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Allegiance Coal provides 4Q21 activities report

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World Coal,

Allegiance Coal has provided an activities report for the quarter ending 31 December 2021.


  • Coal sales for the December quarter totalled 68 000 t generating US$8 million in revenue, a significant increase from US$1.7 million generated in the September quarter driven by the commencement of export sales. Coal sales for the March quarter are forecast to be 133 000 t based on coal sold and committed for delivery with revenue forecast to increase threefold on the December quarter.
  • Black Warrior run-of-mine production (ROM) for the quarter totalled 51 000 t vs 48 000 t for the prior quarter. The increase was due in part to the arrival in November of the new 3600 Hitachi excavator replacing the 1200 Hitachi in waste rock removal. More significant productivity gains are anticipated with the arrival of the 150 t dump truck fleet in January and February.
  • New Elk ROM production for the quarter totalled 77 000 t, down 21% from 98 000 t in the prior quarter. The reduction was due to a decision to realign the underground Main headings. Realignment of the headings will provide quicker access to panel mining and overall better mine development and production. The decision was taken to do this in the December quarter while the mine continued to build its work force and manage the impact of COVID so that when both production units are fully manned, the mine would be set up for both units to optimise productivity.
  • That was a prudent decision with New Elk underground production work force numbers increasing substantially over the last month following a sustained recruitment campaign in the December quarter to the point where the mine is now fully manned with two production units, delivering four production shifts per 24 hour day, five days per week as of 1 February 2022. The increase in production shifts coupled with a better mine layout is anticipated to lead to a significant improvement in production both immediate and long term, subject of course to successfully managing the ongoing impact of COVID.
  • Carbonisation tests undertaken on Black Warrior’s premium Mary Lee Blue Creek seams confirmed a CSR greater than 60% validating the coals’ status as a hard coking coal and has led to a 20 000 t trial shipment to a European steel mill this quarter which, if successful, could lead to a term supply contract based on high vol A index pricing.
  • The Tenas EA application due to be lodged in December 2021 is now likely to be lodged in February as the company awaits the last two environmental impact reports to be delivered by consultants.
  • The price outlook for both high vol A and high vol B remains strong, currently sitting at US$388/t and US$348/t respectively.
  • While the COVID pandemic continues to impact operations, the company has effectively pivoted to optimise opportunities making good progress in setting up its operations for a major step change this quarter.

Chairman and CEO, Mark Gray, said: “I am very pleased with progress to date despite the challenges we face due to the COVID pandemic. Loading our first cargo and completing our first sale on the seaborne market was a significant event and I thank our staff for their efforts notwithstanding the challenges around us. We have two cargos sold for delivery this quarter (one already loaded and delivered) plus a trial cargo agreed subject to documentation for delivery this quarter as well, enabling revenue to more than triple this quarter.”

“It proved a wise decision to realign our two underground main headings at New Elk in the quarter enabling our two fully manned production units to now enjoy long straight driveage this year. That coupled with excellent progress at Black Warrior gives me great confidence we will achieve our q/q production and revenue targets very quickly this quarter. While Black Warrior is already tracking very close to its targets, we will revise New Elk’s targets in February once our two production units have settled into production and our work force numbers have settled following the recent arrivals.”

“It goes without saying, March quarter 2022 will be a very significant step in Allegiance Coal’s growth.”

New Elk update


ROM production in the December quarter tracked as planned with October surpassing September. A decision however was made in the quarter to realign the Main headings rather than later this year. The company is happy with the realignment, a one-off event, that will improve productivity in the short, medium, and long term.

The point of developing two sets of Mains was to accelerate the introduction of a second production unit to increase overall production tonnes before sub-mains and panels could be established.

Mains are life-of-mine infrastructure that require better and higher cost roof support, road construction, belting and structure, and overall higher maintenance costs. Sub-mains and panels are temporary structures closed and sealed when mining is complete and therefore are lower cost and significantly more productive.

While confronted with manning constraints in the quarter, management decided to re-align the Mains by undertaking 90° turns in both the East and South Mains to accelerate sub-mains development and panel mining and improve the overall mine-layout. This exercise required lower manning numbers while the company was still building our work force, and it made sense to utilise its resources to better prepare the mine for the benefit of two fully manned production units, when Allegiance can man them, which it has now done.

When the South Mains reach the East Mains, the two Mains will be connected (as per the black arrow), the East Mains will be closed and sealed, the conveyor belt and structure recovered, and the South Mains will service the mine standalone simplifying materials handling, ventilation, and underground infrastructure maintenance. A single set of sub-mains will then drive south (again as per the black arrow), from which panels will be developed for low-cost high productivity mining, and so the sequence continues throughout the mine plan.


As has been previously announced, attracting and retaining labour at New Elk has been the mine’s single biggest challenge.

Since commissioning the mine in May/June 2021, the company has only been able to retain enough underground crew to support one production unit, day and night shift, slightly less than 50 personnel. The turnover rate for most of 2H21 has been around 45% meaning every new arrival was off-set by a departure, coupled of course with the ongoing impact of COVID isolation requirements.

There appear to be several reasons for high staff turnover ratios, including accommodation issues as previously reported, but management is hopeful that the turnover ratio will decline with the availability of better housing now under our control and as the mine matures.

A single production unit (day and night shift) generally requires 30 production crew supported by non-production crew of around 15 for a total of +/- 45. Following a sustained recruitment campaign in the quarter together with securing around 50 rental properties in the nearby city of Trinidad (for those who are not already adequately housed), the company has been able to engage another 26 production crew for a complement of 71, which will allow it to fully man two production units both day and night shifts. This will commence in the first week of February and continue thereafter provided the work force can be sustained.

Another feature of the new workers is that nearly all have at least five years underground coal mining experience increasing the overall skill level in our production crew. The initial recruitment efforts did not attract experienced operators, with management compromising on skillsets to chase coal. To mitigate the risk of turnover, Allegiance will continue its successful recruiting efforts to reach a steady state. It is pleasing nonetheless that the company can now operate two units two shifts per day.

The work force has been exposed to COVID with 42 cases during the month of January, and a consequent impact on production crews due to the isolation requirements. Those cases plus those who have already had COVID and or are vaccinated, suggests to us it may be less of an issue for the mine going forward with a high level of natural and vaccinated immunity. Regardless, the company continues to comply with strict mine-site COVID protocols to minimise transmission.


Allegiance inherited a large fleet of mining equipment upon completing the acquisition of New Elk. After more than six months operating the equipment, it is strongly positioned to improve equipment performance and utilisation to mitigate equipment downtime. In that regard:

  • The company is changing the electrics in one of the continuous miners and progressively undertaking rebuilds of two continuous miners (there are five operating continuous miners in the fleet).
  • It is investigating the replacement of the electric shuttle cars with battery powered haulers, which management find are more flexible in terms of which route they can select for haulage, and importantly eliminates the existence and presence of an electric cable which follows and precedes a shuttle car in its haulage route.

Management anticipates productivity gains to follow such an investment.


One cargo of four contracted cargos of New Elk coal was delivered in the December quarter ex-Guaymas, Mexico, with the delivery dates for the remaining three re-negotiated to 2Q22 to allow for the return to full production following the Mains realignment.

Large drum samples were delivered to several steel mills in Japan, South Korea and Europe in respect of which we are waiting for feedback from those mills.


Amon Mahon, who was the New Elk Chief Operating Officer from mine acquisition through to December 2021, has relocated to Alabama to direct the Alabama operations while Randy Wiles, who was previously the Production Manager at New Elk, has been promoted to General Manager.

Randy spent a significant part of his underground coal mining career with Murray Energy as the General Manager of multiple underground mines achieving exceptional productivity. He joined New Elk in June 2021 and has played a significant role in attracting proven operators many of whom worked under him at Murray Energy and elsewhere.

In addition, Bill Storms joined the team in January 2022 as the Chief Mining Engineer for both New Elk and Alabama. Bill has had an extensive career in coal with Walter Energy and Peabody Energy and is highly regarded in the industry. His immediate task is to assist Randy at New Elk to reach and sustain production targets, safely.

Larry Cook, who has a lifetime of experience in thin seam underground coal mining and who has served as a non-executive director since July 2019, has agreed to increase his time commitment to assist the company in this critical phase and will serve as an executive director for the foreseeable future.

Black Warrior update


December quarter represented the first full quarter of production of Black Warrior under Allegiance’s ownership and management. Progress has been made transitioning the business away from a 15 000 tpm supplier of domestic thermal coal to a 20 000 tpm supplier of metallurgical coal to the seaborne market, with the ultimate goal of 45 000 tpm production.

Increasing weekly production shifts from five to 10 by spreading the existing work force over fewer but larger machines is the simple strategy and we are on track to achieve that this quarter.

During the quarter, the company acquired an interest in the McCabe land lease over an area previously uncontrolled, covering 65 ha., together with the mineral rights under the land lease.


Modest gains in productivity were achieved in the quarter following the acquisition and commissioning of a 3600 Hitachi excavator replacing a 1200 Hitachi excavator in waste rock removal. The 3600 machine has four times capacity to remove waste rock.

As was announced previously, Black Warrior operated a mix of 18 x 50 t and 60 t dump trucks and following the acquisition, the company contracted to acquire four new Hitachi 200t dump trucks for November delivery. During the quarter however, six second hand 150 t CAT dump trucks became available, and management decided to purchase these machines, which are less costly and operationally less complex. These trucks have begun to arrive at the mine and will be in production mid-February. This will provide the step-up from the current average of 20 000 tpm to 45 000 tpm target.

The 3600 machine is too large for the 60 t dump trucks. Once the 150 t dump trucks are in operation, the step change will be significant and immediate because the 3600 is already set-up and operating in the pit.


Following the retirement of Black Warrior’s Mine Superintendent, Stan Cupps, Mike Engle was recruited, an experienced mine manager and Alabama native, to control pit operations.

In addition to Amon arriving in Alabama as its Director of Operations, Bobby Hypes was recruited as Operations Manager responsible for co-ordinating operations which not only include mine planning, but logistics from mine to wash-plant, to barge loadout and Port. Bobby is an experienced coal mining engineer and like Mike adds strength and substance to the Alabama team.

Although Storms immediate focus is to assist Randy Wiles in New Elk’s ramp up, Bill is also the principal engineer for our Alabama operations.

Management presented production crew with a new remuneration package focussing on staff retention and aligning our overall package at or above market rates. The transition towards day and night shifts has commenced, and this will be fully operational in February once all 150 t dump trucks are operating.

While experiencing some COVID cases, production at the Black Warrior has not been seriously impacted.


Black Warrior loaded and delivered its first sale of export coal in December 2021 ex-McDuffie Terminal, Port of Mobile via a major international commodity trading house.

What was initially a 55 000 t sale into a 80 000 t vessel, was reduced at the last minute to a 33 000 t sale because of a delay in two Black Warrior barges arriving at McDuffie due to a third party vessel sinking and temporarily blocking traffic in the Black Warrior River.

Rather than Black Warrior suffering demurrage on its coal, the trading house supplemented the cargo with its own stock held at McDuffie and the vessel was loaded and departed on time. The two barges have since arrived at McDuffie, have been unloaded, and will go into Black Warrior’s next cargo. The 21 000 t shortfall on that cargo remains committed to that trading house for delivery in equal parcels of 6.7 000 t in the months of April, May and June 2022.

The next cargo already sold is an 80 000 t cargo of Black Warrior coals for a 20 February to 3 March laycan ex-McDuffie Terminal. The company is on track with that cargo with 41 000 t already at port, and production on schedule to deliver the balance before 20 February.

In addition, a 20 000 t trial shipment to a major European steel mill has been agreed, subject to documentation, for delivery in the same laycan of 20 February to 3 March. Allegiance is in discussions with the buyer of the 80 000 t cargo to delay that laycan by 15 days to allow the trial shipment to be loaded first since it is sharing a vessel with 60 000 t of metallurgical coal from one of Alabama’s major producers.

The trial shipment is a direct result of the successful carbonisation tests of Black Warrior’s premium Mary Lee Blue Creek coals delivering a CSR greater than 60%, and validating the coals’ hard coking coal status. If the trial shipment is successful, we are hopeful that this will lead to a supply contract priced against high Vol A indices.

The coal off-take contract for 30 000 tpm with Yellowhammer Energy has not yet commenced with Yellowhammer awaiting the issue of a mine permit for the deposit in respect of which coal will be supplied. The permit is not an issue of a new permit, but rather the splitting of an existing permit between two different coal leases. The company believes that permit will be issued in March 2022 and coal supply from Yellowhammer will commence late calendar 2Q22.

In the meantime, during the quarter informal off-take supply arrangements with Alabama based vendors of high vol A coking coals was bedded down and Allegiance believes it now has a solid basis for reliable supply of Alabama coking coals from small mine owners that we can trade on the seaborne market.

Short Creek

During the quarter, the company announced the acquisition of a tier one underground metallurgical coal asset, Short Creek, comprising a substantial coal deposit of the world recognised mid-vol Blue Creek brand.

In that announcement, an exploration target was reported. Marshall Millar & Associates are close to finalising a JORC 2012 compliant resource statement, which Allegiance expects to announce in February 2022.

Completion of the acquisition is to take place on the transfer of the mining permit which is due to occur in March 2022.

Allegiance has requested Marshall Millar & Associates (along with Sedgman in relation to the wash-plant and materials handling) to submit proposals to undertake a feasibility study for the development of a 1.5 million tpy underground coal mine. The study is expected to be completed during 3Q22.

To support the feasibility study, the company will be undertaking some drilling to update the resource statement, obtain geo-technical data for roof and floor stability and to obtain more coal quality data across the deposit.

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