PERTH (miningweekly.com) – A simplified mine plan at the New Elk coking coal project, in Colorado, has reduced both the start-up and sustaining capital for the project, while allowing ASX-listed Allegiance Coal more time to assess its production ramp-up options.

An initial feasibility study, completed in November last year, estimated that the project would require a start-up capital investment of $56-million, to support a two-million-tonne-a-year operation, over the first four years of the operation, with a mine life of 23 years, based on a saleable coal reserve of 45-million tonnes.

The feasibility study estimated life-of-mine yearly revenues of A$370-million, a net present value (NPV) of A$1.2-billion and an internal rate of return (IRR) of 130%.

However, Allegiance noted that a key takeaway from the original feasibility study was the consumption of retained earnings in the early years of production that were re-invested into expanding production, which had the potential to impact Allegiance’s ability to raise debt as part of its startup capital.

The company has now updated the study, reducing the startup capital to $40-million, with saleable coal production now forecast at 1.4-million tonnes, based on a coal reserve of 23-million tonnes, and a mine life of 15 years.

The updated study estimated average annual revenues of A$290-million, a NPV of A$560-million and an IRR of 121%.

Sustaining capital has also reduced from the $67-million estimated in the original feasibility study to $35-million.

Allegiance told shareholders on Friday that simplifying the mine plan in the early years of production, building the balance sheet and consolidating the business, while allowing time to determine the best ramp-up option, was a prudent strategy.

The company is now hoping to expedite discussions with both equity and debt funders for New Elk in the hopes of closing funding in the next two months.

Assuming that Allegiance completed the acquisition of New Elk within the current timeframes, the company is hoping to start production at the mine by the third quarter of this year.