PERTH (miningweekly.com) – Mining at the New Elk coal mine, in Colorado, is expected to start in the second quarter of this year, subject to owner Allegiance Coal raising sufficient startup capital.

The miner at the end of December unveiled the startup mine plan for the New Elk project, which would see the company mine 22.2-million tonnes of saleable coal reserves over a 24-year mine life.

The project would require a startup capital investment of $17.7-million, with total all-in operating costs estimated at $81.3/t, Allegiance said at the end of December.

Annual average run-of-mine production is expected to reach 1.2-million tonnes a year, with average annual saleable coal production reaching 849 000 t/y.

Based on an average life-of-mine coal price of $130.6/t the New Elk project is expected to have a post-tax net present value of A$393-million and an internal rate of return of 301%.

While the startup plan has not changed from the one announced in April, adjustments have been made to the number of production units, reducing them from four to two, rescheduling labour and production units to mine the entire Blue seam reserve, and extending the Blue seam mine life from 15 to 24 years.

Allegiance told shareholders that the loss of annual production from New Elk from the slow startup mine plan has been offset by the purchase of a similar amount of coal from Mays Mining, allowing the company to maintain a similar coal sales profile for the first 15 years of operation.

Coal sales are planned to start in June this year, at 75 000 t a month, increasing to 137 000 t a month by December this year. By December, annualised coal sales would reach 1.6-million tonnes, and would continue apace thereafter.

Meanwhile, Allegiance told shareholders that it would look to raise some $15-million to finance project development.

The company has a conditional term sheet with Nebari Natural Resources Credit Fund for $25-million, which is subject to an independent third party due diligence. Allegiance has chosen to delay the start of this due diligence process until it settled on its final startup min plan.

Nebari is expected to complete this due diligence process by February.