Hillsborough Resources (HLB)

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Major news - This is the reason the stock has been going up.

Hillsborough Resources: Hillsborough Announces Finalization of Definitive Agreement With Anglo Coal
2/6/2006

VANCOUVER, BRITISH COLUMBIA, Feb 6, 2006 (CCNMatthews via COMTEX) --
Hillsborough Resources Limited (TSX:HLB) is pleased to announce the finalization of a Coal Projects Agreement with Anglo Coal, a division of Anglo American plc (LSE:AAL), in respect of Hillsborough's Five Cabin and ancillary coking coal properties located in Northeast B.C. This represents the conclusion of the definitive agreement anticipated by the previously-announced $4.5 million transaction bridge loan from Anglo Coal entered into at the end of 2005.

The Coal Projects Agreement covers nine of the eleven coal properties Hillsborough holds in Northeast B.C. Under the agreement, these properties have been grouped into two project areas. The first is the Horizon group, comprising the Barbour, Horizon and Northridge blocks of the Five Cabin property as well as the Murray and Waterfall properties, and which includes the Horizon Mine area on which Hillsborough has already initiated pit design and mine planning work. The second group, to be known as the Murray River Group, includes the Southridge area of Five Cabin as well as the Tent Fire, Prospect, Turning Mountain, Mesa, Reesor and Bullmoose properties and will form the basis of the new MRG Joint Venture between the parties.

Under the Coal Projects Agreement, Hillsborough will continue its current work with respect to the Horizon group on developing the mine plan and feasibility study in respect of the Horizon Mine. The $4.5 million transaction bridge financing is now converted into a three year term loan agreement, secured except in limited circumstances with recourse only against the Horizon group properties and with interest accruing at the rate of LIBOR plus 1%. During the three year period, at such time as Hillsborough reaches a decision to develop a mine in respect of the Horizon group, Anglo Coal will have the option to convert the loan and accrued interest into a 60% interest in the Horizon group. The mine would then be developed under the Horizon Coal Joint Venture with the participants funding their proportionate interests, and to the extent the cost to Hillsborough of procuring a development decision exceeds $2.5 million from the date the Coal Projects Agreement takes effect it will be credited for such excess against its share of future development costs. If Anglo Coal does not convert, then with certain limited rights of recovery their option to earn into the Horizon group will expire and Hillsborough will have one year within which to repay the loan.

Under the terms of the MRG Joint Venture, Anglo Coal is assuming immediate responsibility for managing the continuing exploration and development of the Murray River Group properties. By funding the first $5 million of exploration on these properties within three years, Anglo Coal will vest a 51% interest in the Murray River Group. By increasing that expenditure level to $8 million within the three year period, either through further exploration and development or by paying or crediting Hillsborough for any shortfall, Anglo Coal will increase its interest to 60%. The properties would then continue to be developed under the MRG Joint Venture with the participants funding their proportionate interests. At such time as a decision is reached to develop a mine on the Murray River Group properties, Anglo Coal may elect to pay Hillsborough an additional $5 million and Anglo Coal's interest will then increase by a further 10%. In any event, on reaching a decision to develop a mine on the Murray River Group properties, Hillsborough will have the right to elect that its contribution to the development costs be funded in full either by a project loan from Anglo Coal on terms that include bearing interest at the rate of Anglo Coal's cost of funds plus a margin to be set at the time, through project finance to be arranged by Anglo Coal using reasonable commercial endeavours and based on then-prevailing market conditions, or through financing arrangements made by Hillsborough itself.

Hillsborough has been granted a mine gate royalty over all properties, with the rate over the main properties comprising the two groups being 1%, and the agreement makes no provision for Anglo Coal to take an equity position in Hillsborough. Anglo Coal Marketing Limited is appointed as exclusive marketing agent for a minimum five year term from the time when coal is produced from a mine developed by either of the Joint Ventures. Hillsborough has also renegotiated the terms by which it will complete the acquisition of the property interests from the original vendor, altering the amount of consideration payable and the timing of when consideration payments are triggered to more closely align with the stages of the Coal Projects Agreement. Final effectiveness of the Coal Projects Agreement remains subject to certain limited conditions precedent, including approval of the Toronto Stock Exchange, which are expected to be completed shortly.

"We are very pleased to successfully conclude our negotiations with Anglo Coal," said David Slater, President & CEO of Hillsborough Resources Limited. "We look forward to continuing the advancement of these two excellent project areas, and through this new relationship with Anglo Coal we will leverage our joint efforts to develop what is hoped will be the premier metallurgical coal producer of the North East B.C. coal fields."

Anglo Coal is an international coal mining company, with interests in operations in South Africa, Australia, Venezuela and Colombia producing in excess of 90 million tonnes of coal per annum. The Anglo American group of companies is involved in the mining of, among others, gold, platinum, diamonds, base metals, iron ore and other industrial minerals.

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, and the Crossville underground coal mine in Tennessee serving the regional power utility and industrial markets. We are also developing substantial metallurgical coal properties near Tumbler Ridge in the Northeast of British Columbia, as well as the Bingay Creek metallurgical coal project in the Elk Valley region of Southeast British Columbia.

David J. Slater, President & Chief Executive Officer