Allegiance looks to cut mine costs

PERTH (miningweekly.com) – A prefeasibility study (PFS) into the Telkwa metallurgical coal project, in British Columbia, has found that the staged development of the operation could result in a pre-tax net present value of $416-million and an internal rate of return of 37%.

ASX-listed Allegiance Coal said on Monday that the Stage 1 development would see the production of 250 000 t/y of saleable coal, ramping up to 1.75-million tonnes a year in Stage 2, after four years of operation.

The Stage 1 development would require a capital investment of $51-million; however, this could be reduced to $21-million with a manufacturer-funded and operated wash plant and with either contract mining or equipment leasing.

The Stage 2 development would require a further $162-million capital investment. However, this could also be reduced to $54-million with a manufacturer-funded and operated wash plant, and either contract mining or equipment leasing.

Allegiance said the staged approach to permitting and production was pivotal to the company’s objective of putting a safe and environmentally sustainable mine into production that was "both affordable and achievable".

Meanwhile, the PFS estimated a total operating cost of $54.8/t, meaning that the Telkwa project had the potential to be the lowest-cost producer of metallurgical coal in British Columbia, and in the lowest five percentile of coal producers in the global seaborne metallurgical coal market.

Further, relative to Australian metallurgical coal producers, the project would rank eighth lowest among 61 producers in free-on-board costs, and in the lowest ten percentile in Australia.

Allegiance told shareholders that over the next 18 months, the company would undertake a review of the PFS results with the aim of minimising capital costs and optimising production.

A PFS on the Stage 1 development as a standalone operation will also be undertaken and will be completed by the end of the second quarter in 2018.