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1.3¢ allegiance coal limited

Ann: Secured Convertible Note Raises A$42.9 million, page-23

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Protagonist

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26/05/22

09:57

Post #: 61629713
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Originally posted by MIStragic: ↑

Allegiance Coal Limited (AHQ) - New management given breathing room

AHQ is under new management. Jon Romcke (ex- SMR) has commenced as CEO and US coal industry veteran Paul Vining has joined as Non-Executive Chairman. Mark Gray moves into a non-operational Executive Director role. AHQ has secured a US$42.9M convertible note, removing the immediate balance sheet pressure, evident since the Mar. Q’22. Despite lower production in the Mar. Q’22, March output contributed 40-50% of the quarterly total with a further 25% improvement in April. As new management settles in, we expect these stronger production rates can continue at a time of ongoing coal price strength. Post quarterly updates and the inclusion of new debt, our price target has reduced to A$1.22/sh (prev. $1.50/sh). We maintain a BUY given the inherent value due to be unlocked over the coming 12-24 months.
New management with the right experience
Jon Romcke (ex – Stanmore Resources) has started as CEO of AHQ and will be based in Colorado.
Experienced US coal industry professional, Paul Vining, has commenced as Non-Exec. Chairman, Mark Gray has moved to a non-operational Exec.Director role.
Matthew Wall joined as a Non-Exec. Director in February 2022. The Board and management has now have been substantially refreshed.
Convertible note provides breathing room
AHQ’s cash balance reduced to A$5.75M at end March 2022, with a A$42.9M convertible loan subsequently secured to relieve balance sheet pressure; the note has a 10% coupon, 3-year term, $0.816/sh conversion price and is secured against New Elk & Black Warrior mines.
With improving production and higher realised coal pricing, we believe no further capital will be required.
Operational delivery to improve
With new management now in-place and focused on improving operational delivery, we anticipate updated production and cost guidance over coming months.
Whilst the operational ramp-up is ongoing at both New Elk & Black Warrior, we retain a conservative sales profile with 450kt in FY22, 1.3Mt in FY23 & 2Mtpa FY24.
High-vol A&B prices remain very strong at US$468/t and US$450/t respectively; we maintain our conservative price forecasts with just US$357/t and US$283/t in FY22 and FY23 respectively for High-vol A.
Key Dates Ahead
Jun. Q’22 – Jun. Q’22 quarterly activities and cashflow report.

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Is that research note from Petra?
AHQ Price at posting: 57.5¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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