Allegiance Coal, which is looking to develop their Tenas Coking Coal Project in British Columbia, has made major gains since our March 2018 update on the Company.

To reiterate, the Project, which has been acquired from a subsidiary of TSX listed Altius Minerals Corporation, is located just 24km from the Canadian National Rail (that serves the northeastern BC coal mines), and then 375 km by rail from the Ridley Island Coal Terminal. The RICT has the spare capacity to handle the planned production of 750,000 tpa of clean PCI or mid-volatile SSCC of PCI which forms the basis of the current DFS, due to be completed in early 2019. The results of testwork to date by Japanese and Korean steelmills (who are potential offtakers) has indicated that the Tenas product is suitable as for use as either of these products.

Subject to permitting, financing and offtake, first production from the planned 20 year operation could be in early 2022.

Commonly, bulk commodity projects have to be treated as infrastructure plays - the constraints on, and need to provide infrastructure will strongly influence the costs and viability or otherwise of a project. This is not the case with Allegiance - the location, close to infrastructure, allied with a relatively low strip ratio, should result in an operation producing at FOB costs in the lowest 5% of mines supplying the seaborne trade. Also, the Company has estimated that the upfront capex requirements will be in the order of US$70 million - this is by virtue of using a modular wash plant and the plan to lease mobile equipment.

A major advance has been the signing of a contributing JV agreement with the Japanese Itochu Trading Company, a Fortune 500 company, and one of the largest resources traders globally. This allows for Itochu to earn up to 50% of the Project in two stages, and importantly, should result in the consideration for Itochu's equity stake in Tenas to fully fund ongoing activities and the equity portion of the up front capital. This will also give the Company access to potential offtake as well as debt funding partners.

We expect significant newsflow over coming months, particularly with the completion of the DFS (with SRK being the lead consultant) and advances with offtake, financing and permitting. To read our update report on Allegiance please follow the link.