tenas metallurgical coal project definitive feasibility

Allegiance Coal Limited: Suite 107, 109 Pitt Street, Sydney NSW 2000 ABN 47 149 490 353 T: +61 2 9233 5579 F: +61 2 9233 1349 E: [email protected] W: www.allegiancecoal.com.au

18March2019TENASMETALLURGICALCOALPROJECTDEFINITIVEFEASIBILITYSTUDYRESULTS________________________________________________________________________________The Tenas Project DFS reinforces the potential of the Telkwa metallurgical coal complex withexcellent results highlighting an extremely robust project, and significant improvements on theCompany’stwopre-feasibilitystudiesundertakenin2017.__________________________________________________________________________DFSHIGHLIGHTS§ 750,000tonnesperannumofsaleablecoal.

§ 22yearminelifeextractingjust15%oftheentireTelkwacoalresource.

§ 3.6:1BCM/ROMtstripratio.§ 75%averageyieldforallmetallurgicalsaleablecoal.§ US$49.7pertonneaverageall-inFOBcashcost(ex-port)beforeinterestandtax.§ A$121.3Maveragerevenueperannum.

§ A$63.7MEBITDAaverageperannumataratiotorevenueof53%.§ US$54.3Mstart-upcapitalexpenditure.§ A$407.3MNPV8%pre-tax.§ 56.9%IRRpre-tax.§ 2.5yearscapitalpaybackaftercommencementofproduction._______________________________________________________________________________________MrDavidFawcett,Non-ExecutiveChairman,commented:“TheTenasprojectistrulyunique.Ourtwopre-feasibilitystudiescompletedin2017highlightedtousthatthisprojecthasthepotentialtobeaverylowcostproducerofaproducthighlysoughtafterbythesteelmills.But to achieve a cash cost of US$49.7/t, for coal loaded on a vessel at Ridley Coal Terminal is quiteextraordinary.IcommendourDFSteam,includingSRKConsulting(Canada)Inc.andSedgmanCanadafortheexcellentworktheyhavedonetooptimizetheminingpotentialof theTenasdeposit.We lookforwardtoworkingcloselywithourjointventurepartner,ItochuCorporation,insecuringpermitstomineoverthenext18monthsandbringingtheTenasProjectintoproduction”.

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AllegianceCoalLimited(AllegianceortheCompany)ispleasedtopresenttheresultsoftheTenasProjectDefinitive Feasibility Study (DFS). TheDFS follows twopre-feasibility studiesundertakenbyAllegiance in2017,firstinrelationtotheentireTelkwametallurgicalcoalcomplex(publishedon3July2017),andsecondinrelationtoastandaloneTenasProject(publishedon11September2017).Significantly,theDFSconcludedthattheTenasProjectislikelytobeoneof,ifnot,thelowestcostproducersofmetallurgical coalon theglobal seabornemarket.Theseabornemarketcomprisesaround325milliontonnesofmetallurgicalcoalperannum,withsemi-cokingcoalsaccountingforaround60milliontonnesofthattrade.Thevastmajorityofsemi-cokingcoalsontheseabornemarketcomefromtheHunterValleycoalminesinNewSouthWalesfromcompaniessuchasGlencore,Yancoal,andWhitehaven.

Source:WoodMackenzieseabornemetallurgicalcoalcostcurveasatNovember2018SRKConsulting(Canada) Inc. (SRK)andSedgmanCanada(Sedgman)werethe leadDFSconsultantsalongwithanextensiveteamoftechnicalexpertsandAllegianceManagement.TheDFSteamislistedbelow.Company AreaofresponsibilitySRK GeotechnicalengineeringSRK GeochemistrySRK CoalreservesandminingSRK WatermanagementSRK HydrogeologySedgman CoalprocessingSedgman CoalqualityRonParent,Independentgeologist GeologyandresourceMCAEngineeringLtdandBVElectric PowerHooperEngineeringandMorchEngineeringLtd RailloopDWBEngineering MineaccessroadandbridgesKobieKoornhof&AssociatesInc CoalanalysisandmarketingAlltheabove CapitalandoperatingcostsDanFarmer,ChiefOperatingOfficer,Allegiance AncillaryinfrastructureAngelaWaterman,DirectorEnvironment&Govt.Relations,Allegiance Environment,socialandpermittingJonathanReynolds,ChiefFinancialOfficer,Allegiance Financialmodel&economicanalysisDavidFawcett,Non-ExecutiveChairman,Allegiance Technicalreview

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LocatedinthenorthwestofBritishColumbia,Canada,theTenasProjectenjoysexceptionallocationtorailandport.SimplelogisticsisakeyfactorcontributingtotheTenasProjectasalowcostproducer.

Addedtothis,itisashortershippingdistancetotargetmarkets,inparticulartheJapaneseandSouthKoreansteelmills,thanfromitsmaincompetitorofsemi-softcokingcoalsinHunterValleyviatheportofNewcastle.Itis3,800nauticalmilesfromRidleyTerminalstoTokyo,whereasitis4,300nauticalmilesfromNewcastle.

Equally importantly, there is no congestion at Ridley Terminals with no delays in ships berthing; unlikeNewcastle(andQueensland)whereshipsoftenwaittwotofourweeksbeforetheycanberth.Mineownersincurexpensivedemurrageandsteelmillssufferadelayinthesupplyofrawmaterialsfortheircokeovensandblastfurnaceswhichdisruptssteelproduction.

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FirstNationsAllegianceacknowledgestheuncededrightsoftheWet’suwet’ennationto22,000squarekmsoftraditionalterritorywithinwhichtheTenasProjectsits.AllegiancehasandcontinuestoengagewiththeOfficeoftheWet’suwet’en (OW) in respect of all Tenas Project activities. The OW is the central office for theWet’suwet’enfocusingonthemanagementoftheirlandsandresources,fisheriesandwildlife,humanandsocialservices,andtreatynegotiations.TheOWisgovernedbytheWet’suwet’enHereditaryChiefsresidingthroughouttheirtraditionalterritories.InApril2017,aCommunicationandEngagementAgreementwas signedbetweenAllegiance’s subsidiarycompanyTelkwaCoalLtdandtheOW.TheTenasProjectminesiteareaiswithinthetraditionalterritoryoftheCas’Yex(GrizzlyHouse)oftheGitdumdenclanoftheWet’suwet’enandtherailloadoutislocatedwithinLaksilyuterritoryoftheWet’suwet’en.PermittingScheduleThepermittingprocessfirstinvolvesthecollectionofenvironmentalbaselinedata(overatleasttwoyears),and then an environmental impact assessment of the Project on the baseline data collected. The TenasProjectfortuitouslyhasbaselinedataacrossmostenvironmentaldisciplinesdatingbacktothe1990s.Thisprovidesmoresubstancetothemodellingofenvironmentalimpactassessment.ThemapbelowillustratesAllegiance’sbaselinemonitoringactivitiesoverthelast2years.

Themainareasoffocus(notlimitedto),arelistedbelow:§ Geochemistry;

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§ Surfacewaterqualityandquantity;§ Groundwaterquality;§ SoilandTerrain;§ Noise;§ Airquality;§ Vegetation;§ Fishandaquaticspecies;and§ Wildlife.Allegianceisinthepre-applicationphaseofpermitting,andonschedulewiththetimelinebelow.

InadditiontoconstantengagementanddialoguewiththeWet’suwet’en,Allegiancehasbeenveryactiveinwidercommunityconsultation,meetingfrequentlywitharangeofstakeholderandspecialinterestgroups,and having organised and held to date, two of five planned community open houses. BC Governmentguidelinesrecommendtwocommunityopenhouses.ToreinforceAllegiance’scommitmenttothecommunity,CompanyCEO,MarkGray,relocatedtoTelkwa12monthsagoandisnowresidentthere.Thishasproventobeveryvaluable,enablinginformal,daily,adhoccommunityconsultationwiththeCompany.Environmental baseline programmes are now largely complete. Less intensive environmentalmonitoringcontinues during the permitting phase and into production. Allegiance has prepared and submitted theValuedComponentSelectionSummarydocumenttotheEnvironmentalAssessmentOfficeforreview,andisnow preparing the Application Information Requirements document. Target period for lodgement ofapplicationsforanEACertificateandMinesActPermitsremainsQ32019.

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SummaryofDFSResultsAsummaryofthekeyresultsoftheDFSaresetoutinTables1to4below.Table1:CoalResourceandProductionParametersLifeofMine Units TotalTelkwacoalcomplexcoalresourceacross3deposits MTonnes 148.1TotalTenasdepositcoalresource MTonnes 36.5DFSlife-of-mineROMcoalproduction MTonnes 22.0DFSlife-of-minesaleablecoalproduction(at10%moisture) MTonnes 16.5DFSaverageROMcoalproduction(at5%moisture) MTonnesperannum 1.0DFSaverageproductcoalyield % 75DFSaveragesaleablecoal KTonnesperannum 750DFSaveragestripratio BCM/ROMt 3.6:1DFSminelife(incl.pre-production) Years 22Table2:Start-upCapital LeasefinanceUS$M OwnerfinanceUS$MPre-productionactivities 4.2CHPPandassociatedplantinfrastructure 3.3 14.0Minesiteinfrastructure 12.5Watermanagement 17.3Railloopandloadout 5.4Mobileequipment 32.9 0.9TotalStart-upCapital(excludescontingency) 36.2 54.3Table3:OperatingCostsLifeofMine US$/SaleabletSiteCosts Mining–wasteremovalandcoalrecovery 19.5Coalprocessing 6.3Generalandadministration 4.2Reclamation 0.9TransportationandMarketing Marketingcosts 1.9Haulage(CHPPtoRailSiding) 3.8Railtoportandloaded 13.1Totalall-incashcostFOBpre-interestandtax 49.7Table4:KeyPerformanceIndicatorsLifeofMine Units Value2021and2022averagecoalprice US$/t 1202023onwardsaveragecoalprice US$/t 114ExchangerateCanadiandollarstoUSdollars CAD:USD 1.33ExchangerateAustraliandollarstoUSdollars AUD:USD 1.41ExchangerateCanadiandollarstoAustraliandollars AUD:CAD 1.06Pre-taxnetpresentvalue@8% A$M 407.3Pre-taxInternalrateofreturn % 56.9Paybackfromcommercialproduction Years 2.5ProductionTargetsandForecastFinancialInformationAllegiancenotesthefollowinginrelationtotheproductiontargetsdisclosedinthisannouncement:

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§ Allmaterialassumptionsonwhichtheproductiontargetsandforecastfinancialinformationarebasedaredisclosedintheannouncement;

§ The coal resources and reserves onwhich the production targets are based have been prepared bycompetentpersonsinaccordancewiththerequirementsofthe2012editionoftheJORCCode;and

§ Theproductiontargetsandforecastfinancialinformationinthisannouncementareunderpinnedsolelybyacombinationofcoalreservesandmeasuredandindicatedcoalresources.Therelevantproportionsofprobablecoalreservesandprovencoalreservesis12:78.

TelkwaCoalResources&ReservesTheTelkwametallurgicalcoalcomplexhashadseveraldrillingandbulksampleprogrammescompletedbypreviousownersbetween1980and1997,andmost recentlybyAllegiance in2018.Other thanthe2018Allegiancedrillprogramme,all coal resourcedataandqualityanalysiswasundertakenduring theperiodillustratedinthetablebelow,anestimatedA$40Mworthofhistoricalexplorationdata.

On3July2017,Allegiancepublishedtheresultsofthefirstoftwopre-feasibilitystudies(PFS)inrelationtotheTelkwametallurgicalcoalcomplex(3July2017Announcement).InthatPFS,SRKpreparedastatementofresourcesandreservesinaccordancewithJORC2012Edition(JORCCode)andNationalInstrumentNI43-101‘StandardsofDisclosureforMineralProjects’(NI43-101),asissetoutinthe3JulyAnnouncement.Foreaseofreference,asummaryofthePFSresourcesandreservesisrepeatedinTables5and6below.Table5:Resources MeasuredMt IndicatedMt InferredMt TotalMt(adb)Tenasdeposit 58.8 - - 58.8Goathorndeposit 59.5 9.2 0.2 68.9TelkwaNorthdeposit 15.7 3.7 1.0 20.4Total 134.0 12.9 1.2 148.1

Table6:Reserves ROMCoalMt CleanCoalMt SaleableCoalMtTenasProven 29.1 20.6 21.0TenasProbable - - -TenasTotal 29.1 20.6 21.0GoathornProven 22.1 12.6 18.8GoathornProbable 0.2 0.1 0.1GoathornTotal 22.3 12.7 13.9TelkwaNorthProven 10.8 6.4 7.0TelkwaNorthProbable 0.7 0.4 0.5TelkwaNorthTotal 11.5 6.8 7.5GrandTotal 62.9 40.1 42.5

0

20

40

60

80

100

120

140

160

1979

1981

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1987

1989

1991

1993

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1997

Exploration Year

Numb

er of

Dril

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ROTARY

CORE

Intotal,826drillholesrecoveredcorefrom91,000mofdrilling;plus,a208tbulksamplein1983,anda80tbulksamplein1996.Fromthis,coalwasrecoveredtoundertakecoalwashabilityandqualitytestsandpetrographicanalysis.

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ThecoalresourcesincludingdrillholelocationsoftheTelkwametallurgicalcoalcomplex,aslistedinTables5and6above,areillustratedinthemapthatfollows.

Following a 34-hole drill programme in the Tenas deposit undertaken by Allegiance in 2018, the Tenasgeologywasre-interpretedandthecoalresourcesupdatedbasedontheidentificationofaseriesoffaults.In addition, non-continuous, thin and high ash coal seams were excluded from the resource statementreducingthenumberofcoalseamsfrom13tojustthree,oneofwhichwassplitintoalowerandupperply.The updated resource statement for Tenaswas publishedbyAllegiance on 18 June 2018 (18 June 2018Announcement).Foreaseofreference,18June2018AnnouncementstatementofresourcesisrepeatedinTable7below.

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Table7:TenasResources MeasuredMt IndicatedMt InferredMt TotalMt(adb)cSeam 4.5 1.4 - 5.91lowerseam 8.1 2.7 - 10.91upperseam 4.5 1.6 - 6.21Seam 9.9 3.5 - 13.5Total 27.1 9.4 - 36.5

EstimationMethodologyCoalqualityandseamthicknessparameterswereestimatedusinginversedistancesquaredwithintheseamwireframeswhichcontrolthedistributionofinterpolatedvaluesin3D.Themodelisofthecoalseamsonlyand the interburden has been modelled by default but to sufficient detail to assist with waste rockcharacterisationandwasterockmanagement.Themodelblocksizerangesfrom5to25malongstrike,5to10mdowndipand5minheight.AveragedrillholespacingforTenasis110mandtheaveragecoreholespacing(withqualitydata)is237m.Akeyassumptionutilizedintheresourceestimatewastherelationshipbetweenashcontentonanairdriedbasisandbulkdensityusedforconversionofvolumetotonnes.Thegeologicalinterpretationisbasedonthe“stacking”ofseambottomsalong25mspacedcrosssectionsfromthelowermostseamupward.Themainvalidationmethodusedwasacomparisonbetweenwireframesolidsvolumeandvolumegeneratedfromthe3Dblockmodelaftercoding.Themodelaccuratelyrepresentsthedrilledseamtruethicknessesto+/-0.1matagivenXYlocation.Theelevationsmayvaryupto3matanydrillholeintercept.Thisisduetothesectionalnatureof themodellingprocess,projectingall seam intersectionsamaximumof12.5mto thenearestcrosssection.UpdatedTenasReserveStatementIn theDFS, SRK updated the Tenas reserves in accordancewith the JORC Code andNI 43-101,which issummarised in Table 8 below. The DFS accounts for just 15% of the entire coal resource of the Telkwametallurgicalcoalcomplex.Table8:TenasReserves ROMCoalMt SaleableCoalMtTenasProven 17.1 12.9TenasProbable 4.9 3.7TenasTotal 22.0 16.5TheproductiontargetsandforecastfinancialinformationoutlinedinthisannouncementinrelationtothenewTenasReserves,arebasedsolelyontheProvenandProbableReserves inTable8.Modifyingfactorssuchasminingdilution,mining recovery, rawashanddensity,andcoalyieldhavebeenestimatedusingacceptedtechniquesconsideredbyAllegianceandSRK.TheaccuracyoftheTenasReserveestimateissubjectto geological data and modelling procedures to estimate the coal resource and to modifying factorassumptionsfordilutionandloss.WhiletheTenasProjectisnotinproductionandsuchreconciliationisnotpossible,theassumptionsarebasedonsoundprinciplesandexperiencefrommineswithsimilarconditions.AllTelkwaReserveestimatesarebasedon:minimumseamthicknessof0.8m;maximumashcontentof50%;dilutionof0.15m(unlessblastingthroughseams,whereitis0.25m)andcoallossof0.10m(0.20mwhereblastingthroughseams)percoalseam;ROMcoalandsaleableproductbases,withamoisturecontentsof5%and10%respectively;andcoalyieldsarebasedonwashabilitiesatafloat-sinkspecificgravityof1.6.

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TenasProjectComponentsTheTenasProjectislocated7kmsouthwestofthesmalltownofTelkwa(population~2,000),and25kmsouthofthelargertownofSmithers(population~6,000)whichhasanairportwithdailydirectflightstoVancouver.The townofTelkwahasa longhistoryofcoalminingdatingback to the late1800swithcoalproductionceasingasrecentlyas1985.TheTenasProjecthasaccesstoexcellentroadinfrastructuredevelopedbytheforestryindustry,isjust3kmfrompower,and16kmfromtheproposedCHPPtotheproposedrailloadoutalongagentledecliningprivatedesignated haul road (to be constructed). The excellent existing infrastructure has kept the cost ofinfrastructureconstructionlowhelpingtominimizestart-upcapitalexpenditure.

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TheTenasProjectcomponents,highlightedonthemapabove,willinclude,amongstotherthings:§ Onesingleopenpitmine;§ Typicalopenpitmineoperationsequipmentincluding91tdumptrucks,excavatorsanddozers;§ Wasterockdumpsoutsidethepitaswellasback-filldumpsduringminingwithinthepit;§ Diversionditchestodivert‘contact’waterintothewatermanagementponds;§ Watermanagementpondstosubmergeunderwaterpotentiallyacidleachingwasterockduringmining;§ Sedimentationpond;§ Dedicatedpipelinefromthesedimentationpondtoawatercoursefordischarge;§ ROMcoalhaulroadsfrompitoperationstothecoalhandlingandpreparationplant(CHPP);§ TheCHPPitselfandassociatedinfrastructure;§ Mineinfrastructureincludingamongstotherthingsequipmentmaintenanceshop;§ 3kmpowerlineconnectingtheminetoalocal25kVpowerline;§ Adedicated16kmprivatecleancoalhaulroadfromtheCHPPtotherailloadout;§ Severalsmallbridgesalongthecleancoalhaulroad;§ ArailloopandloadoutfacilityadjacenttoCanadianNationalRail’s(CNRail)mainlinetoRidleyTerminals.MiningMethodandScheduleTheTenasdepositisasynclinebasinwiththecoalseamsgentlydippingfromthewestmeetingthesynclineontheeast.Thedepositistobeminedbyopenpitminingmethodsinvolvingninephases.Miningcommenceswithphase1intheshallowestareatothesouthwest,thenprogressivelyminingtowardsthesynclinetotheeast,northandsouth,asillustratedbelow.

MultipleminingapproachescanbedeployedtotakeadvantageoftheuniquegeologicalandtopographicsettingoftheTenasdeposit.Shallowdippingcoalstrata,andreasonablynearsurfacecoalstrataallowforabottom-upminingapproach.

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Forthis,abox-cutisestablishedatthelowerendofaphaseandsuccessivecutsadvanceup-dip,progressivelyexpandingavailablebackfillspacedown-dipfromtheactivecuts.Hydraulicexcavatorsminethebulkofthewaste,withtrackdozerspushingsomeofthewasteabove1U-seamontofinalpitbottom.Coalisalsominedbyhydraulicexcavator.Blasting is inbenchesaboveC-seam,andthen throughC-seamstandingoff from1U/1-seam.Notallphasesareamenabletothismethodduetosteeperseamdipsnearerthesyncline,relyinginsteadonmoreconventionaltop-downbenchmining.Theup-dipminingisillustratedbelow.

ThemineproductionschedulefortheTenasProjectisnominally1,050,000ROMtonnesperannumfora22-yearminelifeincludingconstruction,producingonaverage750,000saleabletonnesperannum,atastripratioof3.6:1BCM/ROMt,andatayieldof75%(at10%moisturewhenloadedontoavessel).EquipmentRequirementsTheprimaryfleetatfullproductionwillinclude:§ Twoproductiondrills(one250mmandone140mmbitdiameter);§ Threehydraulicbackhoes(12m3);§ Onebackhoeexcavator(6m3);§ 12rigidframehaultrucks(91t);§ Fourtrackdozers(3.9mblade);§ Threegraders(4.26mblade);and§ Twowatertrucks(91t).The production fleetwill be supportedwith ancillary equipment similar to other open pit operations inwesternCanada.LabourRequirementsTheminewilloperate24/7withfourcrewsonasevenshifton,sevenshiftoffrotation,alternatingdaysandnights,whilethemaintenanceworkforceisassumedtolargelyworkadayshiftfour-on/four-offschedulewithtwotradespeopleworkingnightshifttosupportmineoperations.Atfullproduction,themineaverages95mineworkers, 29minemaintenanceworkers alongwith technical support and supervisory staff.TheneighbouringtownsofTelkwa,Smithers,and50kmsouthofTelkwa,Houston,allhouseskilledmineworkers

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whosupportthehardrockminingindustry intheregion. Inaddition,theprimaryindustry intheregionisforestry,whereskilledequipmentoperatorsprovideareadilyavailablelabourpool.CoalHandlingandPreparationPlantTheCHPPconfigurationwillbeaDMC/flotationplantdesignedandconstructedtoprocess145t/hofrawcoal (ROM)over themine’s life.A key factor to this processing ratewas adesirebyAllegiance touse aSedgman modular plant with minimal upfront capital expenditure. However, to allow for increasedproductiononcecashflowisestablished,theCHPPhasbeendesignedtobeabletoexpandto190t/hofROMcoal(equivalentto1.35MtofannualROMproduction)byaddingasecondaryfloatcellandbeltfilterpressfor finerockdewatering.TheCHPPcanbefurtherexpandedto350t/h(equivalentto2.5MtannualROMproduction)byaddingarefluxclassifiercircuit,arejectdrainandrinsescreen,flotationcell,beltfilterpressmodule and increasing the size of the building. The images that follow illustrate the Sedgman designedmodularCHPPandrelatedinfrastructure.

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TheCHPPislocatedapproximately2kmtothenortheastoftheTenaspit.ThislocationwasselectedasithasarelativelyflatprofilewhichminimisesbulkearthworkcostsrequiredtoconstructthepadrequiredforboththeCHPPandancillaryinfrastructure.Theplantlocationalsoallowsforanyfutureexpansionofthepitasthereareknowncoalresourcesresidinginthe2kmbetweentheselectedplantlocationandTenaspit.TheCHPPflowsheetincorporatesthefollowingprocessstages:§ Rawcoalreclaimingandsizereduction;§ Coarse coal (DMC) circuit for coal between 50.0 by 0.50 mm with horizontal basket centrifuge for

dewatering;§ Magnetiterecoverycircuit;§ Finecoalflotationforcoal<0.50mmwithscreenbowlcentrifugefordewatering;§ Finerockthickeninganddewateringusingabeltpressfilter;§ Washedcoalloadoutattheplantviaan8,400-tonneopenairstockpile;§ PlantRockloadoutviaa6,600-tonneopenairstockpile;§ 16kmon-highwaytruckhaultotheRailLoadout;§ Washedcoalloadoutviaa30,000-tonneopenairstockpile;§ 375kmrailtransportusing116carunittrainstoRidleyTerminals.InfrastructureThe construction of the infrastructure required to support themining operation will occur in stages tominimizetheupfrontcapitalbutalsoallowforexpansion:§ 2020/21–Infrastructureconstructedtosupporttheimmediateoperationalneedsareconstructed;§ 2022–Maintenanceinfrastructureupgraded;and§ 2023–Stacker/reclaimerupgradetobemoreefficientattherailloadout.TheInfrastructurefacilitiesoutlinedbelowwillbeconstructedinyears2020and2021oftheoperation:§ One50,000Ldieselfueltankanddispensingstationformineandlightvehicles;§ Electricalsubstationandsitedistribution;§ Improvementsto6.0kmofexistingforestryaccessroadthroughtheGoathornCreekValley;§ Afitforpurpose110tonnesinglelanebridgeoverGoathornCreek;§ Anewlyconstructed10.0kmaccessroadtothetrainloadout;§ Atrainloadoutpadwithsprayerapparatus;§ 2.5kmrailloopwhichincludes500metresfortheleadtieintracktosupporta116-carunittrain;§ 3.6kmof25kVtransmissionlinetosite;§ Anew25kVto600Vsubstationandelectricalroomsonsite;§ Apolemounted25kVto600VtransformeratGoathornCreek;§ AsecondpolemountedtransformerlocatedattheExplosivestoragefacility;§ Communicationsystem;§ ExplosiveFacilitiesandmagazines;§ Flocculantshedsattherailloadoutandthemainsedimentationpondatsite;and§ Administrationandminedrybuilding.TheInfrastructurefacilitiesoutlinedbelowwillthenbeaddedin2022tosupporttheoperation:

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§ Minetruckshopfacilityincludingawarehousewithaloadingdock;§ Coldstoragefacility;§ Lightvehicleshopandemergencyrescuefabricstructure;§ Second50,000Ldieselstoragetank;§ Bulklubefacilityatthetruckshop;and§ Dustsuppressionsystemattherailloadoutandplantsite.TheInfrastructurefacilitiesoutlinedbelowwillthenbeaddedin2023tosupporttheoperation:§ StackingandReclaimingsystemattherailloadout;§ Additionalconveyorantifreezesystem;and§ AutomatedsignalsatTelkwaCrossing.Itisestimatedthatthefacilitiesconstructedin2020/2021willtakeuptoeightmonthstodeliverwiththerailloopandaccessroadbeingthelongestleaditems.CoalQualityTelkwacoalwillbewashedatanSGof1.6toproduceatarget9%ash,mid-volatilesemi-softcokingcoal,atasaleablecoalyieldof75%.Table9:TelkwaCoalQuality Units Tenas NSWHVSSCC QLDMVSSCCInherentmoisture % 1.1 2.5-4.5 2-2.5Volatilematter % 25.8 33-38 25-27Ash % 9.0 5-9.5 9.5-10Sulphur % 0.98 0.35-0.85 0.35-0.55Fixedcarbon % 65.3 50-60 55Freeswellindex 3-4 3-6 3-3.5HGI 63 40-52 70-80Reflectance % 0.96 0.65-0.85 0.99-1.06Maximumfluidity Ddpm 6 10-500 15-50Baseacidratio 0.15 0.10-0.20 0.12-0.21

The quality parameters for Telkwa coal are summarized in Table 9 above, and are compared to similarproductsexportedfromNewSouthWalesandQueensland.CoalPricingKobieKoornhof&AssociatesInc(Koornhof),arespectedcoalmarketspecialistwithparticularexpertiseinNorthAmericancoals,providedAllegiancewithamarketoutlookformetallurgicalcoalalongwithapriceguideforTelkwacoalasamid-volatilesemi-softcokingcoal,andamid-volatilePCI.TheDFShasreliedonKoornhof’spricingguidanceforaTelkwamid-volatilesemi-softcokingcoal.According to Koornhof, demand for hard coking coal is continuing at robust levels as steel industryfundamentals remaina strongdriver for seabornecokingcoal imports.Thecurrentconstraints to supplyavailabilityforhighqualitycokingcoalsislikelytoremainfortheforeseeablefuture,sinceglobalcokingcoalsupplyisnotcomingonlineatapacethatwillupsetthecurrentsupply/demandbalance.Inthemediumterm,thebiggestrisktometallurgicalcoalpricingliesinapossibleglobaleconomicslowdown,fuelledbythefearofburgeoningtradewars.

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IndeterminingasuitablepricepointforTelkwasemi-softcokingcoal,KoornhofnotesTelkwaSSCCisaclosermatchwiththeQueenslandmediumvolatileSSCC(MVSSCC),thanNewSouthWaleshighvolatileSSCC(HVSSCC).TheneteffectivecarboncontentoftheMVSSCC,whichisconsiderablyhigherthanthatoftheHVSSCC,resultsinapremiumofUS$2-3/tonnefortheMVSSCC.KoornhofnotedthatAustralianSSCCforQ42018wassettledonJanuary29,2019atUS$135pertonne.ThenetresultforTelkwaSSCC,consideringasulphurpenalty/ashpremium,andfactoringintheUS$2.50/tonnepremium for MV SSCC over HV SSCC, is a US$2.05/tonne discount to HV SSCC pricing. Based on thesettlementsforQ42018,thatwouldindicateapriceofUS$132.95pertonneforTelkwaSSCCtoday.Koornhofassumedapricerangeforpremiumbenchmarkcokingcoalforthemediumterm(2020to2022)and long term (2023 onwards), againstwhich it then applied the current trend discount forHV SSCC tobenchmarkhardcokingcoal.ThebenchmarkparametersusedforpricingaresummarizedinTable10below.Table10:Benchmarking Priceas%ofHCC MediumtermpriceUS$/t LongtermpriceUS$/t Years2020-2022 Years2023onwardsPremiumlowvolcokingcoal 100% 185-210 175-210Semi-softcokingcoal 66% 122-139 116-139Usingavalueinusemethodology,KoornhofprovidedapricerangeforecastforTelkwacoalsummarisedinTable11below.ForthepurposesoftheDFS,AllegianceassumedthelowestpriceofUS$120/tforcoalsoldin2021and2022,andthelowestpriceofUS$114/tforcoalsoldfrom2023onwards.Table11:Priceforecast MediumtermpriceUS$/t LongtermpriceUS$/t Years2020-2022 Years2023onwardsTelkwaMVSSCCpricerange 120-137 114-137

CoalMarketsAllsteelmillsuseablendofcokingcoalsrangingfromhardcokingcoalstosemi-cokingcoalstofeedtheircokeovens.Generally,thesteelmillsblendataratioof70:30hardcokingcoaltosemi-cokingcoal.Insomeinstances,semi-cokingcoalistheprimaryfeedforacokeoven.Tenas Project’s target customers are the north Asian steelmills. Using coal derived from the 2018 drillprogramme,AllegianceprovidedbulksamplecoaltothethreeJapanesesteelmillsandoneSouthKoreansteelmill,allofwhomundertookcoalqualitytests.Followingthetestresults,expressionsofinterestwerelodgedforthepurchaseofTelkwacoaloncetheTenasProject is in production. Feedback from the steelmills emphasised the scarcity ofmid-volatile semi-softcokingcoalsontheseabornemarket.Theyadvisedthatthesemi-softmarketisdominatedbythesupplyofhighvolatilesemi-softcokingcoalsfromtheHunterValleyandthatthereonlyafewmines,producinglowvolumes,ofmid-volatile semi-cokingcoal fromcentralQueensland.Theyalsoadvised therewasnonon-Australiansupplierofmid-volatilesemi-softcokingcoal to theseabornemarket,placingTelkwacoal inauniqueposition.Koornhofalsonotedinhisreport,that“TelkwaSSCCisexpectedtobewellreceivedduetolimitedavailabilityofmidvolSSCContheseabornemarket, incontrasttothemorereadilyavailablehighvolatileSSCCcoalsfrom NSW. The market should react favourably to the introduction of a newmidvol SSCC, not only as

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diversification from Australia, but also due to the fact that Canadian SSCC supplies have largely beeneliminatedwiththeclosureoftheCoalMountainoperation.”CapitalThestart-upcapitalexpenditureissummarizedinTable12below.Table12:Start-upCapital LeasefinanceUS$M OwnerfinanceUS$MPre-productionactivities 4.2CHPPandassociatedplantinfrastructure 3.3 14.0Minesiteinfrastructure 12.5Watermanagement 17.3Railloopandloadout 5.4Mobileequipment 32.9 0.9TotalStart-upCapital(excludescontingency) 36.2 54.3Pre-productionactivitiesincludeslandclearing,logging,topsoilsalvageandpre-strip.Minesiteinfrastructureprimarilyincludes:§ Earthworks;§ Connectingtopowerincludingsub-station;§ Upgradingexistingforestryroads;§ ROMandcleancoalhaulroadconstructionincludingseveralsmallbridges;§ Rawwatersystem;§ Fueltanks;and§ Fencing.Asdiscussedpreviously,theCHPPisaSedgmandesignedmodularwashplantwhichwillhaveafeedcapacityonstart-upof145t/handthepotentialwithexpansiontofeed350t/h.Thewashplantconfigurationwasdriven by a desire to minimise start-up capital expenditure without materially compromising yield andperformance,aswellasallowinganincreaseinproductioninduecourse.Effectiveandreliablewatermanagement iscritical foranymineoperation inBritishColumbia.Managingsurfacewaterfromrainandsnowmeltthatcontactsmineoperations isveryimportant.Contactwater isdivertedviaditchestopondswherethewaterisheldallowingsedimenttosettlepriortothewaterbeingdischargedintothecatchmentarea.TheDFSalsoassumesthewaterwillbedischargedintotheTelkwaRiver(alargewatercourse)viaapipe.Waterisdischargedinspringandsummeroncethepondshavethawedafterthespringmeltandduringhighwaterflows.Inaddition,someofthewasterockminedhasthepotentialtoleachacidwhenexposedtoairandwater,whichtheDFSassumeswillbesubmergedunderwaterinmanagementpondsconstructedduringthefirst10yearsofproductioneliminatingtheopportunityfortherocktoacidise.TheDFS assumes that start-upproductionequipmentwill involvenewequipment.Attractive equipmentfinancingtermswereofferedbyseveralwellknownequipmentbrandsforfleetsofnewequipment.ThesustainingcapitalexpenditureissummarizedinTable13below.

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Table13:SustainingCapital LeasefinanceUS$M OwnerfinanceUS$MProductionmilestonepaymentsrelatingtoprojectacquisition 5.6Mining 8.1CHPPandassociatedplantinfrastructure 11.4Minesiteinfrastructure 4.4Watermanagement 52.4Railloopandloadout 2.8Mobileequipment 10.8 21.6Administrationinfrastructure 0.7TotalSustainingCapital(excludescontingency) 10.8 107.0ThemilestonepaymentsaretoAltiusMineralsCorporationinthefirsttwoyearsafterthecommencementofproductionandrepresentthemajorityofthepurchasepricepaidbyAllegiancefortheacquisitionoftheTelkwacoalexplorationtenements.TheDFSassumesUS$10.8Mofthemobileequipmentwillbeleasefinancedandthebalancefundedfromcashflow.As discussed above, on going water management, and mitigating the risk of environmental impact isimportantandrequiressignificantongoingcapitalinvestmentduringthelifeofmine.ThisisnotuncommoninBritishColumbia,andCanadagenerally,andreflectsthehighstandardsthatCanadasetsfortheprotectionoftheenvironmentfromindustry,notjustmining.OperatingCostsTheDFSoperatingcostsaresummarizedinTable14below.Table14:OperatingCostsLifeofMine US$/SaleabletSiteCosts Mining–wasteremovalandcoalrecovery 19.5Coalprocessing 6.3Generalandadministration 4.2Reclamation 0.9TransportationandMarketing Marketingcosts 1.9Haulage(CHPPtoRailSiding) 3.8Railtoportandloaded 13.1Totalall-incashcostFOBpre-interestandtax 49.7TheTenasProjectenjoysrelativelyeasyminingconditionswith flatgentledippingcoalseams,anda lowaveragelife-of-minestripratioof3.6:1BCM/ROMt,or4.8:1BCM/PRODt.Thisalongwithdozerpushingandbackfillingasignificantamountofwasterockmaterialduringmineoperations,hascontributedtoverylowminingcosts.ItochuCorporationaretheappointedsalesagentforTelkwacoal,andreceiveasalescommissionof3percentoftheFOBprice,ofwhich1.5%ispaidonsale,and1.5%ispaidasaprofitshareafterEBITDA,assumingEBITDA ispositive.TheEBITDAmarketing fee isnot included in theall in cashcost/tabovebecause it issubjecttoprofitability,notrevenue.

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AroyaltyisalsopayabletoAltiusMineralsCorporationforthelifeofmineaspartoftheprojectacquisitionpurchaseprice,equalto3%oftheFOBprice,andpaidquarterlyaftersales,whichroyaltyisnotincludedintheallincashcost/tabove.FinancingThe Board of Allegiance considers that there is a reasonable basis to assume the necessary funding fordevelopmentoftheTenasProjectwillbeabletobeobtainedwhenrequired,becauseof(butnotlimitedto)thereasonsoutlinedbelow.FundingfromcompletedDFStocompletionofpermittingAspreviouslyannouncedbyAllegianceon5November2018,ItochuCorporationofJapan(Itochu)hasagreedtoinvestC$6.6M(A$6.9M)intoTelkwaCoalLtd(TCL),subscribingforsharesinTCLrepresenting20percentoftheissuedsharecapitalofTCL,asfollows:§ C$1.5Mfora5.3%interestinTCL,completedinJanuary2019,followingtheissueofasection10order

undertheEnvironmentalAssessmentActofBritishColumbia(whichformallyacknowledgestheTenasProject has been accepted for environmental review and permitting and was received by TCL earlyNovember2018);

§ C$1.5M for a further 4.8% interest in TCL, following completion of the Tenas Project DFS to thesatisfactionofItochu;and

§ C$3.6Mforafurther9.9%interestinTCL,followinglodgementofanapplicationforanEnvironmentalAssessmentCertificate,targetedforQ32019;and

§ InadditiontothesharesthatItochureceivesinTCL,ItochuhasbeengrantedtheexclusiverighttomarketandsellallcoalminedatTelkwa,includingfromtheTenasProject.

It isanticipatedthattheItochuinvestmentwill fundTCLthroughtothecompletionofpermitting.Totheextent that itdoesnot,Allegiancemayhave to raiseadditional capital for thatpurpose. If required, it ispresentlyanticipatedthatsuchcapitalwouldmostlikelyberaisedthrough:§ Equitycapitalmarkets;and/or§ Furtherfarm-outofparticipatinginterestsintheTenasProjecttoItochu,orotherpotentialinvestors.MinedevelopmentfundingpostpermittingItochuhastheright,afterpermitstominetheTenasProjectaregranted,tosubscribeforadditionalsharesinTCLonthebasisofavaluationwhereallpermitstominearegranted.Thatvaluationistobedeterminedbetweentheparties,orfailingthatbyanindependentexpert.ItisAllegiance’sviewthatavaluationoftheTenasProjectwhereallpermitstominearegranted,willproperlyreflectvalueandthatItochuislikelytobepreparedtoinvestfurtherequitytowardsTenasProjectconstructioninordertomonetisethevalueoftheircoalmarketingrights.TheBoardconsidersthisviewreasonable.Withoutthisfurtherinvestment,andintheabsenceofalternativefunding,thecoalmarketingrightswillnotbeofvalue.Two major equipment suppliers have offered favourable financing terms for the supply of newminingequipmentduringtheminestart-upphase.TheDFShasassumedthatthemajorequipmentsuppliedfromthepreferredsupplierwillbeleasefinancedfromthatsupplierattheofferedinterestrateof5.6%pa,andrepaid in full over five years from the commencementof production. In addition, theDFS assumed thatancillarymobileequipmentwillalsobeleasefinancedandassumedthesamefinanceleaserateofferedbythesamepreferredsupplier.

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Table15below lists themajormineequipment, for thestart-upphase,with indicativepriceand financetermsfromthepreferredsupplier,andsummarisestheancillarymobilemineequipmentassumingthesamefinancerate.Table15:Equipmentleasefinancedonstart-up Numberofunits C$’000Crawler-mountedRotaryDrill6.00-9.88inchdiameter 1 2,662Crawler-mountedRotaryDrill4.5inchdiameter 1 778Diesel15.7cubicyardBackhoe 2 7,366Diesel7cubicyardBackhoe 1 1,228100-tonclassHaulTruck 10 20,354D8class12.9inchbladeDozer 3 2,98814Hclass14inchbladeGrader 3 1,608100-tonclass75,000LWaterTruck 1 2,335ArticulatedHaulTruck43st30yd 2 1,902988classFrontEndLoader 4 4,335Ancillarymobileequipment 3,664Inadditiontotheabove,minedevelopmentfundingoptionswillbeexploredduringthepermittingphaseoftheTenasProjectandinclude:§ Projectfinance;§ Vendorfinance;§ Customerfinance;and/or§ Equitycapitalmarkets.ProjectEconomicsInadditiontothecoalproductioninputsdiscussedthroughoutthisannouncement,additionalinputsintothekeyperformanceindicatorsoftheProjecteconomicsaresetoutinTable16below.Table16:AdditionalinputstoKeyPerformanceIndicators Units ValueAverageCoalpriceforTenasproductcoal–2021and2022 US$/t 120AverageCoalpriceforTenasproductcoal–2023onwards US$/t 114BCMineralstaxrate(deductiblefromcorporatetaxes)* % 2or13BCCorporatetaxrate % 11FederalCorporatetaxrate % 15

*BCMineralstaxratecomprisesanetcurrentproceedstaxrateof2%oranetrevenuetaxrateof13%dependingontaxableincome.

TheProjectkeyperformanceindicatorsaresummarizedinTable17below.Table17:KeyPerformanceIndicators Units ValuePre-taxNPV8% A$M 407.3Pre-taxIRR % 56.9Post-taxNPV8% A$M 260.5Post-taxIRR % 47.0Paybackfromcommencementofproduction Years 2.5Allegiancecurrentlyowns95%ofTCL.TCLowns100%oftheTenasProject.Theremaining5%ofTCLisownedbyItochu.Onthatbasis,Allegiance’scurrent95%shareofProjectNPVissummarizedinTable18below:

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Table18:Allegiance’sshareofNPV Units ValuePre-taxNPV8% A$M 386.9Post-taxNPV8% A$M 247.5Sensitivityanalysiswasundertakentodeterminetheeffectonthepost-taxNPV8%andtheIRR.TheresultsofthesensitivityanalysisaresetoutinTables19and20below.Table19: OperatingandCapitalCosts(US$M)NPV(US$M) 185 944 1,079 1,213 1,348 1,483 1,618 1,753

PriceUS$/Producttonne

84.0&79.8 130 95 59 22 -18 -61 -11096.0&91.2 182 148 114 78 41 3 -39

108.0&102.6 234 200 166 133 97 61 23120.0&114.0 286 252 219 185 152 116 80132.0&125.4 338 304 271 237 203 170 135144.0&136.8 390 356 323 290 256 222 189156.0&148.2 442 408 375 342 308 275 241

Table20: OperatingandCapitalCosts(US$M)IRR(%) 47 944 1,079 1,213 1,348 1,483 1,618 1,753

PriceUS$/Producttonne

84.0&79.8 47% 31% 19% 12% 6% 2% 0%96.0&91.2 69% 47% 32% 22% 14% 9% 4%

108.0&102.6 93% 66% 47% 34% 24% 17% 11%120.0&114.0 118% 87% 64% 47% 35% 26% 19%132.0&125.4 147% 108% 82% 62% 47% 36% 27%144.0&136.8 179% 132% 101% 78% 61% 47% 37%156.0&148.2 215% 158% 121% 95% 75% 59% 47%

Tables19and20showthattheTenasProjectperformanceindicatorsaresensitivetochangesincommoditypriceandoperatingandcapitalcosts.TheProjectcansustaina30%decreaseinproductsellingpriceresultinginaposttaxNPV8%ofUS$22Mand12%posttaxIRR.TheProjectcansustaina30%increaseincapitalandoperatingcostsresultinginaposttaxNPV8%ofUS$80Mand19%posttaxIRR.RisksThekeyrisksinrelationtotheTenasProjectaresummarisedbelow:§ Environment:The impactofminingontheenvironment isalwaysan issue irrespectiveofthetypeof

mineand its location.OncetheCompanyhascompleted itsenvironmentalaffectsassessmentof theProject,targetedforQ22019,theCompanywillhaveasolidunderstandingofwhattheimpactsmightbe.

§ WaterManagement:Relatedtothefirstpointofenvironmentalimpact,oneareaofparticularconcerntotheCompanyiswatermanagement.TheProjecthasseveralstreamswithinitsvicinitywhichallfeedintoamajorriversystem.EnsuringthattheProjectdischargescleansurfacewaterbackintotheriversystemisamatterofhighprioritytotheCompany.

§ AcidRockManagement:TheProjecthassomewasterockthathaspotentialtogenerateacidleachingofmetalswhenminedandexposedtoairandwater.TheDFSassumesthisrockwillbepermanentlystoredunder water cover inmanagement ponds constructed in the first 10 years ofmining. This planwillpreventoxidisationoftherockwhichinturnwilleliminatetherequirementfortreatmentofacidicwater.

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There is a risk that the water balance will not be positive requiring water to be pumped from awatercoursetomaintainthewatercover,oractiveongoingwatertreatment.

§ Water Discharge Quality: The Government provides thresholds for water quality discharge. Until an

effectsassessmentoftheProjectonwaterqualitybeingdischargedintothecatchmentiscompleted,andwhichispartoftheenvironmentalassessmentprocess,itwillnotbeknownforcertainwhetherthetreatmentofwaterpriortodischargeisrequired.

§ Permitting:ThereisnoguaranteethattheProjectwillbegrantedallpermitsrequiredtooperateamineatwhateverstageofplannedproduction.WhilstBritishColumbiaisinafirstworldcountry,withaveryprescriptiveminepermittingregime,thereisalwaysuncertaintyanddoubtastowhetherGovernmentministrieswillsupportaparticularminingactivity.

§ Finance:Notwithstanding theCompany’s confidence in this regard, there isnoguarantee that if andwhentheProjectispermittedandreadyfordevelopment,therewillbefundingavailabletodoso.WhilsttheProjectisverylowdownthecostcurveandcanwithstandamaterialdropinthepriceofcoal,thevolatilityofcommoditypricesinadownwardtrendoftendampenstheinterestofinvestorsinaparticularcommodity,suchthatfundingmaybedifficulttosecure.

§ Coal performance: unless and until a particular coal has been tested for its performance in a blast

furnace,thereremainsanuncertaintyastohowitwillactuallyperform,andthismayhaveanimpactoncoalpricing.

_______________________________________________________________________________________Formoreinformation,pleasecontact:MrDavidFawcett MrMarkGrayChairman,AllegianceCoalLimited ManagingDirector,AllegianceCoalLimitedMobile:+16046122376 Mobile:+61412899979Email:[email protected] Email:mgray@allegiancecoal.com.auAboutAllegianceCoalAllegianceCoalisapubliclylisted(ASX:AHQ)AustraliancompanyadvancingametallurgicalcoalmineintoproductioninBritishColumbia,Canada.TheTelkwametallurgicalcoalcomplex(Project)includesthreepitareascomprising125.8MtofJORCcompliantcoalresourceofwhich102.3MtisintheMeasuredCategory;22.3MtisintheIndicatedCategory;and1.2MtisintheInferredCategory.TheTenasProjectthesubjectofthisDFSrepresentsthefirstdevelopmentofthecomplexandcomprises36.5MtoftheProjectresourceand16.5MtoftheProjectreserves.CoalResources&Reserves:GoathornDeposit&TelkwaNorthDepositTheestimatesofcoalresourcesorcoalreservesinthisannouncementinrespectoftheGoathornDeposit&theTelkwaNorthDeposit,werefirstreportedintheCompany’sannouncementof3July2017.TheCompanyconfirmsthatitisnotawareofanynewinformationordatathatmateriallyaffectstheinformationincludedin the announcement of 3 July 2017 insofar as it relates to the coal resources or coal reserves for theGoathornDeposit&theTelkwaNorthDepositandthatallmaterialassumptionsandtechnicalparametersunderpinningtheestimatesintheannouncementof3July2017continuetoapplyandhavenotmateriallychanged.

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CoalResources&Reserves:TenasProjectTheestimateofcoalresourcesinthisannouncementinrespectoftheTenasProjectwasfirstreportedintheCompany’s announcement of 18 June 2018. The Company confirms that it is not aware of any newinformationordatathatmateriallyaffectstheinformationincludedintheannouncementof18June2018insofarasitrelatestothecoalresourcefortheTenasProjectandthatallmaterialassumptionsandtechnicalparametersunderpinningtheestimatesintheannouncementof18June2018continuetoapplyandhavenotmateriallychanged.CompetentPersonsStatementTheestimateofcoalreserves inthisannouncementinrespectoftheTenasProject isbasedonandfairlyrepresents, information and supporting documentation prepared by by Mr Ron Parent and Mr RobertMcCarthy.MrParent isaProfessionalGeologistregisteredwiththeAssociationofProfessionalEngineersandGeoscientistsofBritishColumbia.MrMcCarthyisaProfessionalEngineerregisteredwiththeAssociationofProfessionalEngineersandGeoscientistsofBritishColumbia.MrParentandMrMcCarthyareindependentconsultantstotheCompany,andhavesufficientexperiencewhichisrelevanttothestyleofmineralisationandthetypeofdepositunderconsiderationandtotheactivitywhichtheyundertooktoqualifyasCompetentPersons as defined in the JORCCode (2012 Edition of the “Australian Code for Reporting of ExplorationResults,MineralResourcesandOreReserves”).MrParentandMrMcCarthyascompetentpersonsforthisannouncement have consented to the inclusion of the information in the form and context in which itappearsherein. ______________________________________________________________________________________

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APPENDIX-JORCTABLE1Section1 SamplingTechniquesandDataCriteria JORCCodeexplanation CommentarySamplingtechniques

• Natureandqualityofsampling(e.g.,cutchannels,random chips, or specific specialised industrystandard measurement tools appropriate to theminerals under investigation, such as down holegammasondes,orhandheldXRFinstruments,etc.).Theseexamplesshouldnotbetakenaslimitingthebroad meaning of sampling.

• Include reference to measures taken to ensuresample representativeness and the appropriatecalibration of anymeasurement tools or systemsused.

• AspectsofthedeterminationofmineralisationthatareMaterialtothePublicReport. Incaseswhere‘industrystandard’workhasbeendonethiswouldberelativelysimple(eg‘reversecirculationdrillingwasusedtoobtain1msamples fromwhich3kgwas pulverised to produce a 30g charge for fireassay’). In other casesmore explanationmayberequired, suchaswhere there is coarsegold thathas inherent sampling problems. Unusualcommoditiesormineralisationtypes(egsubmarinenodules) may warrant disclosure of detailedinformation.

• Allboreholes,whereconditionspermitted,weregeophysicallyloggedwithsomeorallofthefollowingtools:deviation,gamma,density,caliper,neutron,dip.

• Geophysicalloggingoperatorsroutinelycalibratedtheirtoolsbetweenprograms.

• Coreholesweresampled,wherecorerecoverypermitted,aswholecorecollectedforcoalqualityanalysisandrockgeochemistry.

• Theresultsfromthegeophysicalloggingwereusedtodeterminethelithologyofthestratainthehole.

• Thecoredintervalsarecomparedtothegeophysicalloginordertodeterminesampleintervalsandcoreloss.

• SamplesfromtheseprogramsweresenttotheCrowsnestResourcesLimited(CNRL)companylaboratoryandtoLoringLaboratoriesinCalgary.

• Abulksamplingtestpitwasalsoexcavatedwitha219tonnesamplecollectedfrom7seams.ThesamplesfromthistestpitweretestedbyBirtleyLaboratoryinCalgary.

• Afurthercoalqualitydrillingprogramwasconductedin2018thatconsistedoffourPQcoreholesandabulksamplecomprisedof14,6inchcoreholes.ThePQholesweretestedattheBirtleyLabortoryinCalgary,ABwhilethe6inchholesweretestedbytheSGSLaboratoryinDelta,BC

Drillingtechniques

• Drilltype(e.g.,core,reversecirculation,open-holehammer,rotaryairblast,auger,Bangka,sonic,etc.)anddetails(e.g.,corediameter,tripleorstandardtube,depthofdiamondtails, face-samplingbitorothertype,whethercore isorientedand ifso,bywhatmethod,etc.).

• Avarietyofdrillingtechniqueswereutilizedonthisprojectincludingmainlycore,airrotaryoracombinationofboth.

• From1979to1989thedrillingwasdoneforCNRLusingtop-headdriveIngersollRand(IR)rotaryrigsandLongyear38diamondcorerigs.Corediameterwas17/8”NQcoreplussome6”diametercores.

• From1992to1998thedrillingwasdoneforManaltausingtop-headdriveFailing1250andIRrotaryrigsandanAckerdiamondcorerig.Corediameterwas17/8”NQcore.Samplingofcoalwasdonebythediamondcorerig.Rotarycoringtoobtain10cm(4”)diametercorewasalsoused.

• Corewasnotorientated.• Adrillingprogramwascompletedin2018consistingofPQ

diamondcoreholeswhichwereloggedplusabulksampleobtainedfrom6inchairrotaryholes.

• Drill samplerecovery

• Methodof recordingandassessing coreand chipsample recoveries and results assessed.

• Measurestakentomaximisesamplerecoveryandensure representative nature of the samples.

• Whether a relationship exists between samplerecoveryandgradeandwhethersamplebiasmayhave occurred due to preferential loss/gain offine/coarsematerial.

• Thecoredintervalswerecomparedtothegeophysicalloginordertodeterminesampleintervalsandcoreloss.

• Thedrillingcontractorwasresponsibleforensuringthatcorerecoverywasmaximized.

• Duetothenatureofthedeposit,corequalitywasgenerallynotaffectedbycoalrecovery.

• Corerecoveryrecordswerereportedonthewrittencoredescriptionsheetsforeachcorehole.Theaveragerecoveryfrom1992to1998wastypicallyinthe80%to100%rangeandwastypicallybetterthanthatachievedduringtheCNRLtenureperiod

• Corerecoveryforthe2018programwasbetween80and100%forthePQcoreholesand95to100%forthe6inchcoreholes.

Logging • Whether core and chip samples have beengeologicallyandgeotechnicallyloggedtoalevelofdetail to support appropriate Mineral Resource

• Allcorewasloggedusingsimilarloggingcriteriaincludedlithology,weathering,corequality/hardnessandobservationofstructuralfeatures.

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Criteria JORCCodeexplanation Commentaryestimation, mining studies and metallurgicalstudies.

• Whether logging is qualitative or quantitative innature.Corephotography.

• The total length and percentage of the relevantintersectionslogged.

• Theloggingwithrespecttothedownholelogsisquantitativeandcorephotographsareavailableinsomeinstances.

• Allboreholes,whereconditionspermitted,weregeophysicallyloggedwithsomeorallofthefollowingtools:deviation,gamma,density,caliper,neutron,dip.

• Geophysicalloggingoperatorsroutinelycalibratedtheirtoolsbetweenprograms.

• Thegeophysicallogswereusedtodeterminethelithologicalintervalsinrotaryholeswherenocorewasretrieved.Ingeneral,coalwasdeterminedbyitslowresponseonthedensitytool(~<1.8g/cc).Oncedeterminediftheintervalwascoalornot,alithotypeforrockintervalswasdeterminedbyobservingthegammalogresponse,whichhadthelowestresponseincleansandstoneswithlittleclaycontentandthehighestresponseinshalesduetothehighclaycontent,whichcontainedKthatemitsradiation.

• Allholesin2018wereloggedgeophysicallyanddipmeterwasrunonholes.The6inchcoreholeswereonlyloggedgeologically.

Sub-samplingtechniques andsamplepreparation

• Ifcore,whethercutorsawnandwhetherquarter,halforallcoretaken.

• Ifnon-core,whether riffled, tube sampled, rotarysplit,etcandwhethersampledwetordry.

• For all sample types, the nature, quality andappropriateness of the sample preparationtechnique.

• Quality control procedures adopted for all sub-samplingstagestomaximiserepresentativenessofsamples.

• Measures taken to ensure that the sampling isrepresentative of the in situ material collected,including for instance results for fieldduplicate/second-halfsampling.

• Whethersamplesizesareappropriatetothegrainsizeofthematerialbeingsampled.

• Allsamplestakenwereofwholecore.• Ofthefewrotarysampledholes,noneoftheanalytical

datawereusedintheresourceestimate.• Qualitycontrolwasprovidedviareferencingthe

geophysicallog.Theanalyticalresultswerecheckedforreasonablenessagainstthegammaanddensityresults.Thereshouldbeadirectrelationshipbetweendensityandashcontent.

• Wholecorematerialofeachseamorply,eitherassinglesamplesoraseriesofsamplesbydepthincrements,weresenttothelaboratoryforanalysis.AllcoalcoresampleswerebaggedonsitebeforebeingtransportedtoLoringandBirtleyLaboratoriesinCalgaryforcoalqualitytestwork.

Qualityofassaydata andlaboratorytests

• The nature, quality and appropriateness of theassaying and laboratory procedures used andwhether the technique is considered partial ortotal.

• For geophysical tools, spectrometers, handheldXRF instruments, etc, the parameters used indetermining the analysis including instrumentmake and model, reading times, calibrationsfactorsappliedandtheirderivation,etc.

• Natureofquality controlproceduresadopted (egstandards, blanks, duplicates, external laboratorychecks)andwhetheracceptablelevelsofaccuracy(ie lack of bias) and precision have beenestablished.

• Loring,SGS,andBirtleyLaboratoriesareISO9001certified,adheretoASTMpreparationandtestingspecificationsandhavequalitycontrolprocessesinplace.

Verification ofsampling andassaying

• The verification of significant intersections byeither independent or alternative companypersonnel.

• Theuseoftwinnedholes.• Documentation of primary data, data entry

procedures, data verification, data storage(physical and electronic) protocols.

• Discussanyadjustmenttoassaydata.

• Theverificationintermsofcoalqualitywasbycomparisonofanalyticalresultswiththegeophysicallog.Thesamplingandanalyticalresultswereoverseenandreviewedbyqualifiedgeologists.

• Anomalouslythickintersectionsinthedatasetwerecheckedtoensurecorrectness.

• Twinningofholesisgenerallynotrequiredexceptintheabsenceofageophysicallog.

• Ingeneralallcorelogsandintervalswererecordedusinghandwrittenlogs,someofwhichweretranscribedintospreadsheetsorothersoftware.

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Criteria JORCCodeexplanation Commentary

• Datapriorto1992havepapergeophysicallogs,howeverallholedrilledfrom1992–1998havelogasci(.las)filesindigitalformat.

• AllofthedatahasbeenstoredinanMSAccessdatabase.• 2018datawascomparedtohistoricalinformationandthe

geophysicallogstovalidatetheresultsobtainedLocationofdatapoints

• Accuracyandqualityofsurveysusedtolocatedrillholes (collar and down-hole surveys), trenches,mineworkingsandotherlocationsusedinMineralResourceestimation.

• Specificationofthegridsystemused.• Qualityandadequacyoftopographiccontrol.

• Allhistoricaldrillholeshavebeensurveyedusingtotalstationsurveyequipment.Extensivedocumentationofsurveytraversesisavailableaspartoftherecord.

• AllhistoricaldatapointsusedintheresourceestimateweresurveyedinNAD27.ThesewereconvertedtoNAD83forthepurposesofthisstudyandfuturework.

• Topographiccontoursat2mintervalsprovideappropriatetopographiccontrol.

• 2018drillholesweresurveyedusingGPSwithRTKcorrectionsresultinginaccuraciesof+/-5cminNAD83

Data spacinganddistribution

• DataspacingforreportingofExplorationResults.• Whether the data spacing and distribution is

sufficienttoestablishthedegreeofgeologicalandgrade continuity appropriate for the MineralResourceandOreReserveestimationprocedure(s)andclassificationsapplied.

• Whethersamplecompositinghasbeenapplied

• AveragedrillholespacingforTenasis110m,125mforGoathornand135mforTelkwaNorth.Theaveragecoreholespacing(withqualitydata)is237minTenas,173minGoathorn,and157minTelkwaNorth.

• Theresourceclassificationisbasedonanassessmentofthegeological(seamthickness)andcoalqualitycontinuity.Thishasthenbeensummarisedusingthedistancefromnearestacceptabledatapoint(drillhole)forcoalseamthicknessidentificationandanassessmentoftheconfidenceincoalseamcontinuity/correlation.ThedrillholespacingandcontinuitiesareconsideredappropriatetodefineMeasured,IndicatedandInferredResourcesonthefollowingbasis:

o Measured=within75mofdrillholeutilizedinthemodel(thatis,holesidentifiedasappropriateforuseinthecurrentresourceestimate);

o Indicated=within75mto150mofdrillhole;o Inferred=within150mto300mofdrillhole.

Orientation ofdata in relationto geologicalstructure

• Whether the orientation of sampling achievesunbiased sampling of possible structures and theextent to which this is known, considering thedeposittype.

• Iftherelationshipbetweenthedrillingorientationandtheorientationofkeymineralisedstructuresisconsideredtohaveintroducedasamplingbias,thisshouldbeassessedandreportedifmaterial.

• Drillingwasorientedoncrosssectionsat25mspacingorientedperpendiculartolocaltrend.

• Drillingwasverticalandcoalseamsdipatbetween0and65degrees.Seamthicknessinterceptsarecorrectedtotruefromapparentthicknessusingthelocallyinterpretedseamdip.

Samplesecurity • Themeasurestakentoensuresamplesecurity. • Noknownspecialsamplesecuritymeasureswereappliedatthetimeofsamplesubmissiontothelaboratories,

Audits orreviews

• The results of any audits or reviews of samplingtechniquesanddata.

• Extensivechecksandcomparisonsbetweendatahasbeenundertaken to verify and validate data for this resourceestimate

Section2 ReportingofExplorationResults

Criteria JORCCodeexplanation CommentaryMineraltenement andland tenurestatus

• Type, reference name/number, location andownershipincludingagreementsormaterialissueswith third parties, such as joint ventures,partnerships, overriding royalties, native titleinterests, historical sites, wilderness or nationalparkandenvironmentalsettings.

• The security of the tenure held at the time ofreporting along with any known impediments toobtainingalicensetooperateinthearea.

• Coaltenureisheldintheformofcoallicenses(22parcelsfor5579Ha)andfreeholdcoal(5parcelsfor1301Ha).ThecoallicensesareheldbyTelkwaCoalLimitedandBulkleyValleyCoalLimited(BVCL).

• TheBVCLlicenseownershipareunderanagreementsignedbetweenCDCandBVCLandthisagreementhasbeenassignedtoTelkwaCoalLimited..

• Thetenureissecureandmaintenancepaymentsarealluptodate.

• ThefreeholdareasareownedbyTelkwaCoalLimited

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• Theonlyknownimpedimenttoobtainingalicensetooperatewillbenegotiationswithselectprivatelandholdersintheareafordevelopment.

Explorationdonebyotherparties

• Acknowledgment and appraisal of exploration byotherparties.

• Intheperiodfrom1979to1998atotalof867documenteddrillholeswerecompletedontheTelkwapropertybyCNRLandManalta.Ofthose,525weredrilledusingconventionalrotary methods, while 310 were cored. In 47 of the drill-holes, 59 piezometers were selectively installed at variousstratigraphic levels. 32 surficial bore-holes have also beencompleted to date on the property. In addition, there arereportsofabout30holesbeingdrilledbyCyprusandCanexsporadically intheperiodfrom1969to1978; thisdatahasnotbeencompiledduetothepoorqualityoftherecords.

• Additionally, surface geophysics has been conductedperiodicallybybothCNRLandManaltawiththeintentionoftracingcoalseamsonsurface.

Geology • Deposit type, geological setting and style ofmineralisation.

• ThesemediumtohighvolatilebituminouscoaldepositsarepartoftheRedRoseformationoftheSkeenaGroup.

• TheSkeenaGroupsedimentsoftheTelkwaCoalfieldareanerosional remnant of Lower Cretaceous sedimentary rockwhichwereinitiallydepositedwithinalargedeltaiccomplexalongthesouthern flanksof theBowserBasin.ThroughoutlateJurassicandearlyCretaceoustimetheBowserBasinwasthefocusofrapidsedimentation,subsidenceandincreasedtectonic activity, which resulted in thick accumulations ofcoal-bearingsedimentaryrock.

• ThegeologytypeclassificationforCanadiancoaldepositsis“complex”. Minimum open pit mineable thickness forcomplexcoaldepositsis0.8m.

• Themaineconomicseamsrangefromaminimummineablethicknessof0.8mto9minthickness.

Drill holeInformation

• A summary of all information material to theunderstandingoftheexplorationresults, includinga tabulation of the following information for allMaterialdrillholes:

• EastingandNorthingofthedrillholecollar• Elevation or RL (Reduced Level – elevation above

sealevelinmetres)ofthedrillholecollar• Dipandazimuthofthehole• Downholelengthandinterceptiondepth• Holelength• Iftheexclusionofthisinformationisjustifiedonthe

basisthattheinformationisnotMaterial,andthisexclusiondoesnotdetractfromtheunderstandingofthereport,theCompetentPersonshouldclearlyexplainwhythisisthecase.

• Modern exploration of the Telkwa Project started withCyprus Anvil Mining in 1978 and since then over 800explorationdrillholesand3bulksampleshavebeencarriedoutontheproperty.

• Other ancillary activities such as trenching, geologicalmappingandsurfacegeophysicshavealsobeencarriedout.

Dataaggregationmethods

• In reporting Exploration Results, weightingaveraging techniques,maximum and/orminimumgradetruncations(e.g.cuttingofhighgrades)andcut-off grades are usuallyMaterial and should bestated.

• Where aggregate intercepts incorporate shortlengthsofhighgraderesultsandlongerlengthsoflow grade results, the procedure used for suchaggregation should be stated and some typicalexamplesofsuchaggregationsshouldbeshownindetail.

• The assumptions used for any reporting of metalequivalentvaluesshouldbeclearlystated.

• Allcompositingwaslengthbased.• Seams consist of minimum 2:1 coal to rock ratio with a

maximuminternal“parting”of0.3mforTenascomplexand0.5mforGoathornandTelkwaNorthcomplex.

• Seam composites were made from compositing oflithological intervals (Coal or Parting) honouring the seamcode.

• Coal quality intervals are cross referenced with the seamcomposites

Relationshipbetweenmineralisationwidths andinterceptlengths

• TheserelationshipsareparticularlyimportantinthereportingofExplorationResults.

• If thegeometryof themineralisationwithrespecttothedrillholeangleisknown,itsnatureshouldbereported.

• Ifitisnotknownandonlythedownholelengthsarereported,thereshouldbeaclearstatementtothis

• Composited seam intervals were assigned a dip from ageologicalsectionandthetruethicknessoftheintervalswasestablished

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Criteria JORCCodeexplanation Commentaryeffect (e.g. ‘down hole length, true width notknown’).

Diagrams • Appropriate maps and sections (with scales) andtabulationsofinterceptsshouldbeincludedforanysignificantdiscoverybeing reported. These shouldinclude,butnotbe limited to, aplan viewofdrillhole collar locations and appropriate sectionalviews.

• Diagrams have been developed for the project by TelkwaCoalLimitedinaccordancewithJORCCoderequirements.

• Diagramsincludelocationmaps,drillholeplotsandgeologycross-sections.

Balancedreporting

• Where comprehensive reportingof all ExplorationResultsisnotpracticable,representativereportingofboth lowandhighgradesand/orwidthsshouldbe practiced to avoid misleading reporting ofExplorationResults.

• Notapplicable.Whilefulldetailsofalltheexplorationresultshavenotbeenreleased,therearenosignificantormaterialissuesnotsummarisedinthisTable1.

Othersubstantiveexplorationdata

• Otherexplorationdata,ifmeaningfulandmaterial,shouldbereported,including(butnotlimitedto):

• Geologicalobservations• Geophysicalsurveyresults• Geochemicalsurveyresults• Bulksamples–sizeandmethodoftreatment• Metallurgicaltestresults• Bulk density, groundwater, geotechnical and rock

characteristics• Potentialdeleteriousorcontaminatingsubstances

• Bulk samples have contributed considerably to theunderstanding of the quality characteristics of the Telkwacoalsandhavebeenextractedfromeachofthethreemainresource areas. On each, a complete suite of coal qualityanalyses was performed, including testing on a variety ofsimulatedpreparationplantproducts.

• In1983,a219tonnebulksamplewascollectedfrom7majorseamswithintheGoathornEast(Pit3)area.In1989,abulksamplewasextractedfromtheBowser(TelkwaNorth–EastPit)areaviaalarge-diametercoringprogram.And,in1996,an 80 tonne bulk sample was collected from the threemineableseamsinTenasarea.

• Totalsulphurandthreeformsofsulphur(organic,inorganic,andsulphate)havebeenestimatedforthevariousseamssoastodeterminethepotentialforwatertreatment.

Futurework • Thenatureandscaleofplannedfurtherwork(e.g.testsforlateralextensionsordepthextensions,orlarge-scalestep-outdrilling).

• Any additional future work will involve drilling mainly insupport of acid rock drainage, structural understanding,hydrogeology,andgeotechnicalevaluations.

• Some2dseismicprogramsmayalsohappentoaidwithfaultlocationsandoverburdendepthsandmaterialtypes.

Section3 EstimationandReportingofMineralResources

Criteria JORCCodeexplanation CommentaryDatabaseintegrity

• Measurestakentoensurethatdatahasnotbeencorruptedby, forexample, transcriptionorkeyingerrors,betweenitsinitialcollectionanditsuseforMineralResourceestimationpurposes.

• Datavalidationproceduresused.

• By overlaying the geophysical log density data on thelithological intervals, the coal intercepts were assigned adensityvaluewhichwasthencheckedforreasonableness(i.e.density from geophysics should be between 1.30 and 1.80g/cc).

• Downholegeophysicaldatawasused tovalidateandverifyseam intercepts and to assist with seam correlation andstratigraphy.

• Otherdatavalidationincludedvisualinspectionofeveryseamintersection on cross section to allow for proper seamcorrelations and to look for anomalies in the stratigraphicinterval.

• ForDatacaptureandcurrentdatabasestorageMSAccessisutilized, along with cataloguing and electronic filing of allpertinentdatastoredontheSRKserver.

Sitevisits • Comment on any site visits undertaken by theCompetentPersonandtheoutcomeofthosevisits.

• AsitevisitwasconductedonApril11,2017by:o Ron Parent – Resource Competent Person

(Independent)o BobMcCarthy–ReserveCompetentPerson(SRK)o EdSaunders–Geotech(SRK)o DavidMaarse–WaterLead(SRK)o KarlHaase–Processing(Sedgman)

• The visit consisted of an aerial tour via helicopter and agroundtouronaccessibleroads.Thecorestoragefacilitywasobservedaswellasseveraloutcrops.

• RonParentalsospentfiveweeksonsitesupervisingthe2018explorationprogram.

Geologicalinterpretation

• Confidence in (or conversely, the uncertainty of)thegeologicalinterpretationofthemineraldeposit.

• There is a high level of confidence in the geologicalinterpretation,especially inareasof theresourcethathavebeenincludedinthereserves.

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• Nature of the data used and of any assumptionsmade.

• Theeffect,ifany,ofalternativeinterpretationsonMineralResourceestimation.

• The use of geology in guiding and controllingMineralResourceestimation.

• Thefactorsaffectingcontinuitybothofgradeandgeology.

• Stratigraphicsequenceiswellunderstoodandcorrelationsarerelativelystraightforward:thecurrentinterpretationhasmodifiedtheseamnomenclatureinplaces.

• Structureandfaultingarecommonlyshallowdippingwithpredominantlynormalfaultingupto100mdisplacement.LocalthrustfaultingisobservedintheGoathornarea.

• Limitsofthedepositsneedtobebetterdefined;sincesomeofthesub-croporstructurallycontrolledboundarieshavenotbeenfullydefined.

• Noalternativeinterpretationsareconsideredasthecurrentinterpretationiswellsupportedbyavailabledata.

• Thegeologicalmodelisathicknessmodel,whosedataiscompositedfromdrillholeseamintersectionsandconfirmedbygeophysicallogintercepts.

• Thecoalqualityparametersdonotaffectthequantityofcoal,buttherecoveryandgenerationofasuitableproduct.

Dimensions • TheextentandvariabilityoftheMineralResourceexpressedaslength(alongstrikeorotherwise),planwidth,anddepthbelowsurface to theupperandlowerlimitsoftheMineralResource.

• TheTenasdepositisapproximately3kmnorth-southby2kmeast-west, reaching a maximum depth of 400 m for thelowermost1LeSeam.

• GoathornEastis5kmby2kmreachingamaximumdepthof650mforlowermost1Seam.

• GoathornWestis1.5kmby800mreachingamaximumdepthof300mlowermost1Seam.

• TelkwaNorthis1.6kmby3.6kmreachingamaximumdepthof300mforthelowermost2Seam.

Estimationand modellingtechniques

• Thenatureandappropriatenessoftheestimationtechnique(s) applied and key assumptions,including treatment of extreme grade values,domaining, interpolation parameters andmaximum distance of extrapolation from datapoints. Ifacomputerassistedestimationmethodwas chosen include a description of computersoftwareandparametersused.

• The availability of check estimates, previousestimates and/or mine production records andwhether the Mineral Resource estimate takesappropriateaccountofsuchdata.

• The assumptionsmade regarding recovery of by-products.

• Estimation of deleterious elements or other non-grade variables of economic significance (egsulphurforacidminedrainagecharacterisation).

• Inthecaseofblockmodelinterpolation,theblocksizeinrelationtotheaveragesamplespacingandthesearchemployed

• Any assumptions behind modelling of selectiveminingunits.

• Coalqualityandseamthicknessparameterswereestimatedusing inversedistance squaredwithin the seamwireframeswhichcontrolthedistributionofinterpolatedvaluesin3D

• Themodelisofthecoalseamsonlyandtheinterburdenhasbeenmodelledbydefaultbuttosufficientdetailtoassistwithwasterockcharacterisationandwasterockmanagement.

• The current resourceestimate is comparablewithpreviousresourceestimatescompletedin1989,1997,and2015

• Sulphur (total, organic, inorganic, and sulphate) have beeninterpolatedinthemodelwheredatawasavailable

• The model block size ranges from 5 to 25 m along strike(TenasandTelkwaNortharerotated),5to10mdowndipand5minheight.

• Average drillhole spacing for Tenas is 110 m, 125 m forGoathornand135mforTelkwaNorth.Theaveragecoreholespacing(withqualitydata)is237minTenas,157minTelkwaNorthand173minGoathorn.

Estimationand modellingtechniques(continued)

• Any assumptions about correlation betweenvariables.

• Description of how the geological interpretationwasusedtocontroltheresourceestimates.

• Discussion of basis for using or not using gradecuttingorcapping.

• The process of validation, the checking processused, the comparison ofmodel data to drill holedata,anduseofreconciliationdataifavailable.

• Akeyassumptionutilized in the resourceestimatewas therelationshipbetweenashcontentonanairdriedbasisandbulkdensityusedforconversionofvolumetotonnesusingthe formula 1.2713+0.0092*ash% (adb), which wasdeveloped from the relationship between ash and bulkdensitypresentedinGSCPaper88-21.

• The geological interpretation is based on the “stacking” ofseam bottoms along 25 m spaced cross sections from thelowermostseamupward.

• Themainvalidationmethodusedwasacomparisonbetweenwireframesolidsvolumeandvolumegeneratedfromthe3Dblockmodelaftercoding.

• The model accurately represents the drilled seam truethicknessesto+/-0.1matagivenXYlocation.Theelevationsmayvaryupto3matanydrillholeintercept.Thisisduetothesectionalnatureofthemodellingprocess,projectingallseamintersectionsamaximumof12.5mtothenearestcrosssection.

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Criteria JORCCodeexplanation CommentaryMoisture • Whetherthetonnagesareestimatedonadrybasis

or with natural moisture, and the method ofdeterminationofthemoisturecontent.

• Thetonnagesareestimatedonanair-driedbasis,whilethemoisturecontentmeasurementsareavailablewithinthecoalqualitytestingresults.

Cut-offparameters

• Thebasisoftheadoptedcut-offgrade(s)orqualityparametersapplied.

• All coal quality parameters modelled were on an air-driedbasis.

• To assist in developing the coal reserves, coal yields werebasedonwashabilitytestingatacut-pointof1.65g/cc.

• Cleancoalobjectiveoftheprocesswillbe9.50%withatargetsaleableproductattheportat10%moisture.

Mining factorsorassumptions

• Assumptions made regarding possible miningmethods,minimumminingdimensionsandinternal(or, if applicable, external) mining dilution. It isalways necessary as part of the process ofdetermining reasonable prospects for eventualeconomic extraction to consider potential miningmethods, but the assumptions made regardingminingmethodsandparameterswhenestimatingMineral Resources may not always be rigorous.Wherethisisthecase,thisshouldbereportedwithan explanation of the basis of the miningassumptionsmade.

• Minimum coal ply thickness = 0.80m for Tenas,Goathorn,andTelkwaNorth.

• Maximumincludedpartingthickness=0.30mforTenasand0.50mforGoathornandTelkwaNorth

• Minimumcoal:rockratio=2:1• Theresourcesareallconsideredpotentiallysurfacemineable,

andrestrictedtoa20:1BCM:inplacecoaltonnecut-offstripratio depth. Despite there being previous undergroundmining on the property, no underground resources areconsideredatthistimeforthistable.

Metallurgicalfactors orassumptions

• Thebasisforassumptionsorpredictionsregardingmetallurgicalamenability.Itisalwaysnecessaryaspart of the process of determining reasonableprospects for eventual economic extraction toconsiderpotentialmetallurgical methods,buttheassumptions regarding metallurgical treatmentprocesses and parameters made when reportingMineral Resources may not always be rigorous.Wherethisisthecase,thisshouldbereportedwithan explanation of the basis of the metallurgicalassumptionsmade.

• Metallurgicalamenabilitywassimulatedfromtestworkusingindustrystandardmodelsforcoalbeneficiation

• Ashcontentofdilutionisassumed80%,sizingofAshissimilarto sizing of coal andwith a density of 2.50 g/cc. Thiswasbasedoffresultsofthebulksamplecompletedin1996whichusedcompleteddilutionanalysis.

Environmentalfactors orassumptions

• Assumptions made regarding possible waste andprocess residue disposal options. It is alwaysnecessary as part of the process of determiningreasonable prospects for eventual economicextractiontoconsiderthepotentialenvironmentalimpacts of the mining and processing operation.Whileat thisstagethedeterminationofpotentialenvironmental impacts, particularly for agreenfields project, may not always be welladvanced,thestatusofearlyconsiderationofthesepotential environmental impacts should bereported. Where these aspects have not beenconsidered this should be reported with anexplanation of the environmental assumptionsmade.

• Potential for ARD was studied extensively in the 1990s tosupportfeasibilitystudiesandenvironmentalassessments

• ThePropertyhostsbothnon-PAGandPAGseaminterburdenand overburden rock. Tenas, Goathorn and Telkwa Northhavebeencharacterizedtoestimatenon-PAGandPAGrockineachphase.

• The ratio of NP to MPA, NPR was used as the basis forclassifyingeachinterburdenandtheoverburdenzoneasnon-PAGorPAG. Muchof the rock isnon-PAGwhileall of theoverburden material and material excavated in themanagementpondsisnon-PAG

• Methods used to estimate NP and MPA in the 1990s aredifferent from thoseused currently and to varyingdegreesover-estimate bothNP andMPA resulting in uncertainty inthethresholdNPRusedtodelineatePAGandnon-PAGstrata.Based on the exploration program conducted in 2018,moderntestingmethodswereusedtomeasureNPandMPAand also allowed the historical data to be correlated tomodernvalueswhichallowedareduction intheamountofuncertainityinNPandMPAvaluesandwhichthresholdNPRvaluetouse.

• TheratioselectedtodefinePAGrock isNPR<2.0whichstillallows for the uncertainty in NP. A lower value may besuitableasunderstandingofthemineralogicalcharacteristicsoftherockimproves.

• Toassignestimatedvolumestonon-PAGorPAG,thesampleswithineachphaseandseaminterburden/overburdenwerebinnedintotwoNPRgroups,<2.0,and>2.0.

• TheintentofthemineplanwastoscheduleandplaceallPAGrock into designated management ponds that are floodedwithwatertopreventrockoxidationandacidgeneration.

• ThereisnoTailingsManagementFacility.BothCCRandfinesrejectswillbeplacedindesignatedsurfacestoragepiles,andperiodically capped with compacted overburden covers topreventacidrockdrainage.

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• Aflocculationsystemwillbeusedforwaterpriortodischargetomeetregulatoryrequirmentsfortotalsuspendedsolids.

• FurtheroptimizationofPAGmanagementincludingblendingPAGrockintonon-PAGrockand/orusingalowercutofftosegregatePAGrockfronnon-PAGrockshouldbeinvestigatedintheoperationsphaseoftheproject.

Bulkdensity • Whetherassumedordetermined.Ifassumed,thebasis for the assumptions. If determined, themethodused,whetherwetordry,thefrequencyofthe measurements, the nature, size andrepresentativenessofthesamples.

• Thebulkdensityforbulkmaterialmusthavebeenmeasuredbymethodsthatadequatelyaccountforvoid spaces (vugs, porosity, etc), moisture anddifferences between rock and alteration zoneswithinthedeposit.

• Discuss assumptions for bulk density estimatesused in the evaluation process of the differentmaterials.

• The bulk density (BD) was assumed based on an empiricalrelationshipwiththeairdriedashforhighvolatilebituminouscoal. Thisempirical formulawasextracted fromTable1ofGeologicalSurveyofCanadaPaper88-21:

BD(adb)=1.2713+0.0092xASH(adb)

Classification • The basis for the classification of the MineralResourcesintovaryingconfidencecategories.

• Whetherappropriateaccounthasbeentakenofallrelevant factors (ie relative confidence intonnage/gradeestimations,reliabilityofinputdata,confidence in continuity of geology and metalvalues, quality, quantity and distribution of thedata).

• Whether the result appropriately reflects theCompetentPerson’sviewofthedeposit.

• Theresourceclassificationisbasedonanassessmentofthegeological(seamthickness)andcoalqualitycontinuity.

• This has then been summarised using the distance fromnearest acceptable data point (drillhole) for coal seamthicknessidentificationandanassessmentoftheconfidenceincoalseamcontinuity/correlation.

• The drillhole spacing and continuities are consideredappropriate to define Measured, Indicated and InferredResourcesonthefollowingbasis:

o Measured=within75mofdrillholeutilizedinthemodel (that isholes identifiedasappropriateforuseinthecurrentresourceestimate);

o Indicated=75mto150mofdrillhole;o Inferred=150mto300mofdrillhole.

• The surface resources (those resources considered to haveprospectstobeopenpitmineable)arerestrictedtowithina20:1COSRbcm/tonnecoalfromsurface,whichisconsideredreasonableforcoalofthistype.

Audits orreviews.

• The results of any audits or reviews of MineralResourceestimates.

• Peer review by SRK personnel was carried out on thegeologicalinterpretation.Noexternalauditorreviewoftheresource estimate for this model was carried out. Theresourceestimatesaresimilartothosefrompreviousstudiesperformedwith the samedataandanydifferencesarenotdeemedtobematerial.

Discussion ofrelativeaccuracy/confidence

• Where appropriate a statement of the relativeaccuracy and confidence level in the MineralResourceestimateusinganapproachorproceduredeemedappropriatebytheCompetentPerson.Forexample, the application of statistical orgeostatistical procedures to quantify the relativeaccuracyof theresourcewithinstatedconfidencelimits, or, if such an approach is not deemedappropriate,aqualitativediscussionofthefactorsthat could affect the relative accuracy andconfidenceoftheestimate.

• Thestatementshouldspecifywhetheritrelatestoglobal or local estimates, and, if local, state therelevant tonnages, which should be relevant totechnicalandeconomicevaluation.Documentationshould include assumptions made and theproceduresused.

• These statements of relative accuracy andconfidence of the estimate should be comparedwithproductiondata,whereavailable.

• Theresourcesestimatesareassumedtobewithin+/-10%to15% on a global basis (or over an assumed annual miningvolume)andthisaccuracyisconsideredappropriatefortheclassification classes of Indicated and Measured CoalResources,andappropriatetosupportat leastaFS levelofstudyandreserveassessment.

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Section4 EstimationandReportingofOreReserves


MineralResourceestimateforconversiontoOreReserves

• DescriptionoftheMineralResourceestimateusedasabasisfortheconversiontoanOreReserve.

• Clear statement as to whether the MineralResourcesare reportedadditional to,or inclusiveof,theOreReserves.

• TheTenas,GoathornandTelkwaNorth resourceestimateswerecarriedout followingtheguidelinesof theJORCCode(2012)bySRKConsulting(Canada)Ltd.andreportedinJune2017. The Tenas resource estimate was updated andreportedbyTelkwaCoalLtd.inOctober2018

• TheMineralResourcesareinclusiveoftheOreReserves.

Sitevisits • Comment on any site visits undertaken by theCompetentPersonandtheoutcomeofthosevisits.

• Ifnositevisitshavebeenundertaken,indicatewhythisisthecase.

• TheCompetentPersonfortheOreReservesestimationisBobMcCarthy.Mr.McCarthy visited the site on April 11, 2017alongwithAllegianceCoalpersonnel.

• Thevisitconsistedofanaerialtourviahelicopterandagroundtouronaccessibleroads.Thecorestoragefacilitywasobservedaswellasseveraloutcropsandwatercourses.

Studystatus • Thetypeand levelofstudyundertakentoenableMineral Resources to be converted to OreReserves.

• The Code requires that a study to at least Pre-Feasibility Study level has been undertaken toconvertMineral Resources toOreReserves. Suchstudies will have been carried out and will havedetermined a mine plan that is technicallyachievable and economically viable, and thatmaterialModifyingFactorshavebeenconsidered.

• TelkwaCoalLimitedcompletedtwoprefeasibilitystudiesontheTelkwaCoalProjectin2017.

• TheOreReserveswere reported in conjunctionwith thosestudiesinJuneandSeptember2017.

• AnupdatedorereservefortheTenasdepositisbasedupona feasibility level study where geological confidence issufficientandmineplanninghasbeencompletedtoa levelrequiredtodeterminetechnicalandeconomicviability.

• Modifying factors consideredmaterial to the developmentand economic extraction of the coal resource have beentakenintoaccount.

Miningfactorsorassumptions

• Themethodandassumptionsusedasreportedinthe Pre-Feasibility or Feasibility Study to converttheMineralResourcetoanOreReserve(i.e.eitherby application of appropriate factors byoptimisationorbypreliminaryordetaileddesign).

• The choice, nature and appropriateness of theselected mining method(s) and other miningparametersincludingassociateddesignissuessuchaspre-strip,access,etc.

• The assumptions made regarding geotechnicalparameters(e.g.pitslopes,stopesizes,etc.),gradecontrolandpre-productiondrilling.

• The major assumptions made and MineralResourcemodelusedforpitandstopeoptimisation(ifappropriate).

• Theminingdilutionfactorsused.• Theminingrecoveryfactorsused.• Anyminimumminingwidthsused.• Themanner inwhich InferredMineral Resources

areutilisedinminingstudiesandthesensitivityoftheoutcometotheirinclusion.

• The infrastructure requirements of the selectedminingmethods.

• TheTenasprojectusesacombinationtruckandshovelopencut mining as well as dozer pushing to execute an up-dipmining method for areas of shallower dipping coal seam(<22°). At steeper dips (three of the nine phases), moreconventionalbenchminingofwasteandcoalisperformed.

• The basis of design is a lerch-grossman economic pitoptimization combinedwitha cut-off strip ratioanalysis todeterminetheultimatepitlimits.Theultimatepitshellwasthen developed into a detailed pit design and broken intopracticalpitphasesandminingcuts.

• Conventionalmobileequipment(excavatorsandhaultrucks)is used for overburden and waste rock mining. non-PAGinterburden is dozer pushed on to mined out footwallswheneverpossible.

• For the Tenas project, water management ponds areexcavatedtoallowsub-aqueousstorageofPAGrockhauledfromthepit.

• Coallossanddilutionweremodelledasskinsonthehangingwall and footwall of each seam. The total coal loss anddilutionskinthicknessappliedtotheTenasdepositwas15cmfor1/1U-seamand20cmforC-seam(through-seamblastinginvolved).DilutionandcoallossfortheGoathornandTelkwaNorthpitweresetat20cmtotal.

• Theminimumseamthicknessforminingwassetat0.80mforalldeposits.

• PitslopecriteriawereupdatedbySRKaspartoftheFSforTenas andwere largelydrivenby the slopeof thebeddingseamsineachsectorofthepit.Manypitwallsaresimplyfootwallsdaylightingintotheoverburdenandtopography.Wherehigh wall benching is required the bench face angles aredetermined by the slope of the bedding plane and 8mbenchesarerequiredoveramaximumheightof45m.Thus,pit slopes vary between 35-60 degrees. Pit slopes in areaswithidentifiedfaultsthatreducetherockmassstrengthwereadjustedappropriately.

• Coalresourceswithlimitedgeologicalcertaintyareclassifiedasinferredandcannotbeconvertedtocoalreserves.Thus,any inferredcoal resourcesare consideredaswaste in thisstudy and there are no inferred resources included in theproduction schedule or coal reserve estimate. The TenasdeposithasnoInferredresources

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• Thefinancialevaluationoftheproposedmineplanissufficienttosupporteconomicviabilityofthecoalreserve.

• TheprimaryinfrastructurerequiredforthedevelopmentoftheopencutsatTelkwaarewatercontainmentandmanagementfacilities.Numerousditchesarerequiredforbothcontainingcontactwateranddivertingsomenon-contactwaterfromtheminingareas.Contactwateriscollectedinsedimentationpondsbeforedischarge.

Metallurgicalfactorsorassumptions

• The metallurgical process proposed and theappropriateness of that process to the style ofmineralisation.

• Whether the metallurgical process is well-testedtechnologyornovelinnature.

• The nature, amount and representativeness ofmetallurgical testworkundertaken, thenatureofthe metallurgical domaining applied and thecorresponding metallurgical recovery factorsapplied.

• Any assumptions or allowances made fordeleteriouselements.

• Theexistenceofanybulksampleorpilotscaletestwork and the degree to which such samples areconsidered representative of the orebody as awhole.

• Formineralsthataredefinedbyaspecification,hasthe ore reserve estimation been based on theappropriatemineralogytomeetthespecifications?

• Process flowsheet is a traditional 2-circuit approach withcustomisedequipmentsizingtoallowfornominalthroughputforthisspecificcoal

• Allmetallurgical processes and technologyhavebeenusedextensivelywithinthecoalindustryworldwide

• TestworktodatewascompletedunderAustralianStandardmethodsatthetimeofthetestworkandissuitableforthislevelofstudy

• Ithasbeenassumedthattheorganic liquidsusedforfloat-sinkhashadnoeffectonthecoalproperties

• 2 Bulk samples have been completed in the pastwith onepilot scale testwork being completed. Pilot testwork wascompletedona19mmx0mmsizefractionusingaDSMheavymediaconefor19mmx0.6mmand2stagespiral/wateronlycyclone for below 0.6mm fraction. Due to the testworkpractices this pilot wash was not suitable for use as aframeworkforthisstudyandtheresultswerenotusedintheanalysis.

• A further coal quality and washability program wascompleted in2018usingcurrent lab techniquesandabulksample wash was performed by SGS at their Lakefield lablocatedinOntairio,Canada.

• 1998,1996Bulksamplesand2018testworkwereusedintheprocesssimulationsanditisbelievedfromtheseresultsthatthecoalisfairlyhomogeneouswithinseams.

• Thecurrentproposedplantwillproduceacleancoalwhichisofmarketablespecification

Environmental • The status of studies of potential environmentalimpacts of the mining and processing operation.Details of waste rock characterisation and theconsideration of potential sites, status of designoptions considered and, where applicable, thestatusofapprovalsforprocessresiduestorageandwastedumpsshouldbereported.

• Forgeochemistrydata,refertosectiontitled“Environmentalfactorsorassumptions”

• Existingdataonbackgroundsurfaceandgroundwaterqualityand flowhasallowed for thedevelopmentof a conceptualsitewaterbalanceandpreliminarywaterqualitymodelling.Thesewillberevisedtoadetailedsitewaterbalanceandfinalwaterqualitymodellingpriortothesubmissionofregulatoryapplications.

• The results indicate that due to background levels alreadyexceedingBCWQGthatasite-specificwaterqualityobjectivewillneedtobedevelopedforaluminium.

• Inaddition,duetotheconservativenessofthewaterqualitymodelutilizingMDLwheremeasurementswerebelowMDL,anumberofparameterswerepredictedtoexceedBCWQG.It is anticipated that with better water quality data usinglower MDLs that the model can be refined and theparameterscouldachievecompliance

• If necessary, a water treatment plant may need to beintroducedfortheco-precipitationofelements.

Infrastructure • The existence of appropriate infrastructure:availabilityof land forplantdevelopment,power,water, transportation (particularly for bulkcommodities),labour,accommodation;ortheeasewithwhich the infrastructurecanbeprovided,oraccessed.

• TheTelkwaSiteisservedbythefollowinginfrastruceforthedevelopment:o A138-kVpowerlinetotheeastanda25-kVpowerline

tothenorthofthepropertyo Ahighcapacitymainrail lineownedandoperatedby

CNrailwhichisalreadyinuseforthetransportofcoalunit trains is approximately 7 kilometers east of theproperty.InitialdiscussionbetweenAllegianceandCNrail have occurred and CN has agreed that the railcapacityissufficientforthisproject

o TheportofPrinceRupertislocated375kmtothewestandhassufficientcapacityforthisproject

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• Theprojectis locatedtonearbytownsofSmithers,Telkwa,andHoustonforthesupplyandaccommodationoflabour

• ThesiteiscurrentlyservicedbyaForestryServiceRoadandcurrenttopographywillallowtheconstructionofadedicatedcoalhaulroadbetweentherailandtheproposedplantsite

• The proposed plant sitewill be on crown landwith a coallicenseownedbytheproponent

Costs • Thederivationof,orassumptionsmade,regardingprojectedcapitalcostsinthestudy.

• Themethodologyusedtoestimateoperatingcosts.• Allowances made for the content of deleterious

elements.• The derivation of assumptionsmade of metal or

commodityprice(s),fortheprincipalmineralsandco-products.

• Thesourceofexchangeratesusedinthestudy.• Derivationoftransportationcharges.• The basis for forecasting or source of treatment

andrefiningcharges,penaltiesforfailuretomeetspecification,etc.

• The allowances made for royalties payable, bothGovernmentandprivate.

• ThecostingoftheTenasFShasassumedanowner-operatedapproach,wherein,allinfrastructureandequipmentisleasedorpurchasedbyTCLandoperatedbyTCL.

• Costsaredevelopedfromfirstprincipleswhereverpossible,utilizing inputs from engineering firms and vendors. Thedesignsuponwhichthesecostsarebasedaretofeasibility/class3level.

• Engineering work has been undertaken to establish thecapitalcostrequirementfortheproject,includingthemine,processingplant,railandroads,aswellasothersupportinginfrastructure.

• Capitalcostsfortheprojectaresupportedbyworkby:o SRK Consulting – mining, geochemistry, water

management,hydrogeologyo Sedgman–processplanto HooperEngineeringandMorchEngineeringInc.–rail

infrastructureo Bulkley Electric – powerline and substation

construction• Operatingcostsarebasedonworkby:

o SRK Consulting – allmining costs inclusive ofmobileequipment,supportservicesandlabour

o SRKConsulting–watermanagemento Sedgman–processingandcoalhandlingo TCL–sitegeneral&administrativecosts,o HooperEngineering–railo IEG-relamation

Revenuefactors

• Thederivationof,orassumptionsmaderegardingrevenue factors including head grade, metal orcommodityprice(s)exchangerates,transportationand treatment charges, penalties, net smelterreturns,etc.

• The derivation of assumptionsmade of metal orcommodity price(s), for the principal metals,mineralsandco-products.

• ACLplanstoproduceamid-volatilesemi-softcokingqualitycoalsatanominalrateof750,000cleantonnesperannum.

• Mid-volatile semi-coking coals are scarce in supply andarepricedatapremiumtothemorecommonhigh-volatilesemi-cokingcoals.

• CommoditypricingfortheprojectwasadvisedbyACLbasedonthestudyconductedbyKobieKoornhof&Associates.

• AnaveragepriceofUS$120/tcoalproductwasassumedforthe Tenas project for 2021 and 2022, and 2023 onwards,US$114/t

• According toKobieKoornhofandAssoc, currentpricing forTelkwacoalisUS$132.5/t.

• Anexchangerateof1.33CA$:US$wasapplied tocalculatetherevenue.

• PrivateroyaltytoAltiusMineralwasappliedatarateof3.0%onrevenue.

• ItochuCorporationofJapanisthecompany’ssolesalesandmarketingagentand receivesa sales feeof3%of theFOBprice,1.5%onsale,and1.5%afterEBITDAassumingEBITDAispositive.

Marketassessment

• The demand, supply and stock situation for theparticular commodity, consumption trends andfactorslikelytoaffectsupplyanddemandintothefuture.

• Acustomerandcompetitoranalysisalongwiththeidentification of likely market windows for theproduct.

• Priceandvolumeforecastsandthebasisfortheseforecasts.

• Forindustrialmineralsthecustomerspecification,testing and acceptance requirements prior to asupplycontract.

• PerKobieKoornhofandAssoc,demandforhardcokingcoaliscontinuingatrobustlevelsassteelindustryfundamentalsremainastrongdriverforseabornecokingcoalimports.Thecurrentconstraintstosupplyavailabilityforhighqualitycokingcoalsislikelytoremainfortheforeseeablefuture,sinceglobalcokingcoalsupplyisnotcomingonlineatapacethatwillupsetthecurrentsupply/demandbalance.Inthemediumterm,thebiggestrisktometallurgicalcoalpricingliesinapossibleglobaleconomicslowdown,fuelledbythefearofburgeoningtradewars.

• PerKobieKoornhofandAssoc.,thecoaltobeproducedatTelkwacanbeclassifiedasamediumvolatilesemi-soft

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cokingcoal(MVSSCC)andassuchisexpectedtofindamarketintheinternationalsteelindustry.

• TelkwaMVSSCCisexpectedtobewellreceivedduetolimitedavailabilityofMVSSCContheseabornemarket,incontrasttothemorereadilyavailablehighvolatileSSCCcoalsfromNSW.ThemarketshouldreactfavourablytotheintroductionofanewMVSSCC,notonlyasdiversificationfromAustralia,butalsoduetothefactthatCanadianSSCCsupplieshavelargelybeeneliminatedwiththeclosureoftheCoalMountainoperation.

• Competitorcoalsare:o HVSSCCfromHunterValleyinNSW,Australia;ando MVSSCCfromCentrlQueensland,Australia.

Economic • Theinputstotheeconomicanalysistoproducethenet present value (NPV) in the study, the sourceandconfidenceoftheseeconomicinputsincludingestimatedinflation,discountrate,etc.

• NPV ranges and sensitivity to variations in thesignificantassumptionsandinputs.

• Anafter-taxeconomicmodelwaspreparedbytheCompany,substantiallyatmonthlyrests,totesttheeconomicviabilityoftheCoalReserve.

• Theeconomicmodeltookintoaccountprojectrevenue,freightandsellingcosts,marketingfeetoItochu,royaltytoAltiusMinerals,capitalcosts,operatingcostsandadministrativecosts.

• Allowancewasmadeintheeconomicmodelforfinancingthemobilefleetbywayofleaseforthestart-upandearlyoperationalphases.

• Theprojecteconomicswereevaluatedusingastandarddiscountedcashflowmethodatanominalmid-perioddiscountrateof8%.Noallowancewasmadeforinflation.

• TheeconomicanalysiswasconductedinCanadiandollars.• ResultsarereportedinUSdollarsusinganexchangerateof

1.33CAD:USDandinAustraliandollarsusinganexchangerateof1.06AUD:CAD..

• Basedontheeconomicanalysis,thecurrentmineplanresultsinapositivepost-taxNPV8%ofUS$185MandanIRRof45%.

• Sensitivityanalysesshowedthattheprojectcanwithstanda30%decreaseincommoditypricesresultinginpositiveposttax NPV8% of $22M and post tax IRR of 12%. The projectwouldalsosustainpositivereturnwitha30%increaseofbothcapitalandoperatingcostsresultinginapost-taxNPV8%of$80Mand19%post-taxIRR.

Social • The status of agreements with key stakeholdersandmattersleadingtosociallicencetooperate.

• The Property is within the traditional territory of theWet’suwet’en (OW). In April 2017, the company signed aCommunicationandEngagementAgreementwiththeOW.

• The company shares all its raw data collected byenvironmentalmonitoringwiththeOW,andactivelyinvolvestheOWinallkeydecisionsanddevelopments.

• The companyhas commencedengagementwith several ofthelandowners,stakeholdergroupsandlocalandprovincialgovernment. A comprehensive community engagementstrategyhasbeendevelopedandbeingimplemented.

• The company has engaged local community (includingholding two public open houses in Telkwa), Smithers andTelkwa environmental expertise to carry out the baselinedataprograms

• Thecompanyhasestablishedcommunicationprotocolswiththe Government regulators as it progresses through theenvironmentalassessmentandpermittingstage.

Other • Totheextentrelevant,theimpactofthefollowingon the project and/or on the estimation andclassificationoftheOreReserves:

• Anyidentifiedmaterialnaturallyoccurringrisks.• The status of material legal agreements and

marketingarrangements.• The status of governmental agreements and

approvalscriticaltotheviabilityoftheproject,such

The key risks in relation to the Tenas Project are summarizedbelow:• Environment:Theimpactofminingontheenvironmentis

alwaysanissueirrespectiveofthetypeofmineanditslocation.OncetheCompanyhascompleteditsenvironmentalaffectsassessmentoftheProject,targetedforQ32019,theCompanywillhaveasolidunderstandingofwhattheeffectsmightbe.

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asmineral tenementstatus,andgovernmentandstatutory approvals. There must be reasonablegrounds toexpect that all necessaryGovernmentapprovalswill be receivedwithin the timeframesanticipated in the Pre-Feasibility or Feasibilitystudy.Highlightanddiscussthematerialityofanyunresolved matter that is dependent on a thirdparty on which extraction of the reserve iscontingent.

• WaterManagement:Relatedtothefirstpointofenvironmentalimpact,oneareaofparticularconcerntotheCompanyiswatermanagement.TheProjecthasseveralcreekswithinitsvicinitywhichallfeedintoamajorriversystem.EnsuringthattheProjectdischargescleansurfacewaterbackintotheriversystemisamatterofhighprioritytotheCompany.

• AcidRockManagement:TheProjecthassomewasterockandrockseparatedincoalwashingprocessthathaspotentialtogenerateacidleachingofmetalswhenminedandexposedtoairandwater.TheDFSassumesthisrockwillbepermanentlystoredunderawatercoverinmanagementpondsconstructedinthefirst10yearsofmining.Thisplanwillpreventoxidizationoftherockwhichinturnwilleliminatetherequirementfortreatmentofacidicwater.Thereisariskthatthewaterbalancewillnotbepositiverequiringwatertobepumpedfromawatercoursetomaintainthewatercover,and/oractiveongoingwatertreatmentand/orliningofthemanagementponds.

• WaterDischargeQuality:TheGovernmentprovidesthresholdsforwaterqualitydischarge.UntilaneffectsassessmentoftheProjectonwaterqualitybeingdischargedintothereceivingenvironmentiscompleted,andwhichispartoftheenvironmentalassessmentprocess,itwillnotbeknownforcertainwhetherthetreatmentofwaterpriortodischargeisrequired.

• Permitting:ThereisnoguaranteethattheProjectwillbegrantedallpermitsrequiredtooperateamineatwhateverstageofplannedproduction.WhilstBritishColumbiaisinafirstworldcountry,withaveryprescriptiveminepermittingregime,thereisalwaysuncertaintyanddoubtastowhetherGovernmentministrieswillsupportaparticularminingactivity.

• Finance:NotwithstandingtheCompany’sconfidenceinthisregard,thereisnoguaranteethatifandwhentheProjectispermittedandreadyfordevelopment,therewillbefundingavailabletodoso.WhilsttheProjectisverylowdownthecostcurveandcanwithstandamaterialdropinthepriceofcoal,thevolatilityofcommoditypricesinadownwardtrendoftendampenstheinterestofinvestorsinaparticularcommodity,suchthatfundingmaybedifficulttosecure.

• Coalperformance:unlessanduntilaparticularcoalhasbeentestedforitsperformanceinablastfurnace,thereremainsanuncertaintyastohowitwillactuallyperform,andthismayhaveanimpactoncoalpricing.

Classification • ThebasisfortheclassificationoftheOreReservesintovaryingconfidencecategories.

• Whether the result appropriately reflects theCompetentPerson’sviewofthedeposit.

• TheproportionofProbableOreReservesthathavebeenderivedfromMeasuredMineralResources(ifany).

• ProvedandprobableorereservesaredeclaredbasedonthemeasuredandindicatedmineralresourcescontainedwithinthepitdesignandscheduledintheLOMplan.

• The financial analysis showed that the economics of theTenasprojectarepositive.

• Noprobableorereserveshavebeenderivedfrommeasuredmineralresources.

Auditsorreviews

• TheresultsofanyauditsorreviewsofOreReserveestimates.

• Noexternal reviewor audits have been completed on thiscoalreserveestimateasoftheissuedateofthistable1.

Discussionofrelativeaccuracy/confidence

• Where appropriate a statement of the relativeaccuracyandconfidence level in theOreReserveestimateusinganapproachorproceduredeemedappropriate by the Competent Person. Forexample, the application of statistical orgeostatistical procedures to quantify the relativeaccuracy of the reserve within stated confidencelimits, or, if such an approach is not deemedappropriate,aqualitativediscussionofthefactorswhich could affect the relative accuracy andconfidenceoftheestimate.

• Therelativeaccuracyandconfidenceleveloftheorereserveestimateisinherentinthereserveclassification.

• Theaccuracyofthereserveestimateissubjecttogeologicaldataandmodellingprocedurestoestimatethecoalresourceandtomodifyingfactorassumptionsfordilutionandloss.Theaccuracycanonlytrulybeconfirmedwhenreconciledagainstactualproduction.WhileTelkwaisnotinproductionandsuchreconciliationisnotpossible,theassumptionsarebasedonsoundprinciplesandexperiencefrommineswithsimilarconditions.

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• Thestatementshouldspecifywhetheritrelatestoglobal or local estimates, and, if local, state therelevant tonnages, which should be relevant totechnical and economic evaluation.Documentationshould includeassumptionsmadeandtheproceduresused.

• Accuracyandconfidencediscussionsshouldextendto specific discussions of any applied ModifyingFactors that may have a material impact on OreReserveviability,orforwhichthereareremainingareasofuncertaintyatthecurrentstudystage.

• It is recognised that this may not be possible orappropriateinallcircumstances.Thesestatementsofrelativeaccuracyandconfidenceoftheestimateshouldbecomparedwithproductiondata,whereavailable.

• Modifying factors suchasminingdilution,mining recovery,ROM ash and density, and coal yield have been estimatedusingacceptedtechniques.

tenas metallurgical coal project definitive feasibility

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