Allegiance Coal Ltd. offered production updates from the Black Warrior mine in Alabama and the New Elk mine in Colorado. By November, 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 metric tons per month (mtpm), and average around 120,000 mtpm for 2022, equating to slightly less than 1.5 million mtpy. In addition, Allegiance has offtake for a further 30,000 mtpm of HVA from a neighboring mine to Black Warrior, providing Allegiance with approximately 150,000 mtpm of saleable coal under its control, or 1.8 million mtpy in 2022.
Allegiance is currently executing its strategy to increase production at the Black Warrior 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. The company has acquired new large-scale mining equipment, to be operational by October. This includes one new Hitachi 3600 excavator, which will remove three times as much waste rock as the mine’s existing 3 x 1200 Hitachi excavators, and four new 200-mt haul trucks to replace in part the fleet of 18 60-mt trucks.
Allegiance is contracting a highwall miner, which will be operational by late October. The company is also spreading the existing workforce across day and night shifts, increasing weekly production shifts from 5 to 10. Based on these improvements, the mine will be able to increase coal recovery from 17,000 raw mtpm to 60,000 raw mtpm, at largely the same operating cost.
The company is targeting export sales of approximately 80,000 mt 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. It will 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 mtpm from predominantly raw production.
The startup of the New Elk Mine has been slower than planned. In addition to the disruption previously announced from COVID cases within the workforce, production rates have been hampered by the shortage of housing near the mine. The total number of employees currently stands at 93 against a target of 154. In the last two months, the mine lost 35% of its miners due to a lack of housing. The mine is working with local authorities to address the issue.
Currently, New Elk 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 works during the weekend. Allegiance has been unable to restart the second production unit so far.
This has caused a delay in the delivery dates of the four 70,000-mt cargos sold to Asian steel mills, with the first shipment now confirmed for October, and the next three shipment timings yet to be finally confirmed. Expected shipping dates are around December, and through the first quarter of 2022, dependent on the successful startup of the second production unit.