PERTH (miningweekly.com) – ASX-listed Allegiance Coal has finalised a sale and marketing agreement with M Resources Trading over the coal produced at its New Elk mine, in Colorado.
The agreement provides for an exclusive global sales and marketing arrangement spanning five years, with M Resources’ marketing fees to be based on a percentage rate of the free-on-board (FoB) coal sales price, multiplied by the tonnes of coal sold.
M Resources will provide up to $15-million in offtake financing, at an agreed percentage above its cost of funds for doing so, and will pay Allegiance its FoB port price for the first coal, when it is placed on ground at the port of departure, and export up to a maximum amount of $15-million.
Allegiance noted that offtake financing took away the credit and payment risk for the company and enabled Allegiance to receive funds up to two months in advance of when it would otherwise be paid.
“Having settled the mine to port rail contract last week, and finalising the sales and marketing contract this week, we’ve put the supply chain in place from coal face to customer,” said Allegiance MD and chairperson Mark Gray.
“M Resources has established itself in the met coal market and has built an enviable global client base. We look forward to working with the team in returning the New Elk mine into production and becoming a reliable producer and supplier of coking coal to the world’s steel mills.”
An updated feasibility study on the restart of New Elk estimated that $40-million in capital would be required to restart the operation, at a production rate of 1.4-million tonnes a year for a mine life of 15 years.