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Allegiance Coal provides operation production and sales guidance

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World Coal,

Allegiance Coal Ltd has provided an update regarding near-term production guidance from the Black Warrior and New Elk mines. By November 2021, clean coal production from both the high vol A hard coking coal (HVA) Black Warrior mine and the high vol B coking coal (HVB) New Elk mine is forecast to exceed 100 000 tpm and average around 120 000 tpm for CY22, equating to slightly less than 1.5 million tpy. In addition, Allegiance has offtake for a further 30 000 tpm of HVA from a neighbouring mine to Black Warrior, providing Allegiance with approximately 150 000 tpm of saleable coal under its control, 1.8 million t in total, for C 22.

Increasing Black Warrior Mine production

Allegiance refers to its announcement dated 30 July 2021 relating to the acquisition of Black Warrior Minerals Inc. and the BWM Mine located 40 miles northwest of Birmingham, Alabama. Allegiance is executing its strategy to increase production from the mine, and transition from a domestic to export focus given the mine is capable of producing a high strength HVA, which is in demand in the market.

As was noted in that announcement, the BWM Mine had operated for 11 years on five day shifts per week, with small excavators and haul trucks, producing around 17 000 tpm of ROM coal, and selling that coal to the Alabama Power Co-operative as a power coal.

Allegiance’s strategy outlined in that announcement was to replace the majority of the equipment with larger machines, add a night shift to increase weekly production to 10 shifts, spread the current work force across both the day and night shifts, and to supply the seaborne metallurgical coal market with a premium CSR hard coking coal. In addition, Allegiance plans to introduce highwall mining.

Since completing the acquisition, Allegiance has successfully progressed towards a November 2021 production ramp-up and market transition by:

  • Acquiring new large scale mining equipment, to be operational by the second half October 2021 (one new 3600 Hitachi excavator which will remove three times as much waste rock as the mine’s existing 3 x 1200 Hitachi excavators, and four new 200 t haul trucks to replace in part the fleet of 18 x 60 t).
  • Contracting a highwall miner to be operational late October 2021.
  • Spreading the existing work force across day and night shifts, increasing weekly production shifts from five to 10.

Based on these improvements, the mine will be able to increase coal recovery from 17 000 – 60 000 ROM tpm, at largely the same operating cost.

Black Warrior mine sales strategy for the remainder of CY21 and all of CY22 encompasses:

  • Export sales of approximately 80 000 t every 1.5 months of HVA (being approximately 50% Black Warrior and 50% offtake) to the seaborne metallurgical coal market, with first shipment of this product targeted for late December 2021.
  • To continue to supply lower quality coal (not suitable to produce HVA) to the Alabama Power Co-op at a slightly reduced rate of 15 000 tpm from predominantly ROM production.

Prior to achieving steady state production of the above, Allegiance is planning an initial export shipment exMobile of a 80 000 t HVB cargo in November 2021.

New Elk Mine start-up

The start-up of the New Elk Mine has been slower than planned. In addition to disruption previously announced from COVID cases within the workforce, production rates have been hampered by the shortage of housing near the mine, forcing the work force to be based 30 miles from the mine in the City of Trinidad.

The total number of employees currently stands at 93 against a target of 154. In the last 2 months, the mine lost 35% of its employees, with the non-sustainable nature of motel accommodation being a significant factor. The mine is working with the Mayor’s office of the City of Trinidad, along with the Commissioners of Las Animas County to create immediate housing capacity for mine workers with the current work force expected to be fully and adequately housed by the end of the year and further housing to continue to become available in the new year.

Currently, the mine has one production unit fully manned with a day and a night shift operating five days per week achieving good production, along with a maintenance crew that work in the weekend. While Allegiance has been unable to restart the second production unit so far, 15 new employees are arriving week commencing 20 September 2021, which will enable the mine to do so on a day shift only with the night shift planned for mid-October.

This has caused a delay in the delivery dates of the 4 x 70 000 t cargos sold to Asian steel mills, with the first shipment now confirmed for October 2021, and the next three shipment timings yet to be finally confirmed. Expected shipping dates are around December 2021, and through 1Q22, dependent on the successful start-up of the second production unit. Beyond that, Allegiance continues to work with all customers for future sales.

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