Allegiance issues note for US coal funds

31st July 2020 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH ( – Canada-based Allegiance Coal has secured up to A$8-million in funding through a convertible note issue to investment fund Mercer Street Global Opportunity Fund.

The ASX-listed company on Friday said that this was the first leg of funding to return the New Elk mine, in Colorado, to production, complete the environmental assessment work necessary to lodge an application for an environmental assessment certificate, and to provide general working capital.

“This investment shows confidence in Allegiance moving closer to securing the full start-up capital requirement to return the New Elk mine to production in 2021, by which time resource analysts are suggesting hard coking coal prices will return to pre-Covid-19 levels,” said Allegiance chairperson and MD Mark Gray.

“In addition, we are well advanced to filing for the environmental assessment certificate for the Tenas project. These are both significant milestones for Allegiance and this convertible note allows us to progress these activities.”

The note will be conducted in two drawdowns, of A$2-million and A$6-million respectively, and will have a term of 12 months, starting from each drawdown.

The note drawdowns will be interest free, but will be issued at an original discount of 16.67% in the case of the first drawdown and 15% in the case of the second, with the note value of the first drawdown amounting to A$2.3-million, and the second up to A$6.9-million.

The notes are convertible at Mercer Street’s election into Allegiance ordinary shares, with the conversion price for the first drawdown being the lesser of 10c a share or 92% of the lowest daily volume weighted average price of Allegiance shares for the ten trading days immediately prior to conversion.

For the second drawdown, the conversion rate would be at the lesser of 15c a share or 90% of the lowest daily volume weighted average price for Allegiance shares in the ten days prior to the conversion notice, subject to Allegiance having sufficient capacity under its existing placement capacity under ASX rules.