Commodities / Raw Materials

[JBmurc]

What was the trigger for the recent sell off?

Looks like the company was under-capitalised and unable to fund the equipment and works needed to properly operate its current mines and had some staffing issues ..

Strategic Review
The Company has been unable to successfully ramp up production to previous expectations at its two
operating mines. In addition, the Company has been unable to secure medium term equipment financing at
both Black Warrior and New Elk, which has driven lower than expected performance. In light of the lack of
available financing, the Company is considering different capital initiatives to fund equipment acquisition and
upgrades at both mines.
Legacy coal sales contracts at New Elk, coupled with production constraints, staffing issues and poor logistics
performance in transporting coal to port, have meant that the mine is running at an operating cash flow loss
which has significantly constrained cash flows.
It is currently unclear if Black Warrior or New Elk have the capability to meet, within a material margin,
previously advised target production rates. As such the Board has made the decision to commence a strategic
review. The outcome of the strategic review is expected before the end of August 2022.

[JBmurc]

Looks like the company was under-capitalised and unable to fund the equipment and works needed to properly operate its current mines and had some staffing issues ..

Strategic Review
The Company has been unable to successfully ramp up production to previous expectations at its two
operating mines. In addition, the Company has been unable to secure medium term equipment financing at
both Black Warrior and New Elk, which has driven lower than expected performance. In light of the lack of
available financing, the Company is considering different capital initiatives to fund equipment acquisition and
upgrades at both mines.
Legacy coal sales contracts at New Elk, coupled with production constraints, staffing issues and poor logistics
performance in transporting coal to port, have meant that the mine is running at an operating cash flow loss
which has significantly constrained cash flows.
It is currently unclear if Black Warrior or New Elk have the capability to meet, within a material margin,
previously advised target production rates. As such the Board has made the decision to commence a strategic
review. The outcome of the strategic review is expected before the end of August 2022.

After this ann... AHQ dropped from 56c to 18c ...now 11.5c

Personally I think Coal prices will keep high for sometime and AHQ will get through these issues ... HIGH risk HIGH return..

https://www.iea.org/news/global-coal...e-high-in-2022

https://www.bloomberg.com/news/artic...lready-surging

[Ferg]

Thanks for the reply JBMurc. Not for the faint hearted then.....as you say high risk, high reward.

[JBmurc]

Thanks for the reply JBMurc. Not for the faint hearted then.....as you say high risk, high reward.

Yes its one trade I'm keeping a very close eye on ...latest Analyst report. 32c target.. I think AHQ has many options maybe even selling off a project ..raising capital ..
Good developments And I'd certainly be doubling my position ...

Allegiance Coal Limited (AHQ) - Pending strategic review Production and operating costs continue to lag budgeted figures and AHQ has commenced a Strategic Review, expected to be completed in August. To provide interim funding, AHQ has established a A$5M facility with Regal Funds Management. This facility provides breathing room whilst new mine plans are established.

Pending increased certainty post the review, we have significantly reduced our assumed ramp-up at New Elk. Despite this, value is still apparent, primarily at Black Warrior, and we back the new MD to deliver an achievable plan. Maintain Buy, TP reduced to A$0.32/share (prev. A$1.22/sh).Another quarterly missWhile volumes are trending in the right direction, AHQ delivered another big quarterly miss in Jun.Q’22 (Fig. 1).Critically, we did not see the scale of improved production that was needed.

Pending the outcome of the Strategic Review, we have reduced our ultimate scale to 0.3mtpa (sales) at New Elk and 0.5mtpa (sales) at Black Warrior, with development of Short Creek deferred to FY25 (from FY23).A lost year, multiple issues now impacting AHQMultiple issues are affecting both production and sales, with staffing, underground roof conditions, equipment availability/reliability, and lack of equipment finance all impacting production rates, and staffing issues within the rail provider impacting exports.

With thermal coal now achieving record prices, the company is looking to supply into the highly priced ARA Rotterdam thermal market. US High Vol Met is well suited to thermal coal replacement.As a result, recently appointed Non-Executive Chairman, Paul Vining, has resigned to avoid strategic conflict with Westmoreland where he is Chairman.Pending review outcome, we assume nominal debtCommentary in the quarterly suggests capital expenditure is required at New Elk, on existing continuous miners, and at Black Warrior on additional mining equipment.

Additional funding will be required to replace equipment finance facilities that AHQ has been unsuccessful in obtaining, to sustain planned production rates at Black Warrior.With delayed ramp up, and a concomitant delay in materially lower operating costs, we see additional funding being required; we assume A$5M debt in FY23.Key Dates AheadAugust 2022 - completion of Strategic Review.September 2022 – FY22 Annual Report.

[JBmurc]

Goldman's Currie Says Commodities Will Surge in 2023

https://www.youtube.com/watch?v=RIG2G--9fV0


I agree and am positioned in what I believe will be continued hot commodities - Graphite,Lithium,Copper,REE ...new tech minerals etc ...and of course the ever expanding demand for energy because of the tech driven economy's ...so Oil,Gas,Coal,U308 etc

[blackcap]

Goldman's Currie Says Commodities Will Surge in 2023

https://www.youtube.com/watch?v=RIG2G--9fV0


I agree and am positioned in what I believe will be continued hot commodities - Graphite,Lithium,Copper,REE ...new tech minerals etc ...and of course the ever expanding demand for energy because of the tech driven economy's ...so Oil,Gas,Coal,U308 etc

I too have been topping up on oil, gas and coal the last 2 years. We are getting these stocks ever so cheap at the moment because of the ESG nonsense that pervades the markets. Get in while you can, it is going to be an exceptional long term play.

[JBmurc]

I too have been topping up on oil, gas and coal the last 2 years. We are getting these stocks ever so cheap at the moment because of the ESG nonsense that pervades the markets. Get in while you can, it is going to be an exceptional long term play.

yes I feel when people are freezing in their homes and investors are hunting for yields in a high interest rate environment high returns from commodities producers of the likes of O&G Coal etc are going be the go to Vs the low return investment of the solar/windmill crew

[JBmurc]

The IEA Pathway to a low carbon future
forecasts that the world will be making more steel using coking coal in 2050 than it is today and
that this is unavoidable. The transition to a low carbon future has to be managed thoughtfully
and carefully to avoid shortages of old energy sources until the world has actually transitioned
to new sources. There is no evidence that any country is exercising that care, so the next
decade is likely to see critical shortages of steel and energy driven by under investment in coal,
meaning above expectation prices and super normal profits for companies

[JBmurc]

Bad days like we see in the resources sector of late I like to watch Rick rule and his common sense


https://www.youtube.com/watch?v=TAnLvDxdA-s&t=2032s

[nztx]

Some interesting deep value being exposed after the recent slide, for those who know where
it is buried ..