Allegiance (ASX:AHQ) is now a ‘diversified’ coal producer

Highlights

  • Allegiance Coal Limited announced the acquisition of Short Creek Mine.
  • AHQ completes the placement of AU$30 million with institutional and professional shareholders.
  • The acquisition makes Allegiance a producer of range of coals.

Allegiance Coal Limited (ASX: AHQ) informed the market about the acquisition of Short Creek Mine on Thursday.

Acquisition of Short Creek Mine

An agreement has been signed with Drummond Coal Inc that includes the terms of the acquisition of Short Creek Mine by Allegiance.

The Short Creek Mine is situated 25 kilometres west of Birmingham, Alabama and is located in the Black Warrior Coal Basin.

The mine is categorised as a tier-one asset as it has been deposited with premium hard coking coal. This coal type complements and consolidates the investments done by Allegiance in Colorado and Alabama.

Marshall Miller & Associates have been engaged to complete the JORC 2012 resource statement and it is estimated that by late November 2021, it will be completed. The acquisition will be completed as the resource compliant is delivered and after the transfer of coal lease, existing permits and fixed assets to Newcastle coal seams, Blue Creek and Mary Lee. It includes the lease of mineral rights under the land for 23 years.

After acquisition completion, it has been estimated that it will take 6 to 9 months to permit underground mine.

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What is the cost of acquiring Short Creek Mine?

To acquire assets and land, a cash payment of US$4.4 million will be made to Drummond and a payment of US$11.5 million will be done to trade the reclamation with the Alabama government.

AU$30 million has been raised by Allegiance through professional and institutional shareholders to fund the acquisition and development of the mine.

Mark Gray, chairman and CEO of Allegiance commented that,

However, even after this announcement, Allegiance Coal shares closed 15.5% down at AU$0.490 per share today.

Bottom Line

The acquisition of the Short creek Mine has been done strategically by Allegiance as it complements the investments in Colorado and Alabama. With the acquisition, the Company moves a step forward to become a producer of a range of coals.

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