Monday 16th December 2019 Font size:

Proposed acquisition of the New Elk hard coking coal mine

Monday, July 15th, 2019

Highlights

  • Allegiance has entered into a binding and conditional terms sheet (Terms Sheet) to acquire all the shares in New Elk Coal Company, LLC (NECC), which owns the New Elk Coal hard coking coal mine (Mine), located in southeast Colorado.
  •  The Mine has been on care and maintenance since late 2012 following the fall in coking coal prices and the subsequent bankruptcy of NECC’s shareholder, Cline Mining Corporation (Cline).
  •  The purchase price for the shares in NECC is US$1.
  •  Completion of the purchase must take place before 14 July 2020 (Completion). Allegiance hopes to complete significantly earlier.
  •  NECC is debt free, except for debt owing to Cline totalling C$55M (Debt).
  •  The Terms Sheet provides that the Debt will be repaid by NECC to Cline as follows:
    – US$3M in cash on completion of the acquisition of the shares in NECC (Completion);
    – US$3M in Allegiance shares issued on Completion;
    – US$5M to replace the Colorado State Mine reclamation bond on Completion;
    – The balance to be repaid from an agreed percentage of Mine operating cash flow.
  •  The Mine is fully constructed and permitted for the production of hard coking coal.
  •  A National Instrument 43-101 Technical Report was undertaken for NECC in July 2012, which declared a mineral resource estimate which appears later in this announcement.
  • The Terms Sheet conditions to Completion are that Allegiance will:
    – Undertake legal and financial due diligence by 14 September 2019;
    – Review the geological model to the Mine by 14 October 2019;
    – Undertake a feasibility study to develop a mine plan for production by 14 April 2020;
    – Raise US$5M to replace the Colorado State Mine reclamation bond by 14 June 2020;
    – Raise US$3M to meet the cash payment part of Debt reduction by 14 June 2020;
    – Raise sufficient working capital to bring the Mine back into production by 14 June 2020;
    – Obtain shareholder approval to the purchase by 14 June 2020;
    – Enter into transaction documentation with Cline by 14 June 2020; and
    – Completion shall be no later than 14 July 2020.

Allegiance Coal Limited (Allegiance or the Company) is pleased to announce the planned acquisition of the New Elk Coal Mine comprising a resource of 656Mt of hard coking coal, which is permitted and constructed, and subject to bringing the Mine out of care and maintenance, is production ready.

https://www.allegiancecoal.com.au
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