Buyers are lining up for high quality coal from Allegiance Coal’s Black Warrior mine in Alabama, with a major trading house the second customer to order a shipment.

The 55,000t order of Black Warrior coal will set sail between January 1 and 10, sharing an 80,000t vessel with the trading house from the McDuffie Terminal at the Port of Mobile.

It is good sign for the operation, Allegiance Coal (ASX:AHQ) chairman and CEO Mark Gray says, where production is set to ramp up to full flight with the completion of the delivery of our larger dump trucks in January.

Gray said, the big digger has been operating since November but the arrival of the full fleet of big dump trucks has been slow due to high demand with strong prices for US coking coals.

An initial shipment from Black Warrior, due to leave for China in early December, has been rescheduled at the request of the buyer for a late February laycan, with Allegiance able to sell its inventory from the October and November production through the new January shipment.

“It all happened within a couple weeks so that’s a fantastic sign,” Gray told Stockhead.

“And the Asian cargo is locked in for a likely February laycan, so that gives me a huge amount of comfort knowing our January and February production is already sold at a price I’m very happy with.”

With PLV and HVA sitting around US$340/t, even at a decent discount to those benchmarks while it waits for its pilot coke oven test results, Black Warrior is still likely to have secured a very good price for those cargos and with operating costs comfortably below US$100/t, both cargoes should generate strong margins and cash returns for Allegiance.


Black Warrior ramp up on the way

Allegiance purchased Black Warrior in July for around US$9.3m, of which US$5.3m was replacement of a reclamation bond, a good proportion of which Allegiance will recover from its Bond Insurer.

Run by a family company headed by an 82 year-old patriarch, it had been selling good CSR coal with great steelmaking properties into the local thermal coal market.

That presented a huge value proposition for the astute Allegiance, which has plans to become a significant US met coal exporter at Black Warrior, its New Elk mine in Colorado and also its premium Blue Creek CSR development project ‘Short Creek’, just 30km from Black Warrior.

Product from Black Warrior is currently undergoing pilot coke oven tests in Germany. Once those confirm its CSR content, Allegiance is hoping to procure prices linked to High Vol A.

With the ramp up to full capacity next year, Gray expects to be sending off a shipment from Black Warrior at least once every 1½ to 2 months.

“Black Warrior will hit peak production by the of January when we get all of our big trucks operating behind our big digger,” Gray said.

“Our brand new 3600 Hitachi digger is operating now, it’s been operating for a month and the mine previously used to operate a 1200, so this Hitachi can move four times as much material.”

“I have one big dump truck onsite now and then I’ll have the full fleet of 150t dump trucks operating by the end of the January.”

“At least every two months there will be an 80,000t cargo from Black Warrior.”

This article was developed in collaboration with Allegiance Coal, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.