Olkovetsky of Jefferies & Company. Please go ahead. David Olkovetsky - Jefferies <Q>: Hi, thank you for taking the follow-up and I have actually a few of them. I wanted to talk a little bit more about the various utilities. Are any of them at risk? I know you said you anticipated they're all long-lived. Are any of them at risk for shutdown given current weak pricing, and also if you could give us a little bit of color on what part of the cost curve these guys are or maybe relative to your current operations? Robert King - Chief Executive Officer These are, as I stated earlier, all key to the western grid in Canada. They are low-cost producers of electricity based on the mine mouth model, and they are-from an economic standpoint, they are base load dispatchable plants. They would dispatch basically at the bottom of the curve. David Olkovetsky - Jefferies <Q>: Okay. Are all seven of the operations, I think it's only six that are mine mouth, right, the mountain one is export? Robert King - Chief Executive Officer That s correct. David Olkovetsky - Jefferies <Q>: Are there any major capex requirements associated with these assets coming in the coming years? 13

24 Robert King - Chief Executive Officer As we look through these assets, there are no major capital requirements for any of the prairie operations, which are the lion's share of the value associated with this transaction. With regard to the mountain operations and the Coal Valley Mine, it has a limited amount of reserves presently and will require permitting of additional reserves and some capital in order to extend the life of that mine. That investment obviously depends on what the markets look like and the view of the export markets. We'll be assessing what we think we need to do from a capital standpoint for that operation. This mindset is very similar capital requirements of the profile of what we have in our existing business, so it will dovetail very nicely into what we already do. David Olkovetsky - Jefferies <Q>: So, since this is basically a doubling of the business, can I assume something on the order of the doubling of capex requirement in 2014 versus 2013? That can get lumpy depending on major projects, but over time, I think that s probably safe assessment. David Olkovetsky - Jefferies <Q>: Okay, great. Then with respect to the $435 million acquisition price, I looked through the Sherritt press release and they're indicating $465. That s Canadian dollars. Theirs is in Canadian, ours is U.S. David Olkovetsky - Jefferies <Q>: I didn t realize that the $CAN and the $US were that far off right now. What are you using as your present value of the capital leases? The $142 number. The number in the release is what they would be. David Olkovetsky - Jefferies <Q>: Okay, $142, got it. Then, are there any unfunded pension or medical liabilities, black lung, etc. associated with this acquisition? Kevin Paprzycki - Chief Financial Officer Very, very minimal pension obligation. No post-retirement medical, almost completely immaterial on the pension side and it's a very small obligation and it's almost completely funded. David Olkovetsky - Jefferies <Q>: Are these mines union mines or no? 14

25 Yes, and some of them are the same unions that we deal with currently. David Olkovetsky - Jefferies <Q>: So, what I'm understanding from Kevin's comments is that essentially the unfunded employee-related liabilities that you guys have and also the asset retirement obligations should not increase dramatically from this? Is that a fair assumption or a fair understanding? Kevin Paprzycki - Chief Financial Officer That s correct on the OPEB. However, we will be taking over their reclamation liabilities, and again, that s one of the numbers that we'll have to translate from IFRS into GAAP, but we will be taking over those liabilities. David Olkovetsky - Jefferies <Q>: What's the number approximately in IFRS? Kevin Paprzycki - Chief Financial Officer I think you're looking at probably plus or minus C$150 million total between the Prairie and Mountain mines. David Olkovetsky - Jefferies <Q>: That s of ARO, right, $150 million plus maybe? Kevin Paprzycki - Chief Financial Officer Correct. <Q>: And then you said there's, not de minimis but very little employee-related workers' comp? Kevin Paprzycki - Chief Financial Officer Correct. You can combine those into $151 or $152 [million] Canadian. David Olkovetsky - Jefferies Okay, perfect. Thank you very much. Operator Thank you. The next question comes from Nelson Obus of Wynnefield Capital. Please go ahead. Nelson Obus - Wynnefield Capital <Q>: You mentioned that Obed would be indemnified by the seller. So, is that $150 million an amount that would be indemnified? We're referring to the spill of water that that occurred at one of their facilities (Obed Mine). There was a discharge into a river and they're in the process of remediating that. That s what we were referring to. 15

26 Nelson Obus - Wynnefield Capital <Q>: Yes, and you're indemnified for that or not? Yes. But that s not $150 million. It's not anything even close to that. Nelson Obus - Wynnefield Capital <Q>: The $150 million are other reclamation liabilities? Yes, just standard reclamation from the mines. Nelson Obus - Wynnefield Capital <Q>: Which would occur over what period? Long periods of time. Kevin, do you want to guesstimate the life on that? Kevin Paprzycki - Chief Financial Officer It is a long period of time. Obviously, with the customer lives going way out into 2020s and 2030s, as Bob indicated, the reclamation is tied way out there. It's generally done over four years and there are offsetting bond collateral requirements that you can release as you execute the reclamation. So, I think its way out in the future and it will be offset by release of the bond [collateral]. Nelson Obus - Wynnefield Capital Okay, thanks. Operator Thank you. The next question is from John King of Western Asset Management. Please go ahead. John King - Western Asset Management <Q>: Actually, I think most of my questions have been answered, but just one clarification on the asset retirement, that C$150 or C$140 million number, that s a gross liability not including collateral or held against the obligation? Is that right? Kevin Paprzycki - Chief Financial Officer That is correct. John King - Western Asset Management <Q>: Do you have a number handy that you can share on how much collateral is held against that? Kevin Paprzycki - Chief Financial Officer Not at this point. 16

27 John King - Western Asset Management Okay, great. That is all I had at this point. Thank you. It looks like that was the last question we had in the queue. As always, we're available offline. Clearly, today we have people running around talking about the deal as well as hopefully getting home to families, so we wish everybody a good holiday season and we'll certainly in the forthcoming days be having more information come out. Operator Thank you. Ladies and gentlemen, this concludes today's conference call. If you would like to access this call for digital replay, you may dial and enter conference ID number Thank you and have a good day. 17

28 Westmoreland Announces Transformational Acquisition of Sherritt s Coal Operations December 24, 2013 Westmoreland Coal Company westmoreland.com NASDAQ:WLB

29 Presenters Keith Alessi Executive Chairman of the Board Bob King President and Chief Executive Officer Kevin Paprzycki Chief Financial Officer & Treasurer 1 Westmoreland Coal Company

30 Disclaimer Forward Looking Statements This document may contain forward-looking statements. Forward-looking statements can be identified by words such as anticipates, intends, plans, seeks, believes, estimates, expects and similar references to future periods. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. They are statements neither of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include political, economic, business, competitive, market, weather and regulatory conditions and the following: Changes in our post-retirement medical benefit and pension obligations and the impact of the recently enacted healthcare legislation; Changes in our black lung obligations, changes in our experience related to black lung claims, and the impact of the recently enacted healthcare legislation; Our potential inability to expand or continue current coal operations due to limitations in obtaining bonding capacity for new mining permits; Our potential inability to maintain compliance with debt covenant and waiver agreement requirements; The potential inability of our subsidiaries to pay dividends to us due to restrictions in our debt arrangements, reductions in planned coal deliveries or other business factors; Risks associated with the structure of our power plants' contracts with its lenders, coal suppliers and power purchaser, which could dramatically affect the overall profitability of our power plants; The effect of Environmental Protection Agency inquiries and regulations on the operations of power plants; The effect of prolonged maintenance or unplanned outages at our operations or those of our major power generating customers; Future legislation and changes in regulations, governmental policies and taxes, including those aimed at reducing emissions of elements such as mercury, sulfur dioxides, nitrogen oxides, particulate matter or greenhouse gases; and Other factors as described in Risk Factors found in our Annual Report on Form 10-K. Any forward-looking statements made by us in this document speak only as of the date on which they are made. Factors or events that could cause our actual results to differ may emerge from time-to-time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise, except as may be required by law. In addition, Canadian reserve reporting and IFRS auditing standards differ from the standards applicable to public reporting companies in the United States. As such, the numbers reported herein may differ in immaterial amounts from the final numbers that will be reported following the IFRS to GAAP financial statement conversion process. 2 Westmoreland Coal Company

31 Westmoreland to Acquire Sherritt s Coal Operations Westmoreland Coal Company ( Westmoreland ) has entered into an agreement to acquire the Prairie and Mountain coal mining operations of Sherritt International Corporation ( Sherritt ) for approximately $435 million $293 million in cash consideration $142 million in capital lease assumptions BMO Capital Markets and Deutsche Bank have provided Westmoreland with fullycommitted financing that will enable Westmoreland to fund the full purchase price and the reclamation bonding obligations and transaction expenses The transaction is unanimously approved by the Boards of both companies Closing is expected towards the end of Q subject to certain conditions Note: All figures in presentation in US$ unless otherwise noted 3 Westmoreland Coal Company

32 Building a Diversified North American Coal Leader Westmoreland Coal Company Coal Operations Westmoreland Coal Company Pro Forma Description Leading market position as a low-cost fuel provider Established position in minemouth business and supplier to investment grade utilities Executes a unique contract business model to generate consistent cash flow Award-winning safety and environmental performance Strong management team with proven track record of integrating acquisitions and operating mine-mouth business model Canada s largest thermal coal producer Leading position in minemouth business and supplier to investment grade utilities Established exporter of coal to Asian markets with committed port capacity Leader in safety and reclamation Operates in Western Canada, considered to be one of the most attractive mining jurisdictions globally Leading North American supplier of coal to minemouth power plants Long-term cost-protected contracts provide cash flow stability and visibility Geographically diversified company in two highly attractive mining jurisdictions Established exporter of coal to Asian markets with committed port capacity Strong management team and workforce LTM Coal Sales (Mst) LTM Revenue (US$) $660 mm $736 mm ~$1.3 bn (1) No. of Operating Mines 6 6 (Prairie), 1 (Mountain) 13 Reserves (2) (Mst) ,229 Source: Company filings 1. Sherritt revenue is a US GAAP estimate, excludes Highvale and is converted to US$ based on the exchange rate of each period and aggregated to an LTM figure. 2. Reserves as of 31-Dec Westmoreland Coal Company

33 Expanded Production and Geographic Footprint Top 10 North American Coal Producers 2012 Production Peabody 193 Arch Coal 137 Coal Valley Genesee Paintearth Sheerness Bienfait Poplar River Boundary Dam Savage Absaloka Beulah Rosebud Alpha Cloud Peak Murray Energy Kemmerer (1) PF Westmoreland 49 Westmoreland Headquarters Alliance Luminant NACCO 28 Jewett Westmoreland Operations Teck 27 Prairie Operations Mountain Operations (mm tons) Source: EIA, Company filings 1. Reflects 2012 production on a pro forma basis. Coal sales for the LTM period total 52 million tons. 5 Westmoreland Coal Company

34 Summary of Transaction Terms Transaction Definitive agreement with Sherritt and certain Sherritt subsidiaries to acquire 100% interest in Sherritt s Prairie and Mountain businesses via a plan of arrangement The portfolio of coal and potash reserves and royalties will be transferred to Altius Minerals Corporation Purchase Price Total purchase price of $435 million including: $293 million for acquisition of Prairie and Mountain operations $142 million for assumption of capital leases Financing BMO Capital Markets and Deutsche Bank have provided Westmoreland with fully-committed financing Will fund the full purchase price and the reclamation bonding obligations and transaction expenses Key Agreement Terms Customary reps, warranties, interim covenants and termination provisions Sherritt to fully indemnify Westmoreland with respect to the Obed Mountain Mine Release liabilities Transaction is not contingent on the completion of the royalty transfer to Altius Minerals Key Approvals Court of Queen s Bench of Alberta Investment Canada Canadian Competition Act Not subject to Westmoreland or Sherritt shareholder approval Indicative Timetable Submit Investment Canada and Competition Bureau filings in January 2014 Closing is expected towards the end of Q subject to certain conditions 6 Westmoreland Coal Company

35 Overview of Sherritt s Coal Assets Prairie Operations Six surface mines that supply adjacent power plants Long-term supply contracts protect revenue and margin Majority of revenue derived from investment grade utilities Coal is the primary source of electricity in Alberta and Saskatchewan Includes two value-added product streams that provide an entrance into both the industrial and environmental markets 50% interest in an activated carbon plant Mountain Operations Includes the producing Coal Valley Mine Produces and exports a high-quality, low sulfur, thermal coal sold mainly into the seaborne market Exports primarily serve Pacific Rim markets and are sold to utility customers and large commodity traders Majority of production is transported by rail to port facilities in British Columbia On-site wash plant with a capacity of 4.4 million clean tons/year Potential to expand reserves and significantly increase mine life Char plant 2012 Prairie Highlights 2012 Mountain Highlights Coal Sales (1) Revenue (2) Reserves Coal Sales Revenue (2) Reserves tons tons tons tons 22 $ $ million million million million million million 1. Production is exclusive of Highvale. 2. Revenue is a US GAAP estimate, excludes Highvale and is converted to US$ based on the period end exchange rate. 7 Westmoreland Coal Company

36 Westmoreland s Plan for Sherritt s Coal Assets Westmoreland plans to leverage its experienced team to: Ensure business continuity and control Implement transition and synergy initiatives Integrate operations teams Initiate implementation of Westmoreland s operating and capital spending philosophy Execute upon identified opportunities for additional cost and capital savings Key operational areas of focus for cost improvements include the following: Prairie Improved dragline procedures and utilization Improved capital and operational planning Mountain Improved coal segregation, cleaning and blending practices Improved coal recovery and plant availability Implementation of use of augers to increase resource recovery and lower costs Improved capital and operational planning 8 Westmoreland Coal Company

37 Transaction Rationale Significantly Increases Westmoreland s Scale Annual production from Prairie and Mountain operations will double Westmoreland s production creating the 6 th largest North American coal producer as measured by 2012 production Long mine lives supported by a combined reserve base of over 1.2 billion tons will provide sustainability and will support Westmoreland s long-term cash flows Highly Complementary to Existing Operating Model Complementary to Westmoreland s core surface mining, mine-mouth business model with long-term cost protected contracts Opportunities identified to further optimize the Prairie and Mountain operations based on Westmoreland s experience at existing operations Safe and environmentally responsible operations Enhances Westmoreland s Asset Portfolio Asset diversification into Canada, one of the world s most favorable mining jurisdictions Mountain operations provides entry point into the export market and strategic access to port facilities Existing workforce and management teams at the Prairie and Mountain operations are expected to be highly complementary to Westmoreland s team Financially Accretive to Westmoreland The acquisition is expected to be financially accretive to Westmoreland on a free cash flow basis Opportunities have been identified to further optimize the mining operations based on Westmoreland s experience, synergies and economies of scale On a combined basis, the pro forma company s estimated LTM U.S. GAAP revenue would have been approximately US$1.3 billion Note: Sherritt revenue based on US GAAP estimate, excludes Highvale and is converted to US$ based on the exchange rate of each period and aggregated to an LTM figure. 9 Westmoreland Coal Company

38 High Quality, Stable Customer Base Stable cash flows from long-term cost-plus or cost-indexed contracts Reduced exposure to underlying commodity price At Westmoreland: 95% of sales under long-term cost-plus or cost-indexed contracts 63% of contracts include fixed cost reimbursement even if tons are reduced Expect contracts to be extended with longterm customers Majority of revenue for Westmoreland and Prairie derived from investment grade utilities Long Lived Reserves and Contracts with High Quality Stable Customers Prairie Operations Existing Westmoreland Operations Reserve Life Contract Life Customer Rating Rosebud Kemmerer Beulah Savage Jewett Absaloka Genesee Poplar River Boundary Dam Sheerness Paintearth Weighted Avg. Contract Life: 2022 Power Plant Customer Moody's / DBRS S&P Colstrip PPL, Puget Sound Baa3, Baa2 BBB, A- Naughton PacifiCorp Baa1 A- Coyote Otter Tail Baa3 BBB Lewis & Clarke MDU n.a. BBB+ Limestone NRG Energy Ba3 BB- Sherco Xcel Energy Baa1 A- Genesee Capital Power n.a. BBB- Poplar River SaskPower AA n.a. B. Dam, Shand SaskPower AA n.a. Sheerness ATCO, TransAlta n.a., Baa3 A, BBB- Battle River ATCO n.a. A 10 Westmoreland Coal Company

39 Proven Record of Acquisition Integration The Kemmerer mine was acquired from Chevron in January 2012 Added 118 million tons of reserves Significantly enhanced financial performance and exceeded guidance Majority of production is committed and priced under cost-plus contracts minimizing downside exposure Signed new six-year labor agreement driving operational and productivity improvements Productivity (1) Mining Cost per Ton Mine Citations Labor Grievances Reportable Incidents 14% 11% 45% 77% 59% Kemmerer integration has exceeded expectations with strong improvements in productivity, costs, and safety 1. Tons per man hour. 11 Westmoreland Coal Company