Altius

Telkwa Coal Project (BC, Canada)

In September 2014 Altius entered into an option and royalty agreement concerning its Telkwa coal project with a private company, Telkwa Coal Ltd. ("TCL"), being funded out of Australia. Altius acquired the Project a few months prior as part of its acquisition of the Carbon Development Partnership ("CDP").

Recently in September 2016, TCL announced a conditional binding agreement to be acquired by an Australian based public issuer, Allegiance Coal Ltd. (“Allegiance”) (AHQ:ASX). Upon successful regulatory and shareholder approvals of the proposed transaction Altius expects to be a significant shareholder (>5%) of Allegiance while retaining a project level royalty over the Telkwa project.

Agreement


The terms of the agreement allow TCL the right to earn up to a 90 percent interest in the Telkwa project in exchange for staged milestone payments. Altius will retain both a sliding scale gross sales royalty that ranges between 3% and 4.5% depending upon benchmark coal prices at the time of any coal sale and a 10% project interest. Altius has elected to date to receive pending milestone option payments in the form of Allegiance shares while it also most recently agreed to formally transfer ownership of the Project tenements for an additional 40,600,000 common shares (http://www.allegiancecoal.com.au/irm/PDF/1276_0/Acquires100OwnershipofTelkwaMetCoalProject). Altius now holds 55,464,395 ordinary shares representing approximately 14.4 percent of the Company’s share capital, on a diluted basis.

Project Overview

The Telkwa metallurgical coal project (Project) is located on the western side of British Columbia. The Project enjoys simple access to rail and port and, from the Port of Prince Rupert, it is a comparatively short shipping distance to the Asian steel mills where Telkwa metallurgical coal will likely be sold.

The Project has been the subject of a significant amount of historical exploration and evaluation including most recently two pre-feasibility studies which delivered robust economic outcomes and determined that the Project would sit in the lowest five percentile of the global seaborne metallurgical coal cost curve. The global seaborne trade of metallurugcal coal is around 320 million tonnes per annum.

The Project contains 148 million tonnes of coal resource declared in accordance with JORC 2012 and NI 43-101. Of that total, 135 million tonnes representing 90 percent of the coal resource is in the ‘measured’ category confirming the very high level of geological confidence in the resource. Following the two pre-feasibility studies, 42.5 million tonnes of resource has been converted into saleable coal reserves (economically recoverable and saleable coal).

The coal is a metallurgical coal which will be used in blast furnace steel production. Steel delivers the goods and services that our societies need – healthcare, telecommunications, improved agricultural practices, better transport networks, clean water and access to reliable and affordable energy. Global steel production is dependent on coal. Seventy percent of steel produced today uses metallurgical coal, or coking coal.

Iron ore and coking coal are the two primary ingredients of steel. Iron occurs as iron oxide in the earth’s crust from which the ore is converted, or ‘reduced’, using carbon. The primary source of carbon is coking coal, a high grade and comparatively rare coal which has unique properties suitable for blast furnace steel production.

The blast furnace is fed with iron ore, coke and small quantities of fluxes (minerals, such as limestone, which are used to collect impurities). Air is heated to about 1200°C and blown into the furnace causing the coke to burn producing carbon monoxide which reacts with the iron ore and heats the ore to create molten iron. Thereafter the iron is refined to create the variety of steel products which society demands.

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