Why the Allegiance Coal (ASX:AHQ) share price is climbing today

The company has updated its coal production guidance. Here are the details

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The Allegiance Coal Ltd (ASX: AHQ) share price is on the move today following a trading update from the company.

Earlier today, the coal miner's shares were up 7.21% to an intraday high of 59.5 cents. They have since partially retreated and are swapping hands for 56.5 cents apiece, a 3.67% gain on yesterday's closing price.

What did Allegiance announce?

Investors are pushing the Allegiance Coal share price higher after the company updated its near-term production guidance from its Black Warrior and New Elk mines.

By November 2021, clean coal production from both its high-vol A hard coking coal Black Warrior mine and the high-vol B coking coal New Elk mine is forecast to exceed 100,000 tonnes per month. However, in the 2022 calendar year, this number is expected to reach 120,000 tonnes per month, slightly under an annualised rate of 1.5 million tonnes.

The improved guidance comes off the back of the Black Warrior mine in Alabama ramping up clean coal production efforts. Allegiance stated its strategy is to increase production from the mine, and transition from a domestic to an export focus.

The company is acquiring new large-scale mining equipment, as well as adding a night shift to increase production. The new excavator is expected to remove three times as much waste rock as the mine's existing 3 excavators. In addition, 4 new 200-tonne haul trucks are set to replace some of the 18 60-tonne fleet.

Investors seem to have reacted positively to this news, pushing up the Allegiance Coal share price.

What's happening at the New Elk mine?

The company also provided an update on its New Elk mine. It noted the start-up has been slower than planned due to some of the workforce contracting COVID-19 and the shortage of housing near the mine.

Discussions are currently being held with the mayor's office of the City of Trinidad to create an immediate housing capacity. It's projected the issue will be solved by the end of the year.

The mine has one production unit manned, but the second unit has been unable to restart so far. New employees are due to arrive on site this week to begin operations.

As a result, there's been a delay in the shipment of 280,000 tonnes of coking coal to Asian steel mills. The first of four shipments are scheduled for completion this December, with the remainder in Q1 2022.

About the Allegiance Coal share price

Over the past 12 months, Allegiance shares have tracked upwards of 70%, with year-to-date gains of close to 50%. The Allegiance Coal share price reached a 52-week high of 78 cents in June before some profit-taking took place.

Based on today's price, Allegiance commands a market capitalisation of around $195.6 million and has roughly 329 million shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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