Allegiance is forecasting a big payoff. Pic: via Getty Images
One million tpa : Allegiance has a lot of coking coal and the rewards are rich indeed
Mining
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Allegiance has been steadily transitioning from an explorer and developer into a coking coal producer and expects the benefits to start flowing during the current half year.
Coal prices have hit record highs following Russia’s invasion of Ukraine, building on the already high prices coal miners have enjoyed since the middle of 2021.
The company says it now expects to deliver 415,000t of coal sales – 325,000t of which is already contracted – during the half year to 30 June, generating US$90m ($122.23m) in revenue.
This is thanks to Allegiance Coal (ASX:AHQ) recommencing mining at the previously idle New Elk Mine in Colorado and its ramp-up of production and redirection of sales to the seaborne metallurgical coal market at the Black Warrior Mine in Alabama.
The big takeaway here is that AHQ’s growth spurt is only just beginning. Chairman and chief executive officer Mark Gray told Stockhead, current quarter sales are still at discounted prices for volumes negotiated late in 2021 – prior to the completion of Black Warrior’s successful coke oven tests.
“We expect to get – and are currently negotiating – high-vol A index pricing for Black Warrior cargos in Q4’ FY22 and thereafter… and at New Elk index pricing shortly follows in Q1’ FY23 he added.
“As the business has a largely fixed cost base, we expect the growth in revenue generation to have a marked impact on the Company’s reported earnings in H2 FY22.”
This is made all the more impressive given that revenue during the first half of FY2022 was $13m on coal sales of 91,000t.
Further growth ahead
Looking further ahead, Gray said he expected the company to be generating coal sales of more than 1 million tonnes per annum by 30 June 2022 with output from Black Warrior enjoying high-vol A index pricing.
“And we anticipate further step changes thereafter based on ongoing efforts to improve productivity and especially as New Elk achieves the advance rates of which it is capable,” he added.
“We are particularly fortunate that the seaborne met coal market is presently experiencing a period of excellent demand against constrained supply. We are now at a point where we can enjoy these prices.”
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.
