NEMI and Aviva to merge, creating a growth-oriented international coal and energy business.

NEMI Northern Energy & Mining Inc. and Aviva Corporation announce that they have entered into a merger implementation agreement to combine the businesses of the two companies to create a new growth-oriented international coal and energy group. The combined entity will provide investors with exposure to operating and development stage assets across attractive metallurgical and thermal coal projects.

The Merger is expected to be completed by way of an Aviva scheme of arrangement in Australia, with Aviva shareholders to receive 0.59 NEMI shares (in the form of “CHESS Depository Interests” or “CDIs”) for each Aviva share they hold at completion. It is intended that upon the completion of the Merger, NEMI will change its name to reflect the expanded scope of its business. The merged group will maintain its primary listing on the Toronto Stock Exchange and will apply for a listing on the Australian Securities Exchange and the Botswana Stock Exchange. Existing shareholders of NEMI and the former shareholders of Aviva will each hold approximately 50% of the expanded share capital of the merged group at closing on a diluted basis taking into account NEMI’s outstanding convertible debentures. The key terms of the Agreement (including conditions to completion) are summarised in the Annexure to this announcement.

The Merger will create a diversified coal and energy producer and developer, with significant growth potential, that will benefit from:

– A complementary development pipeline providing for superior growth potential with:
i. Peace River Coal (which NEMI has an interest in) having recently entered commercial production and its inherent expansion opportunities;
ii. Coolimba Power (which Aviva has an interest in) moving through engineering and regulatory approvals; and
iii. Mmamantswe (which Aviva also has an interest in) providing for longer term power and coal production potential;
– Cash flow potential and a strong balance sheet with the ongoing ramp- up of the Peace River Coal operations and a combined cash balance of approximately C$25 million currently;
– Enhanced market positions with a diversity across geographies (Canada, Australia and Botswana), coal products (metallurgical and thermal) and capital markets (TSX and ASX listings);
– An expanded and experienced board and management team with a mix of operational, technical, corporate and financial skill sets from both the resource and power sectors; and
– A continued strategic focus on organic growth, pursuit of attractive opportunities, and beneficial partnering strategies, all as part of an over-riding drive to create shareholder value.

Pat Devlin, President and CEO of NEMI, said “When we look at the landscape of parties active in the coal development arena globally with whom we could partner to grow our business and create value Aviva easily stands apart from the rest in terms of complementary assets, management team and overall fit. We believe we will be positioned as a leading growth-oriented coal and energy producer with a global mandate, an outstanding inventory of coal resources, key top-tier partners, and managerial and technical skills to drive future growth. Despite the current market difficulties, I’m confident in the fundamentals of the Merger and the capabilities of our combined team.”

Lindsay Reed, CEO of Aviva, added “The Merger represents a true win-win situation for our companies as we are bringing together symbiotic assets, people skills and shareholders. Through this combination we expect to accelerate growth and capitalize on the strength of each business in the development of both metallurgical and thermal coal deposits. I look forward to what we can achieve in the short and long term.”

Each of the NEMI and Aviva board unanimously recommend their shareholders vote in favour of all resolutions to be proposed at their respective shareholder meetings to approve the Merger, subject to there being no superior proposal, no material adverse changes, prescribed occurrences, warranty breaches or breach of the conditions of the Agreement requiring the parties to have a certain cash position, and in the case of Aviva, an independent expert finding that the Merger is in the best interests of Aviva shareholders.

Merger Ratio and Current Market Conditions

NEMI and Aviva have considered and investigated the possibility of a business combination for several months. The recent market turmoil has negatively affected the share prices of both companies with significant and volatile share price movements. Despite persistent market volatility, the management teams and boards of NEMI and Aviva have affirmed their initial assertion of the combination as being a true merger of equals. Throughout the period of negotiations, relative values were assessed based on both market values using trailing volume weighted average prices over various time periods, and on asset reviews focused on the intrinsic value of projects.

The agreed merger ratio of 0.59 NEMI shares per Aviva share is largely in-line with the ratio of trailing 30-day volume weighted average prices as of October 17, 2008, being C$0.43 for NEMI on the TSX and A$0.32 for Aviva on the ASX.

The boards of both NEMI and Aviva remain very excited by the overall prospects and improved financial strength for the merged group. Management’s view is that hard coking coal and energy market fundamentals are robust, and that these markets are expected to continue to remain attractive over the medium to long term.

Production and Development Assets

Upon completion of the Merger, the combined business will have an attractive suite of projects in favourable jurisdictions with strong partners. Management’s near term objective will be to focus on generating value from this portfolio through ongoing production optimization and concerted development efforts:

Peace River Coal (Canada) – Located in north-eastern British Columbia, the Peace River Coal Limited Partnership (“PRCLP”) operates
the Trend metallurgical coal mine, which was brought into commercial
production in early 2008, and is ramping up towards a permitted
mining rate of 2 million tonnes per year. A technical report on the
Trend full mine feasibililty, dated November 16, 2005 and prepared by
Norwest Corporation, is filed on www.sedar.com. The partnership also
holds exploration licences over the neighbouring Roman deposit and
nearby Horizon deposit as well as a 50% interest in the Belcourt
Saxon joint venture. Under the terms of the partnership agreement and
due to differing cash contributions of the PRCLP partners during the
year, a final calculation of ownership interests will be undertaken
after year end, however NEMI’s current partnership interest in PRCLP
is estimated at approximately 17%.

Coolimba Power (Australia) – The project is a 400MW integrated energy
development in the mid-west region of Western Australia,
approximately 300km North of Perth, which will be fuelled by Aviva’s
coal deposit located 20km south of Eneabba where reserves of
72 million tones of thermal coal have been defined. The location has
the advantage of low cost fuel, available water and adjacent
infrastructure. Coolimba is expected to be a base load generator
employing leading emissions technology for water, sulphur and carbon
dioxide. Aviva recently announced a joint development agreement with
significant global independent power company, AES Corporation, as
partner for Coolimba Power.

Mmamantswe (Botswana) – Aviva is earning a 90% interest in the
Mmamantswe project in Botswana where, earlier this year, it outlined
an initial inferred resource estimate of 1.3 billion tonnes of low-
sulfur coal. Drill programs are ongoing and Aviva has recently been
qualified, in consortium with the GDF SUEZ group, a major player in
global power solutions, to submit a proposal in respect of a baseload
IPP program by South Africa’s government owned utility, Eskom.

Board and Management

The board and management structure of the combined group will draw on the
expertise of both businesses. Senior management is expected to include the
following:

Pat Devlin (Executive Chairman) – Pat currently serves as President
and Director of NEMI. He was a securities lawyer for 25 years and has
been President of NEMI for the past five years.

Lindsay Reed (President & CEO) – Lindsay has more than 20 years
experience in the resource sector as a mining engineer, resources
analyst and business development executive.

Robert Kirtlan (Executive Director, Corporate Development) – Robert
has 15 years company management experience and spent seven years in
Australian and global mining investment banking in Perth, Sydney and
New York working for major global investment banks with a specialist
role in the mining and natural resources sector.

Stephen Jones (CFO) – Stephen is a Chartered Accountant with over 15
years experience. He worked as an auditor with Arthur Andersen in
Australia and overseas in a diverse range of industries. Before
joining Aviva, he was Finance Manager for Portman Ltd. responsible
for project analysis, corporate reporting and treasury functions.

Mark Chatfield (General Manager, Energy) – Mark was appointed to
Aviva in May 2007 to drive the development of the Coolimba coal
deposit and power station. He has more than 30 years experience in
the energy industry, both in Australia and abroad.

Richard Harris (General Manager, Energy Development) – Richard was
appointed by Aviva in September 2007 to manage all licensing,
commercial and external affairs aspects of the Coolimba Power
project. Richard has nearly 30 years experience in the Western
Australia energy and resources industries, both in private and public
sectors.

The board of the combined group will be reconstituted with three representatives from each of NEMI and Aviva. The appointees are expected to be Pat Devlin as Executive Chairman, Lindsay Reed as President and CEO, Robert Kirtlan as Executive Director – Corporate Development, and non-executive appointees, John Byrne, Durand Eppler, and Shaun McRobert. These individuals provide a broad range of expertise, including broad resource sector and coal industry experience, project management, financing, legal, commercial and corporate governance skills.

Development and Growth Strategies

Although the PRC mine achieved commercial production at the beginning of 2008, and is currently generating an operating profit, the operation has not yet achieved the permitted production rate of 2 million tonnes per year. The PRCLP is currently undertaking a transition from contractor to an owner-operated mining fleet which is targeting higher productivity and coal recoveries. Similarly, efficiencies and upgrades are being undertaken in the plant to achieve greater throughput and plant availability. The PRCLP development area has several deposits under consideration for development expansion with a longer term production goal of 4 million tonnes per year. A significant advantage of the PRCLP site is its immediate access to rail and port infrastructure and preliminary assessments of development options are expected to be completed over the coming six months. Separately, the PRCLP’s 50% interest in the Belcourt Saxon joint venture (with partner Western Canadian Coal), is also undergoing early stage economic studies.

The Coolimba Power project is advancing simultaneously through the various engineering, customer off-take, financing and permitting activities. The project was bolstered by the recent attraction of AES Corporation as the development partner with a joint development agreement signed on September 15, 2008. Current timelines envisage a financial close on the project late in 2009.

Mmamantswe, although early in project assessment, has the advantage of being a large medium grade thermal project with capacity and proximity to infrastructure to develop an export market for its coal together with a power development. Aviva was recently approved by Eskom’s pursuant to a Request for Qualification for independent power projects. The accepted submission was prepared in conjunction with a subsidiary of the GDF SUEZ group and focused on a 1,000MW power plant development. It is expected that a request for proposals will be issued by Eskom in the near future. Water drilling is currently underway and ongoing resource evaluation will be undertaken in 2009 along with preliminary economic studies.

The directors of both NEMI and Aviva believe that as a merged group additional attractive options will be assessed as opportunities for further growth and value creation.

Details of the Transaction

The Merger is expected to be carried out by way of a scheme of arrangement in Australia under Part 5.1 of the Corporations Act 2001, whereby NEMI will acquire all of the issued shares of Aviva (the “Scheme”). Under the Scheme, consideration received by the Aviva shareholders will comprise 0.59 CDIs (each representing 1 NEMI share) to be quoted by ASX for each issued and outstanding Aviva share they hold at the transaction record date. The Scheme will result in Aviva becoming a wholly-owned subsidiary of NEMI. Based on the number of Aviva shares currently on issue, the Merger will involve the issuance of approximately 70 million NEMI shares (and corresponding CDIs), which equates to 55% of NEMI’s shares outstanding (or 50% taking into account the NEMI shares underlying NEMI’s outstanding convertible debentures). The Scheme will have no impact on NEMI’s outstanding convertible debentures.

Each of NEMI and Aviva has agreed to not solicit a competing offer to the Merger and to use their best efforts to obtain necessary consents and approvals to effect the Merger. Each company has also agreed to pay a break fee amounting to C$1 million (reflecting an estimate of transaction costs) to the other party under certain circumstances. In addition, each company has granted the other party the opportunity to match (within a limited period of time) any competing offer that may arise.

The completion of the Merger will be subject to a number of conditions, including the approval of Aviva shareholders at the Scheme meeting, and by the NEMI shareholders in respect of the share issuance as consideration under the Scheme and certain changes to its constating documents to allow for an ASX listing. Both shareholder meetings are expected to be held late December 2008 and January 2009. The boards of both companies have unanimously agreed to recommend the Merger to their respective shareholders in the absence of a superior proposal. Other transaction conditions are customary, and include a favourable report by an independent expert to the shareholders of Aviva, and the approval of the TSX, ASX, ASIC and the relevant Australian Court. The key terms and conditions of the Agreement are set out in the Annexure to this announcement.

It is intended that Aviva’s existing options be cancelled and replaced with options issued by NEMI. The number of NEMI options to be issued in replacement of the Aviva options will reflect the Merger share exchange ratio described above or as otherwise agreed by both NEMI and Aviva, while the exercise price will reflect the exercise price of the existing Aviva options, adjusted in accordance with merger ratio and the foreign exchange rate between the Canadian and Australian currencies, unless otherwise agreed. Additionally, to properly incentivize and align the management and board of the combined business, the companies have agreed that NEMI will provide an additional grant of 3,247,000 NEMI options at completion to certain board members and management.

Full details of the transaction will be included in the formal Scheme Booklet and Management Information Circular to be filed with the regulatory authorities and mailed to Aviva and NEMI shareholders, respectively.

Canaccord Adams acted as financial advisor to NEMI and Borden Ladner Gervais LLP and DLA Phillips Fox are providing NEMI with legal advice. Aviva has retained RBC Capital Markets as financial advisor and has appointed BDO Kendalls as independent expert to provide an opinion to Aviva shareholders. Deacons and Lawson Lundell LLP are legal advisors to Aviva.

Conference Calls

NEMI and Aviva will hold conference calls at 8:00 am Vancouver time on Wednesday October 22nd and at 8:00 am Perth time on Thursday October 23rd to allow shareholders, securities analysts and investors the opportunity to hear management discuss the Merger. A presentation in respect of the Merger will be available from Aviva’s website at www.avivacorp.com.au in advance of the calls. Conference call details are as follows:

Canadian call: 8:00 am (Pacific Daylight Time)/11:00 am (Eastern
Daylight Time), Wednesday October 22nd
Dial in: 416-915-5763 or toll free on 1-800-595-8550

Australian call: 11:00 am (Western Standard Time)/2:00 pm (Eastern
Summer Time), Thursday October 23rd
Dial in details will be provided in advance

About NEMI

NEMI is a mine development company focused on the exploration, development and production of metallurgical coal assets in northeast British Columbia. NEMI’s assets as at June 30, 2008 consist of its interest in the PRCLP, and working capital. As at the date of this release, NEMI has 57,869,745 shares outstanding, C$11,900,000 of convertible debentures with a conversion price of C$0.90, and options and warrants outstanding over a total of 1,500,000 shares.