JOHANNESBURG (miningweekly.com) – ASX-listed Allegiance Coal has entered into an unconditional agreement with TSX-listed Altius Minerals to take full ownership of the Telkwa metallurgical coal project, in Canada, while the diversified royalty company will become a more significant shareholder in the miner.
The company can now advance its discussions with potential project joint venture (JV) partners with increased confidence, Allegiance reported on Tuesday.
In terms of the agreement, Allegiance, through its wholly-owned subsidiary Telkwa Coal, entered into an agreement to acquire a wholly-owned subsidiary of Altius Minerals from the Carbon Development Corporation, and 100% ownership of all the rights to coal licences that make up the Telkwa metallurgical coal project in north-west British Columbia.
Up until the acquisition, the company had earned 20% project ownership and had the right to earn up to 90% project ownership upon satisfaction of several milestones, with Altius retaining 10% project ownership.
Altius has now agreed to transfer full ownership of the Telkwa project to Allegiance in exchange for 40.6-million ordinary shares in the company, and the continued performance of milestone obligations. Allegiance noted that the allotment to Altius, which is equivalent to about 10.5% interest in the company on a diluted basis, will occur on completion of the acquisition.
Allegiance, meanwhile, has been actively engaged with steel mills, and commodity trading and investment houses for several months in relation to potential JV investment and offtake commitment at project level.
Allegiance is “very pleased to attract Altius as a strategic institutional shareholder”, the company noted on Tuesday. Altius has invested in and been a substantial shareholder in Allegiance Coal since the company acquired the project in November 2016 and held shares prior to the acquisition.
Following the acquisition, Altius will hold 55 464 395 ordinary shares that represent about 14.4% of the company’s share capital on a diluted basis.
Allegiance is progressing Telkwa as a staged development with Stage 1 expected to produce at a rate of 250 000 t/y, ramping up to 1.75-million tonnes a year in Stage 2, after four years of operations.
A September 2017 Stage 1 prefeasibility study reinforced the viability of the Telkwa metallurgical coal project as a standalone small mine operation positioned in the lowest five percentile of the global seaborne metallurgical-coal cost curve. The Stage 1 development is estimated to have a pre-tax net present value of $51-million and an internal rate of return of 32%.