Mark Gray

CEO and Chairman of Allegiance Coal Mark Gray

At the regular Trinidad City Council meeting on Wednesday, Nov. 4, CEO and Chairman of Allegiance Coal Mark Gray joined the meeting from the Denver Airport hotel for the meeting where he gave an update to where the company currently stands with the New Elk Mine.

Allegiance Coal is an Australian-based company with a keen interest in getting this area back into premium coal production.

“My focus is in developing and operating steel making coal mines, or coking coal mines,” said Gray, “and we very much have a North American focus.

As of last week Allegiance completed the acquisition of the New Elk Mine and Gray explained that based on feasibility studies and optimization studies the company undertook last year, getting it up and running again looked very promising, despite perceived difficulties.

“Since Pueblo Steel’s blast furnace closed down, and the long rail distance to get to the east coast steel mills, the domestic opportunity for this coking coal, or steelmaking coal is somewhat challenging,” said Gray. “In short, the conclusion of those studies is that yes, it can be economic very much indeed.”

Gray said they would be moving the coal from the Jansen loadout just south of Trinidad, to either the port of Houston or the coal ports in New Orleans. Both BNSF and Union Pacific competed to offer the most attractive rail rates for transport. Ultimately, with all costs calculated, Gray said the net result of their studies determined they could load a vessel in Houston for around $75 per metric ton and in New Orleans for not much more.

“That cost would put this mine in the lowest cost quartile of all the steelmaking coal that reaches the seaborn market every year,” said Gray. “I am pleased to report that this mine can compete very well as far as cost is concerned in delivering New Elk coking coal, or steelmaking coal.”

Gray said he expects that, run properly, the mine will be able to withstand the volatility of prices and avoid the boom and bust patterns often seen in extraction industries.

“This New Elk asset and also the neighboring Lorencito Canyon, which we have also acquired leases for, contains 750 million metric tons of coking coal,” said Gray. “That’s 50 to 100 years of production, so long as there is a continuing demand for blast furnace steel. As a low-cost producer, that means it will be a stable employer.”

Gray said they plan to have 350 full-time jobs at peak production with another 150 or more in contracted services. He also explained that if you take into consideration a spouse and one or two children for every worker, population growth over the next three years could be something to the order of 2,000 people.

In addition to housing and infrastructure concerns with such an influx, Gray said they would also be trucking their coal the first two years of operations at the mine, meaning Highway 12 will be getting quite a bit of truck traffic which would need to be addressed.

Beginning in the first quarter of next year, Gray said they would begin refurbishing the mine and the equipment as well as doing an upgrade on the wash plant. Workforces will begin to arrive in March and April and renovations are broken up into two phases allowing for infrastructure to be ready for the coming influx.

Phase one, considered the pre-rail phase, during which the coal will be trucked to the Jansen loadout, will involve a workforce of 40 mine workers and operators and 10 fixed overhead salary positions. The target date for that, according to Gray is June or July of 2021. This would produce around 35,000 metric tons per month of coal.

Six months following that, they will begin to introduce another 40 mine operators and increase production to around 70,000 metric tons where they’ll stay until the railway track is re-laid and up and running again.

Following the track being completed, the mine would once again ramp up production until they reach their target production of about 2.5 million tons bringing the workforce up to around 350 full-time workers.

With housing being the ultimate critical issue to tackle moving forward, council offered their assistance and support with helping however they could to continue to push for more development in order to be ready for the company’s inevitable growth.

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