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Allegiance Coal announces quarterly activities report

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World Coal,

Allegiance Coal has announced its activities report for the quarter ending 30 September 2021.


  • New Elk recommenced production late May 2021 and achieved 115 000 run-of-mine (ROM) t in the start-up period, delivering 50 000 saleable t by the end of the September quarter, all of which is allocated to the first of four 70 000 t metallurgical coal cargoes sold to Asian steel mills.
  • New Elk’s first 70 000 t vessel is loading and will ship week commencing 1 November 2021 from the Port of Guaymas, northwest Mexico.
  • Two highly successful acquisitions and related capital raisings completing a diversified portfolio of premium metallurgical coal assets. This provides Allegiance with immediate and sustainable growth:
    • The Black Warrior Mine, Alabama, an existing operation producing a high-vol A coking coal coupled with a AUS$30 million placement.
    • The Short Creek Mine, Alabama, a world class near term development project comprising mid-vol Blue Creek coal, a premium CSR hard coking coal recognised as one of the best metallurgical coals on the seaborne market (planned production 2H23), coupled again with a AUS$30 million two tranche placement.
  • Black Warrior (acquired 3 August 2021) produced 48 000 ROM t for the months of August and September, with 25 500 t allocated to higher margin export metallurgical coal for December 2021 quarter sale.
  • Tenas environmental assessment certificate application on schedule to be lodged early December 2021.

Chairman and CEO, Mark Gray, said: “The September quarter was transformational for Allegiance with the start-up of New Elk and the acquisition of a producing mine, Black Warrior, along with the acquisition of a world class development project, Short Creek. It was very much a quarter focused on building a foundation to achieve significant production and cashflow in the December quarter, into 2022, and beyond.”

“Much of the hard work has been done at New Elk with the establishment of an experienced core workforce in our #1 Production Unit, the re-commissioning of mine equipment, wash-plant and mine infrastructure, and bringing the logistics chain together moving coal to port. With an unrivalled platform of premium coking coal assets, our focus now is to leverage the portfolio to optimise shareholder value.

“Black Warrior was a timely and seamless acquisition taking over an existing operation adding immediately to production and sales. We are strongly positioned to transition from a 200 000 tpy to a 600 000 tpy mine redirecting most of the production to the high value seaborne met coal market.

“And Short Creek is simply world class, rounding out our portfolio with a mix of high-vol A and B, and a premium CSR mid-vol. Blue Creek is one of the most recognised brands on the seaborne market commanding a premium price. Substantial deposits of this coal are extremely rare.”

“We are on the cusp of a significant transition. Next week we ship our first cargo setting in motion a flow of export cargos for many years to come. I would like to thank our hard-working employees for their efforts, and our shareholders for their support, in helping Allegiance reach this milestone.”

New Elk update


After sitting dormant for almost a decade, the New Elk Mine returned to production in the last week of May 2021. Despite some initial challenges due to workforce constraints and COVID 19 we have seen noticeable improvements in production.

The graph below highlights the gradual improvement in production from start-up to the end of September quarter with a single production unit achieving 75% of target production with continuing improvements in October.

The company expect a single production unit in the current mining conditions to achieve around 30 000 – 35 000 tpm of saleable coal.

No lost time incidents occurred in this start-up period.

August production dropped due to 25% of monthly production lost from #1 Production Unit day shift isolating for two weeks following two positive COVID-19 results in that crew at the same time. Other than that, the linear progression reinforces the steady growth seen again in October.

Since the COVID-19 incident, the mine has, in agreement with the local Regional Health Board, implemented weekly on-site COVID-19 testing. As a result, in the event a positive COVID-19 result is returned, the production crew (other than the affected person) is not required to quarantine, thus no disruption to production. In addition, the company has encouraged the vaccination of staff and has funded this activity.

The company is proactively working through accommodation and workforce sourcing issues in the December quarter to run the second production unit that was re-introduced in October. It has multiple initiatives underway to remedy this, including:

  • Sourcing available properties and subleasing to workers (estimated 50 leased properties by the end of the year).
  • Purchasing available lots and arranging property development to lease or sell to its workers.
  • Purchasing available properties for sale and on-selling them to workers.

As expected, the wash-plant yield is currently at 45% due to mining around 2 ft of unconsolidated roof before reaching solid sandstone. The out-of-seam dilution does not impact the company’s advance rates and most importantly the target ‘clean tonnes per metre of advance’, which is the key performance indicator that it works to in bord and pillar mining.

The current in-seam mining height is 4.5 – 5 ft before out-of-seam dilution. Wash-plant recovery analysis by Sedgmen calculated the in-seam coal yield to be around 70%, which is consistent with the historical coal quality data that the company has.


As has been previously announced, in May 2021 while high-vol B was trading around US$150/t, the mine contracted to supply 280 000 t of coal to an Asian customer. A price of US$118.75/t was achieved for these sales at a 20% discount to high-vol B due to the untested status of the coal.

Initial drum samples of New Elk coal have been taken and are due for delivery to six prioritised steel mill customers: two to Japan; two to Europe; and one to South Korea and South America, respectively.

The first cargo will be shipped week commencing 1 November 2021 from the Port of Guaymas (Mexico), with the following three cargoes targeted to be delivered in December, January and February. The laycan periods for these sales are yet to be re-set.

Black Warrior update


As was previously announced, the company completed the acquisition of the Black Warrior Mine on 3 August 2021, which includes premium Blue Creek and Mary Lee coking coals. Upon completion of the transaction, the company acquired an interest in six land leases covering an area of 32 ha. and two coal leases relating to the mineral rights under the land leases.

The acquisition added instant production and sales, but most importantly provided an instant opportunity to more than double production at largely the same cost by:

  • Replacing existing mining equipment with larger machinery.
  • Spreading the existing workforce across day and night shifts.

In addition, further value could be achieved by increasing net revenue by exporting a premium hard coking coal, which had hitherto been sold into the Alabama domestic power market as a thermal coal.

During the quarter, operations and production remained at the same historical rates for the months of August and September while plans for transitioning the operation in the December quarter progressed. In that regard, key milestones completed in the quarter to achieve that include:

  • Acquiring and commissioning a 3600 Hitachi excavator for waste rock removal replacing the 1200 Hitachi excavator.
  • Acquiring four 200 t Hitachi dump trucks to replace 10, 50 t dump trucks for waste rock removal (to be delivered in November 2021).
  • Swapping four 50 t Black Warrior dump trucks for four 100 t Yellowhammer Energy dump trucks to support the 200 t dump trucks in waste rock removal (to be deployed early November 2021).

Black Warrior’s existing three 1200 Hitachi excavators have been moved to coal recovery and pre-stripping while the remaining fleet of 50 t dump trucks will continue with coal recovery.

The workforce will be split from day to day and night in November.

A highwall miner has been contracted and will be mobilised to the mine week commencing 1 November 2021, adding to production week commencing 8 November 2021.

Waste removal has already increased significantly with the large excavator now operating and once the larger dump trucks are commissioned, the company expects a 3-fold increase in waste removal and a similar increase in coal recovery.


Around 22 500 t of sales were delivered to the Alabama Power Co-operative in August and September, following which the mine began to stock-pile production for its first sale of a 80 000 t high value coking coal export cargo to occur in the December 2021 quarter.

Commercial terms have been agreed with documentation currently being finalised. Once documentation is signed, more details of the sale will be announced.

The sale has been priced against high-vol B as it includes a blend of Black Warrior and New Elk coals and is untested. Index pricing for high-vol B at the time the sale was agreed was above US$200/t.

The company is currently undertaking coke tests on the Blue Creek and Mary Lee coals with drum samples being delivered to a pilot oven at DMT in Germany. Initial small oven coke tests have been completed indicating good CSR results in the mid-50s, which is expected for high-vol A coking coals. Pilot ovens typically provide a better indication of coke strength particularly for high-vol coking coals and Allegiance is hopeful results will be nearer its calculated CSRs.

Marketing for the second sale of Black Warrior coal (blended with off-take Nickel Plate and #1 American coal), and positioned to be sold as a high-vol A product, will commence in November.

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