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3July2017TELKWAMETALLURGICALCOALPROJECTPRE-FEASIBILITYSTUDYRESULTS________________________________________________________________________________TheTelkwametallurgicalcoalprojecthassignificantattributespositioning it toenjoythehighsandsurvivethelowsoftheglobalmetallurgicalcoalmarket.__________________________________________________________________________PFSEXECUTIVESUMMARY§ Stageddevelopmentofa shallowopenpitoperationcommencingwith250ktpaof saleable

coalproduction(Stage1)rampingto1.75Mtpaover4years(Stage2).

§ ProvenandProbableCoalReserveestimateof62.9Mt.§ Minelifeof28years.§ Averagelife-of-mineall-inFOB(ex-port)cashcostbeforetaxofUS$55pertonne,positionedin

thelowestfivepercentileoftheglobalseabornemetallurgicalcoalcostcurve.§ Averagelife-of-minestripratioof5.8:1BCM/ROMt.§ First14yearsofproduction,anallmetallurgicalsaleablecoalyieldof75%,andalife-of-mine

averageof68%.§ Stage 1 initial capital investment of US$51M, this can be reduced to US$21M with a

manufacturer funded and operated washplant, and either contract mining or equipmentleasing.

§ Stage 2 initial capital investment of US$162M, this can be reduced to US$54M with a

manufacturer funded and operated washplant, and either contract mining or equipmentleasing.

§ UnleveragedNPV10%pre-taxofUS$416M(A$553M)withanIRRpre-taxof37%.

§ Total initialcapital,Stage1and2, isrepaidin1.8years(realterms)aftercommencementof

Stage2production.§ Theassumed life-of-mineaveragecoalprice foraPCIproduct isUS$110per tonne,withan

exchangerateofCAD:USD1.33applied._______________________________________________________________________________________

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Allegiance Coal Limited (Allegiance or the Company) is pleased to present the results of the StagedProductionPre-feasibilityStudy (PFS)of itsTelkwaMetallurgicalCoalProject located innorthwestBritishColumbia(Project).ThePFSwasundertakenbySRKConsulting(Canada)Inc.(SRK)assistedbyotherminingandresourcesspecialistsincludingSedgmanCanada,andwascompletedanddeliveredtotheCompanyon30June2017.Wellpositionedinthelowestfivepercentileontheseabornemetallurgicalcoalcostcurve,theProjecthasthecapacitytowithstandthevolatilityofmetallurgicalcoalprices.ItistheCompany’sviewthatwhencoalpricescomedown,producershigherupthecostcurvegraduallyclose,andwithsupplycurtailment,pricesrecover.Survivingandremaininginbusinesstocatchtherecovery,iskey.TheBoardisexcitedbythePFSresultsandremainssteadfastinitscommitmenttofast-tracktheProjecttoproduction.Thetwoimmediateareasoffocusinthatregardare:

§ APFSreviewwithparticularfocusonthereductionofup-frontcapital,andassessingtheleveloframp-

upproductionwhichachievesthebestreturnoncapitalforcompletionQ12018;and

§ Apre-feasibilitystudyfocusedsolelyonStage1developmentasastand-aloneoperationtosupportanapplication foraSub-EApermittingprocess forcompletion inQ12018 (as isdiscussed in thesectionheaded‘StagedPermittingandProduction’,onpage3).

BackgroundLocatedonthewesternsideofBritishColumbia,theProjectenjoyssimpleaccesstorailandportand,fromthePortofPrinceRupert,itisacomparativelyshortshippingdistancetotheAsiansteelmills.

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As reported previously by the Company, the Project has been the subject of a significant amount ofexploration and evaluation, estimated in today’s dollars to be in the order of A$40M. As a result, theCompanyhashadtodonodrillingforexplorationorresourceupgrade,thoughitwillneedtodosomeforthepermitingprocess.Itsfocustherefore,istoundertakelargelydesktopworktoassessthemostprudentandefficientwaytodeveloptheProject,andtogetitpermitted,quickly.Thisledtoastagedapproachtopermittingandproduction.StagedPermittingandProductionThestagedapproachtopermittingandproductionispivotaltotheBoard’sobjectiveofputtingasafeandenvironmentallysustainablemineintoproductionquickly,thatisaffordableandachievable.TheProjectcomprises threeshallowopenpitsallwithincloseproximityofeachother:Tenas,Goathorn,andTelkwaNorth.Thepitareasareillustratedinthemapsinthesectionheaded,‘Mining&Processing’,onpages7and8.TheCompany’splanistopermitandminethepitsprogressivelyasfollows:§ PermitandmineTenasataproductionrateupto250ktpa;

§ PermitTenasataproductionrateupto1.75Mtpareadytoramp-upinyear3;§ PermitGoathornataproductionrateupto1.75Mtpareadytocommencemininginyear15;and§ PermitTelkwaNorthataproductionrateupto1.75Mtpareadytocommencemininginyear23.The Company believes the staged approach will allow operational data to validate environmentalpredictions and ease the way for additional permitting. It also defers significant costs associated withbaselinestudies,environmentalmonitoring,detailedmineplanningandpermittingtowhentheyneedtobespent,andwhenthereisgreatercertaintythatminingwilltakeplaceinthoseareas.Therelevanceof250ktpainStage1derivesfromBritishColumbiaminingandenvironmentallegislation.Acoal mine producing less than 250 ktpa of saleable coal does not trigger a review under the BritishColumbiaEnvironmentalAssessmentAct (Sub-EA). Italsodoesnot triggeraFederalGovernment reviewundertheCanadianEnvironmentalAssessmentAct.The Company must still complete its baseline studies, continue its environmental monitoring, andundertakeaneffectsassessmenttosupportitsapplicationsforpermitstomineundertheBritishColumbiaMinesAct andBritishColumbia EnvironmentalManagementAct. There is a risk that the Federal and/orProvincial EnvironmentMinistersdeem it reviewable,notwithstanding theProject is Sub-EA.However, anumber of mine projects in British Columbia have successfully proceeded as Sub-EA, several in recentyears. Stage 2 assumes the Tenas Pitwill be permitted under a full environmental assessment review process(Full-EA)toincreaseproductionabove250ktpa,andthereafterprogressivelyrepeatingtheFull-EAprocessforGoathornandTelkwaNorth,respectively.ThePFSassumestheramp-upatTenaswouldcommenceinyearthree,whichassumestheFull-EAreviewprocesswouldtakearound3yearsfromcommencementofStage1development.However,thereisariskthatthetheFullEAprocessmaytakelonger.

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ThePFSalsoassumestheramp-upwouldbetoaproductionrateof1.75Mtpaofsaleablecoal.Theramp-up scale was driven solely by the raw coal feed capacity of the smallest and least expensive modularwashplantpresentedbySedgman.AsaresultofthePFSreview,andfurtherongoingworkparticularly inrelationtooptimizingcapital,thescaleoftheramp-upmaybedifferent.SummaryofPFSResultsAsummaryofthekeyresultsoftheStagedProductionPFSaresetoutinTables1to4below.Table1:ProductionParametersLifeofMine Units Life-of-mineROMcoalproduction Tonnes 62,900,000Life-of-minesaleablecoalproduction Tonnes 42,500,000AverageROMcoalproductionStage1 Tonnesperannum 340,000AverageROMcoalproductionStage2 Tonnesperannum 2,590,000Averageproductcoalyield % 68AveragesaleablecoalStage1 Tonnesperannum 250,000AveragesaleablecoalStage2 Tonnesperannum 1,750,000AveragestripratioStage1 BCM/ROMt 2.7:1AveragestripratioStage1andStage2 BCM/ROMt 5.8:1CoalprocessingcapacityStage1 Feedtonnesperhour 190CoalprocessingcapacityStage2 Feedtonnesperhour 350Minelife(incl.pre-production) Years 28Table2:InitialCapitalBaseCase Stage1US$M Stage2US$MEquipmentincludingprimaryproductionandancillary* 9.1 59.9Pre-strip 3.0 -Mineaccess 1.5 7.0CoalhandlingpreparationplantandrelatedInfrastructure* 20.2 36.3Watermanagement,powerandother 15.2 38.7RailsidingandLoadout 2.3 19.6TotalInitialCapital(*includescontingency) 51.2 161.6Table3:OperatingCostsLifeofMine US$Saleable/tSiteCosts Wasteremoval 23.8Coalrecovery 2.7Coalprocessing 3.6Generalandadministration 4.0Other 2.5Transportation,Marketing&Royalties Marketingcosts 0.2Haulage(CHPPtoRailSiding) 2.6Railtoportandloaded 12.7Thirdpartyroyalties 2.8TotalallincashcostFOBpre-tax 54.8

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Table4:KeyPerformanceIndicatorsLifeofMine Units ValueAverageCoalpriceforamid-volatilePCI US$/t 110ExchangerateCanadiandollarstoUSdollars CAD:USD 1.33Pre-taxnetpresentvalue@10% US$M 416Internalrateofreturn % 37PaybackfromStage2commercialproduction(realterms)ofbothStage1and2 Years 1.8CoalResourcesThePFSandthestatementofResourcesandReserveshasbeenpreparedbySRK inaccordancewiththeJORC 2012 Edition (JORC Code) andNational InstrumentNI 43-101 ‘Standards of Disclosure forMineralProjects’ (NI 43-101). These estimates were based on historical drilling undertaken by previous Projectownersfrom867documenteddrillholesofwhich310werecored.AsummaryoftheResourcesissetoutinTable5below.Table5:Resources MeasuredMt IndicatedMt M+IMt InferredMtTenas 58.8 58.8 -Goathorn 59.5 9.2 64.7 0.2TelkwaNorth 15.7 3.7 19.4 1.0Total 134.0 12.9 146.9 1.2

TheResourceswerepreviouslydeterminedbyNorwestCorporationin2015totalling131MtMeasuredandIndicatedofwhich89Mt(68%)wasintheMeasuredclassification.Therewere44MtofInferredresource.In delivering the PFS, SRK updated the geological model and in so doing increased the Measured andIndicated resources to 147Mt, increasing theMeasured tonnes to 134Mt (91%). The Inferred resourcehoweverdecreasedto1.2Mt.EstimationMethodologyCoal quality and seam thickness parameters were estimated using inverse distance squared within theseamwireframeswhichcontrolthedistributionofinterpolatedvaluesin3D.Themodelisofthecoalseamsonlyand the interburdenhasbeenmodelledbydefaultbut to sufficientdetail toassistwithwaste rockcharacterisation andwaste rockmanagement. Themodel block size ranges from5 to 25m along strike(TenasandTelkwaNortharerotated),5to10mdowndipand5minheight.AveragedrillholespacingforTenas is 110m,125m forGoathornand135m for TelkwaNorth. Theaverage corehole spacing (withqualitydata)is237minTenas,157minTelkwaNorthand173minGoathorn.A key assumption utilized in the resource estimatewas the relationship between ash content on an airdriedbasisandbulkdensityusedforconversionofvolumetotonnes.Thegeologicalinterpretationisbasedon the“stacking”of seambottomsalong25mspacedcross sections fromthe lowermost seamupward.The main validation method used was a comparison between wireframe solids volume and volumegenerated from the3Dblockmodelafter coding.Themodelaccurately represents thedrilled seam truethicknessesto+/-0.1matagivenXYlocation.Theelevationsmayvaryupto3matanydrillholeintercept.Thisisduetothesectionalnatureofthemodellingprocess,projectingallseamintersectionsamaximumof12.5mtothenearestcrosssection.

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CoalReservesAsaresultoftheanalysisundertakeninthePFS,whichestablishestheeconomicviabilityoftheMeasuredandIndicatedResources,SRKdeterminedaReserveestimateof62.9Mtofrawcoalproducing40.1Mtofclean coal with total moisture of 8.5 percent. This results in a total of 42.5Mt of saleable coal with amoisturecontentof10percentatanaveragemine lifeyieldof68percent.SaleableCoal isa termusedunderCIMDefinitionStandardswhichhasthesamemeaningasMarketableCoalunderJORC.AsummaryoftheReservesissetoutinTable6below.Table6:Reserves Product TenasMt GoathornMt TelkwaNthMt TotalMtProven

ROMCoal 29.1 22.1 10.8 62.9CleanCoal 20.6 12.6 6.4 39.5SaleableCoal 21.0 13.8 7.0 41.8

Probable

ROMCoal - 0.2 0.7 0.9CleanCoal - 0.1 0.4 0.5SaleableCoal - 0.1 0.5 0.6

Total

ROMCoal 29.1 22.3 11.5 62.9CleanCoal 20.6 12.7 6.8 40.1SaleableCoal 21.0 13.9 7.5 42.5

Theproductiontargetsandforecastfinancial informationoutlinedinthisannouncementarebasedsolelyontheProvenandProbableReservesinTable6above. Modifyingfactorssuchasminingdilution,miningrecovery,rawashanddensity,andcoalyieldhavebeenestimatedusingacceptedtechniquesconsideredbytheCompanyandSRK.TheaccuracyoftheReserveestimateissubjecttogeologicaldataandmodellingprocedurestoestimatethecoalresourceandtomodifyingfactorassumptionsfordilutionandloss.WhiletheProjectisnotinproductionandsuchreconciliationisnotpossible,theassumptionsarebasedonsoundprinciplesandexperiencefrommineswithsimilarconditions. Mining&ProcessingCoalproductioncommencesintheTenasPit,whichrepresents50percentofsaleablecoal,andthefirst14yearsofmining.Stage 1 commences with 250 ktpa of saleable coal production in a low capital development relying onexistingforestryandpublicroadstoaccessandhaulcoalfrompittowashplant,torailsiding.Theproductionscheduleisfourdaysperweek,MondaytoThursday,10hourdayshiftsonly.Alloperationspersonneltotaling35,andtradetechnicians,willbesourcedlocallyfromthetownsofTelkwa,Smithers(12km)andHouston(50km),whichcontainaskilledworkforcewithextensiveexperienceinforestryandhardrockmining.Start-upprimaryproductionequipmentwillalsobeverysimplecomprisingone5”drillrigforblasting,one100texcavator,fourdumptrucks(50t),twoD8bulldozers(orequivalent)andonefront-endloader.Therailsidingisaround800mlong,runningparalleltoCNRailtrack.Coalisdroppedonacoalpad,fromwhichafront-endloaderwillpickupthecoalandloaditinto110tcoalwagons.

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ThegooglemapbelowillustratestheoverallProjectlayoutofStage1.

TheTenasPit is a synclinebasinof coalwith thewest limb shallowdipping. SRKhasproposedaminingstrategyinvolvingaseriesofcutsinitiatedatthelowestpointinthenorthofthepit,progressinguphilltothesouth.Thestrategyenablesaround50percentofthewastematerialtobebackfilledfromstartofmining,usingdozerstopushwasteback intothepitbottom.Thecostsavings inmovingwastematerialwithdozersasopposedtoanexcavatorloadingadumptruckaresignificant.

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The diagram above illustrates blasting waste rock, dozer push of waste rock into the pit bottom, andexposingthecoalseamformining.Stage2involvesanincreaseinproductioninyear3to740ktpaandinyear4,to1.75Mtpa(averaged).Thisinvolves a more substantial investment in mining equipment and infrastructure including a designatedprivatecleancoalhaulroad,andasignificantlyupgradedrailspurandloadingsystem.ThethreepitsareminedprogressivelyfromTenastoGoathorn,andlastlyTelkwaNorth.ThegooglemapbelowillustratestheoverallProjectlayoutofStage2.

Thewashplant isrelocatedinyear14fromtheTenasPitareatotheGoathornPitarea,whereitremainsuntil mine closure. The washplant is proposed to be modular, built in a manner that enables it to berelocated.Sedgmanassessed twocoalwashplantoptions for thepurposesof thisPFS.FurtherassessmentofotherwashplantoptionswillbeundertakeninthePFSreview.Thetwooptionsconsideredwere:§ Astand-alone100tphwashplantmanufacturedbyaChinesesupplierwhichhasthecapacitytoprocess

750ktpaofrawcoaland,inthecaseofTelkwacoal,upto500ktpaofcleancoal;or

§ ASedgmanmanufactured190tphmodularwashplantwithacapacitytoprocessupto1.4Mtpaofrawcoal,upto1MtpaofcleanTelkwacoal;and

§ Withminimaladditionalcapital,introduceathirdcircuittotheSedgmanplanttoreach350tphcapable

ofprocessing2.5Mtpaofrawcoal,upto1.75MtpaofcleanTelkwacoal.

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For thepruposesof thePFS, the Sedgmanmanufacturedwashplantoptionwas selected. Thewashplantwill be configured with dense media cyclones and flotation during Stage 1, and expanded by theintroductionofarefluxclassifiertomeettheincreasedproductionrequirementsinStage2.Washedcoalwillbestockpiledatthewashplant,thentrucked24.3kmalongforestryandpublicroadstotherailsidingduringStage1,and14kmalongadesignatedprivatehaulroadduringStage2whileminingattheTenasPit,and7kmwhileminingattheGoathornPit.Thecleancoalhaulroadandrailsiding/spurare onGovernment andCNRail owned land, anddonot require the acquisitionof anyprivately ownedland.Infrastructure&TransportAkeycontributortothelowcapitalandlowoperatingcostsoftheProjectisitslocationtoinfrastructure.A 25 kV power line runs to the northern edge ofGoathorn. The power linewill be extended 3 km to asubstation located at the washplant situated at the northern tip of the Tenas Pit area. The haul roadsplannedforStages1and2havealreadybeendiscussedandillustratedonthemapsinthepriorsection.An800mrailsidingwillbebuilttoreceive15,110tcoalwagonsduringStage1.Coalwillbedroppedontoapadwith a storge capacity of 3,300t. Coal will then be loadedwith a front-end loader.Wagonswill beloadedthreetimesaweekfora24hourreturntriptoRidleyIslandCoalTerminal(RICT).A4.5kmrailspurandloadoutloopatthesamelocationwillreplacetherailsidinginStage2,wherecoalwillbeloadedviaa300tbin.Sidingstockpilewillstore25,520t.Trainswillcomprise116,110tcoalwagonsandagainoperateataroundthreetripstoRICTperweek.Onceloaded, it isthena360kmhaultoRICT.RICTcurrentlyhas18Mtpahandlingcapacitywhichcanbeexpandedto25Mtpawithin24months.Theforecasttonnageforthiscalenderyearisaround6Mtpa.Initspeakin2013,RICTexported13.4Mtpa.There is ample capacity for Telkwa coalwithno requirement for upfrontbondpaymentsor takeor paycommitments.TheaverageshipsizeatRICTinthelast12monthshasbeen80Mtpanamaxvessels.MostcoalproducerswhoexportfromRICTsharehulls,andthisisanticipatedinthecaseofTelkwacoal.CoalQuality&ProductOptionsTheseabornemetallurgicalcoalmarketfor2017isestimatedbycoalanalyststobeintheorderof316Mt.Allsteelmillsuseablendofdifferentcoalsintheprocessofmakingsteel.Thisisdriventoalargeextentbythesteelmillsusingalternativestohardcokingcoaltohelpreducetheoverallcostofthecoalusedintheirblast furnances. It isestimatedthat118Mt (37%)of2017seabournemetallurgicalcoalsupplywillcomefromPCIandsemi-cokingcoals–61MtofPCI(19%)and57Mt(18%)ofsemi-coking.Ultimately,thesteelmillswilldeterminehowtheyuseTelkwacoalintheirblastfurnaces.ThePFSassumesthatthecoalissoldasaPCIcoal.However,onceshipmentsofTelkwacoalhavebeendeliveredtoandusedbysteelmills,anditsperformanceasacokingcoalbetterunderstood,Telkwacoalcouldwellbesoldasasemi-cokingcoalforblendingwithhardcokingcoals,atapremiumtothePCIprice.

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TelkwacoalwillbewashedatanSGof1.6.FortheTenasPit,whichhaslowerrawash,acleancoalyieldof75percentisexpected,andfortheGoathornandTelkwaNorthPits,acleancoalyieldof63percent.Thisequatestoa life-of-mineallmetallurgicalcoalyieldof68percent.Forthefirst14yearsofmining,coal isminedfromtheTenasPit.The quality parameters for Tenas coal are summarized in Table 6 below, and are compared to similarproductsexportedfromNSW.Table6:TenasCoalQuality Units Tenas NSWSSCC NSWHVPCITotalmoisture % 9.0 6-10.5 6-10.5Volatilematter % 24.6 33-37 33-39Ash % 9.5 6.5-10.5 9-10.5Sulphur % 0.9 0.5-10.5 0.35-0.85Fixedcarbon % 65.3 50-60 55Calorificvalue Kcal/kg 7,245 N/A 7,250Freeswellindex 3-4 3-6 N/AHGI 64 N/A 40-50Reflectance % 0.84 0.80 0.65-0.85Maximumfluidity Ddpm 2-17 100-500 N/ACoalstrengthreactivity(calculated) % 37-43 25-30 N/AFromyears15to28,coalisminedprogressivelyfromtheGoathornPitandlastlytheTelkwaNorthPit.Thequalityparameters forGoathornandTelkwaNorth coal are largely the sameasTenasalthoughashandsulphurareslightlyhigher.WhilstitisnotanimmediateprioritygiventheGoathornandTelkwaNorthpitswillbemined15yearsaftercommencementofproduction,theCompanywillundertakemorecoalqualitytestworkonGoathornandTelkwaNorth,asmostoftheexplorationinthesetwoareaswasundertakeninthe1970sandthe1980s.Since then, technology relating to coal quality testing and analysis has advanced significantly andmoreaccuratedataisexpectedtobeobtained.CoalPricingKobie Koornhof&Associates (Koornhof), a highly respected coalmarket specialist, provided SRKwith amarketoutlookformetallurgicalcoalalongwithapricerangeforTelkwacoalasbothasemi-cokingcoalandaPCI.Koornhofassumeda long termprice range forpremiumbenchmarkcokingcoalofUS$140 toUS$170pertonne.AgainstthebenchmarkKoornhofthenappliedtypicalpricingparametersforpremiumlow-volPCIandsemi-softcokingcoal,andagainstthat,pricedTelkwacoal.ThebenchmarkparametersusedforpricingaresummarizedinTable7below.Table7:AssumptionsofBenchmarkPricing Priceas%ofHCC LongtermpriceUS$/tPremiumlowvolcokingcoal 100% $140-$170PremiumlowvolPCI 70-75% $98-$128Semi-softcokingcoal 65-70% $91-119Usingavalueinusemethodology(includinganadjustmentforsulphur),KoornhofsummarisesthepriceofTelkwacoalinTable8below.

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Table8:LongtermpriceofpotentialTelkwaproducts PCIUS$/t SSCCUS$/tTelkwacoal 85-112 87-115It is theCompany’s view that therearemanyother intangible factorswhichwill arise indiscussionsandnegotiationswiththeAsiansteelmillsonproductpricing:§ With Australia supplying around 65 percent of the global seabornemetallurgical coalmarket, Asian

steelmills areexposed to supplydisruptions anddelays causedbyweather events, and limitedportcapacity in Australia. It is now a publicly stated strategy that some Asian steel mills will focus andcommit to alternative sources of supply. British Columbia with its vastmetallurgical coal resources,under-utilisedportcapacity,particularlyatRICT,andcompetitiveshippingdistance,offersanexcellentalternative.

§ Thesteelmillstakegreatcomfortfromthefactthatalowcostproducercansurvivesignificantfallsin

metallurgical coal prices and continue to supply coal. Reliable supply alsomitigates the risk of pricevolatility,andthiscanoftenbeasimportanttoasteelmillasthequalityofthecoalitself.

OperatingCostsOperating costs have been estimated applying first principles and covering all aspects of the miningoperation including waste removal, coal recovery, coal processing, haulage, road, maintenance, watermanagement,reclamationandsiteadministration.OperatingcostsaresummarizedinTable9below.Table9:OperatingCosts US$saleable/tSiteCosts Wasteremoval Combinationofload,haulanddozerpush 23.8Coalrecovery Loadandhaul 2.7Coalprocessing 190tphmodularandscalablewashplant 3.6Othersitecosts Watermanagementandreclamation 2.5Generalandadmin 4.0FreightCosts Marketing 0.2Haulage CleancoalloadandhaulfromCHPPtosiding 2.6Railandport 12.7Royalties Payabletothirdparties 2.8TotalOperatingCosts Precorporatetax&BCGovt.mineraltax 54.8TheProjecthaspotentialtobeaverylowcostproducerandiswellpositionedtobeareliable,longtermsupplierofmetallurgicalcoaltoAsiansteelmills.As potentially the lowest cost producer ofmetallurgical coal in British Columbia, and in the lowest fivepercentileofcoalproducers in theglobalseabornemetallurgicalcoalmarket, theProjecthascapacity toweatherthevolatilityofmetallurgicalcoalprices.Inaddition,relativetoAustralianproducersofmetallurgucalcoal,theProjectwouldrankinFOBcostthe8thlowestamongst61producers,andinthelowest10percentileinAustralia.

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ThegraphbelowhighlightstheProject’sextremelylowpositioningontheseabornemetallurgicalcoalcostcurve.

InitialCapitalCapital cost estimates were provided by SRK for mining, water management and water treatment,Sedgmanforprocessingplantandrelatedinfrastructure,AECOMforrailconstruction,ACLformineaccesscapitalandLexEngineeringforpowerlineconstruction.Table10belowsummariesthebasecaseinitialcapitalexpendituretofullproduction.Table10:InitialCapitalBaseCase Stage1US$M Stage2US$MEquipmentincludingprimaryproductionandancillary* 9.1 59.9Pre-strip 3.0 -Mineaccess 1.5 7.0CoalhandlingpreparationplantandrelatedInfrastructure* 20.2 36.3Watermanagement,powerandother 15.2 39.1Railsidingandloadout 2.3 19.6TotalInitialCapital(*includescontingency) 51.2 161.6ForthepurposesofthePFS,contingencywasappliedintherangeof5to10percentvaryingbyarea.ThesustainingcapitalduringthefirstthreeyearsisUS$2.3MandsustainingcapitalfortherestofthelifeofmineisUS$187M. Stage1capitalincorporatedasufficientamountofStage2capitaltoavoidcapitalslippageintheramp-up.IftheProjectwasnevergoingtoramp-up,orwastoramp-uptoalowerlevelofproduction,Stage1initial

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capitalwouldlikelybesignificantlylower.Assessingthebestreturn,onthelowestpossibleinitialcapital,isakeyobjectiveofthePFSreview.Estimatorswerenotaskedtoconsideroptionstoreducestart-upcapitalexpenditurebyconsideringotherwashplantoptions, financingor leasingplantandequipment,orcontractmining.Theprimarypurposeofthe PFS in terms of capital, was to establish the base case fromwhich the Company could then assesscapitalreductionoptionsinitsPFSreviewleadingintoitsfeasibilitystudy.ObviousgainsinreducinginitialcapitaltobeassessedbytheCompanyduringthePFSrevieware,amongstothers,notedinTable11below.Table11:CapitalReductionOptions Stage1US$M Stage2US$M TotalUS$MStart-upcapitalbasecase 51.2 161.7 212.8Manufacturerfinancedandoperatedwashplant 24.6 4.8 29.4Financeminingequipmentorcontractmining 5.5 102.7 108.3ReducedStart-upCapitalpotential 21.1 54.2 75.2Withsuchalowcashcost,equipmentandplantfinanceorleaseoptionsandcontractminingareaveryrealopportunityfortheCompanytoreduceinitialandsustainingcapitalrisk.ItshouldalsobenotedthatStage2initialcapitalcaninpartbefundedfromStage1retainedearnings.ProjectEconomicsInadditiontothecoalproduction inputsdiscussedthroughoutthisannouncement,additional inputs intothekeyperformanceindicatorsoftheProjecteconomicsaresetoutinTable12below.Table12:AdditionalinputstoKeyPerformanceIndicators Units ValueAverageCoalpriceforamid-volatilePCIcoal US$/t 110ExchangerateCanadiantoUSdollars Multiple 1.33BCMineralstaxrate(deductiblefromcorporatetaxes)* % 15BCCorporatetaxrate % 11FederalCorporatetaxrate % 15

*BCMineralsTaxRatecomprisesofnetcurrentproceedsrateof2.0%andanetrevenuetaxrateof13.0%

TheProjectkeyperformanceindicatorsaresummarizedinTable13below.Table13:KeyPerformanceIndicators Units ValuePre-taxNPV10% US$M 416Pre-taxIRR % 37Post-taxNPV10% US$M 243Post-raxIRR % 30PaybackfromcommencementofStage2fullproduction(realterms) Years 1.8Thekeyperformance indicatorswereappliedonlytothebasecase initialcapitalexpenditurescenarioasfinancingplantandequipment,orcontractmining,werenotconsideredinthisPFS.Clearlyhowever,amaterialreductionininitialcapitalexpenditureintheordersofmagnitudeindicatedinTable 11 will likely have a positive material impact on the key performance indicators. And given the

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Project’spositiononthecostcurve,ithasampleoperatingcostcapacitytoleveragethebalancesheettoaprudentlevel,oraccommodatecontractmining.Sensitivityanalysiswasundertakentodeterminetheeffectonthepost-taxNPV10%of$243M,andtheIRRof30%,fromvariationsonbothcoalpriceandcost(operatingcostsandcapitalexpenditure).TheresultsofthesensitivityanalysisaresetoutinTables14and15below.Table14:Sensitivity OperatingandCapitalCosts(US$M)NPV US$243 1,822 2,083 2,343 2,603 2,863 3,124 3,384

Price:US$pertonneofcleancoal

77 179 121 62 3 -57 -120 -18388 259 201 142 84 25 -34 -9499 338 280 222 164 105 47 -12110 417 359 301 243 185 127 68121 496 438 380 322 264 206 148132 575 517 459 401 343 285 227143 654 596 538 480 422 364 306

Table15:Sensitivity OperatingandCapitalCosts(US$M)IRR 30% 1,822 2,083 2,343 2,603 2,863 3,124 3,384

Price:US$pertonneofcleancoal

77 31% 24% 17% 10% 0% 0% 0%88 38% 31% 24% 18% 13% 6% 0%99 44% 37% 30% 24% 19% 14% 9%110 50% 42% 35% 30% 24% 20% 15%121 56% 47% 40% 34% 29% 25% 20%132 61% 52% 45% 39% 34% 29% 25%143 66% 57% 50% 43% 38% 33% 29%

TheresultsshowthattheProjectcanwithstanda30percentdecreaseincoalpricesresultinginapost-taxNPV10%ofUS$3Mandapost-tax IRRof 10%. TheProjectwould also sustain a positive returnwith a 30percentincreaseincostsresultinginapositivepost-taxNPV10%ofUS$68Mandanpost-taxIRRof15%.RisksSRKnotedanumberofProject risks in thePFS.Themajorityof themrelated to theneed formoredatawhich canbeobtained fromamodest drilling program to build a greater knowledgebase in relation tovarious aspects of the Project, and a large number related to matters in respect of which engineeringdesignwouldmitigate risk.OfSRK’sassessment, theCompanybelieves the followingare thekey risks inrelationtotheProject:§ Environment:The impactofminingontheenvironment isalwaysan issue irrespectiveofthetypeof

mineand its location.OncetheCompanyhascompleted itsenvironmentaleffectsassessmentof theProject,targetedforQ42018,theCompanywillhaveasolidunderstandingofwhattheimpactsmightbe.

§ WaterManagement:Relatedtothefirstpointofenvironmentalimpact,oneareaofparticularconcerntotheCompanyiswatermanagement.TheProjecthasseveralstreamswithinitsvicinitywhichallfeedintoamajorriversystem.EnsuingthattheProjectdischargescleansurfacewaterback intotheriversystemisamatterofhighprioritytotheCompany.

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§ Permitting: There is no guarantee that the Projectwill be granted all permits required to operate a

mineatwhateverstageofplannedproduction.WhilstBritishColumbiaisinafirstworldcountry,witha very prescriptive mine permitting regime, there is always uncertainty and doubt as to whetherGovernmentministrieswillsupportaparticularminingactivity.

§ Finance:Notwithstanding theCompany’s confidence in this regard, there isnoguarantee that if andwhen the Project is permitted and ready for development, therewill be funding available to do so.Whilst theProject isvery lowdownthecostcurveandcanwithstandamaterialdrop in thepriceofcoal,thevolatilityofcommoditypricesinadownwardtrendoftendampenstheinterestofinvestorsinaparticularcommodity,suchthatfundingmaybedifficulttosecure.

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

furnace,thereremainsanuncertaintyastohowitwillactuallyperform,andthismayhaveanimpactoncoalpricing.

ConclusionTheStagedProductionPFSconfirmedtwoveryimportantassumptionsbytheCompanyinrelationtotheProject:§ First,atwhateverlevelofproductiontheProjectadopts,itwillbeoneofthelowestcostproducersof

seabornemetallurgicalcoal.TheCompany intentionallytestedthisassumptionbyassessingthemineatavery lowproduction level, alongsideamineata significantlygreaterproduction level. Theall-inFOBcashcostdifference,wasonlyUS$2pertonne.

§ Second,initsbasecase,thecumulativecapitalexpendituretoreach1.75Mtpacleancoalproductionwas just US$213M, which in the Company’s view, relative to projects of a similar scale in BritishColumbia,isverylow.

That has now given the Company the confidence to pursue the Sub-EA process and continue with itsbaselinestudies,environmentalmonitoringandeffectsassessment,toputitselfintoapositioninQ42018tofileapplicationsforpermitstooperateamineupto250ktpaofsaleablecoal.IthasalsogiventheCompanytheconfidencethatitshouldbeabletoraisecapitalforthedevelopmentoftheProjectasandwhenrequired.TheCompany is indiscussionswithpossible jointventureandoff-takepartners, and a number of financial institutions have expressed an interest in assisting in raising thenecessaryfundingfromthecapitalmarketsinduecourse.NextStepsKeyobjectivesanddeliverablesoverthenext18months,subjecttofundingandnotalreadystatedinthisannouncementare:§ ImmediatelyundertakeaPFSreviewwithparticularfocuson:

§ MinimisinginitialcapitalrequiredtobeinvestedinStage1;§ OptimizingbothStage1andStage2capitalintheproductionramp-up;and

16

§ ReleasingtheresultsofthatreviewinQ12018;

§ Completeapre-feasibilitystudyonStage1asastand-alonemineoperationoftheTenasPittoprovideaprojectdescriptionforthepurposesoftheSub-EAprocess,andreleasingtheresultsofthatreviewinQ12018;

§ Commencea feasibilitystudyat thestartofQ12018ofastand-aloneStage1mineoperationof the

TenasPitforcompletionanddeliverybytheendofQ22018;§ ContinuediscussionswithpotentialProjectjointventurepartnersandoff-takeparties;§ ContinuetogrowanddeveloptherelationshipwithFirstNationsandcommencewiderengagementin

relationtotheProjectwiththeTelkwaandneighbouringcommunities;and

§ Continuebaseline studies in theTenasPit areawhichwere recently commencedalongwithongoingenvironmentalmonitoringandenvironmentalassessment.

_______________________________________________________________________________________Formoreinformation,pleasecontact:MrMalcolmCarson MrMarkGrayChairman,AllegianceCoalLimited ManagingDirector,AllegianceCoalLimitedMobile:+61417692849 Mobile:+61412899979Email:mcarson@allegiancecoal.com.au Email:mgray@allegiancecoal.com.auCompetentPersonsStatementThe information in this ASX Announcement that relates toMineral Resources and Reserves is based oninformationand supporting documentation preparedby Mr Ron Parent and Mr Robert McCarthy. MrParent is a Professional Geologist registered with the Association of Professional Engineers andGeoscientistsofBritishColumbia.MrMcCarthyisaProfessionalEngineerregisteredwiththeAssociationofProfessionalEngineersandGeoscientistsofBritishColumbia.MrParentandMrMcCarthyareindependentconsultantstotheCompany,andhavesufficientexperiencewhichisrelevanttothestyleofmineralisationand the type of deposit under consideration and to the activity which they undertook to qualify asCompetent Persons as defined in the JORC Code (2012 Edition of the “Australian Code for Reporting ofExploration Results, Mineral Resources and Ore Reserves”). Mr Parent andMrMcCarthy as competentpersonsforthisannouncementhaveconsentedtotheinclusionoftheinformationintheformandcontextinwhichitappearsherein. ______________________________________________________________________________________

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APPENDIX-JORCTABLE1Section1 SamplingTechniquesandDataCriteria JORCCodeexplanation CommentarySamplingtechniques

• Nature and quality of sampling (e.g., cut channels,random chips, or specific specialised industrystandard measurement tools appropriate to theminerals under investigation, such as down holegammasondes,orhandheldXRF instruments,etc.).Theseexamplesshouldnotbetakenas limitingthebroad meaning of sampling.

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

• Aspectsof thedeterminationofmineralisationthatareMaterial to the Public Report. In cases where‘industry standard’workhasbeendone thiswouldbe relatively simple (eg ‘reverse circulation drillingwas used to obtain 1 m samples from which 3 kgwas pulverised to produce a 30g charge for fireassay’). In other cases more explanation may berequired,suchaswherethereiscoarsegoldthathasinherentsamplingproblems. Unusualcommoditiesormineralisationtypes(egsubmarinenodules)maywarrantdisclosureofdetailedinformation.

• All boreholes, where conditions permitted, weregeophysicallyloggedwithsomeorallofthefollowingtools:deviation,gamma,density,caliper,neutron,dip.

• Geophysical logging operators routinely calibrated theirtoolsbetweenprograms.

• Core holes were sampled, where core recovery permitted,as whole core collected for coal quality analysis and rockgeochemistry.

• The results from the geophysical logging were used todeterminethelithologyofthestratainthehole.

• Thecored intervalsare compared to thegeophysical log inordertodeterminesampleintervalsandcoreloss.

• Samples from these programswere sent to the CrowsnestResourcesLimited(CNRL)companylaboratoryandtoLoringLaboratoriesinCalgary.

• Abulksamplingtestpitwasalsoexcavatedwitha219tonnesamplecollected from7 seams.Thesamples fromthis testpitweretestedbyBirtleyLaboratoryinCalgary.

Drillingtechniques

• Drill type (e.g., core, reverse circulation, open-holehammer,rotaryairblast,auger,Bangka,sonic,etc.)and details (e.g., core diameter, triple or standardtube, depth of diamond tails, face-sampling bit orother type, whether core is oriented and if so, bywhatmethod,etc.).

• Avarietyofdrillingtechniqueswereutilizedonthisprojectincludingmainlycore,airrotaryoracombinationofboth.

• From1979to1989thedrillingwasdoneforCNRLusingtop-head drive Ingersoll Rand (IR) rotary rigs and Longyear 38diamondcorerigs.Corediameterwas17/8”NQcoreplussome6”diametercores.

• From1992to1998thedrillingwasdoneforManaltausingtop-headdriveFailing1250and IRrotaryrigsandanAckerdiamond core rig. Core diameter was 1 7/8” NQ core.Samplingofcoalwasdonebythediamondcorerig.Rotarycoringtoobtain10cm(4”)diametercorewasalsoused.

• Corewasnotorientated.Drillsamplerecovery

• Method of recording and assessing core and chipsample recoveries and results assessed.

• Measures taken to maximise sample recovery andensure representative nature of the samples.

• Whether a relationship exists between samplerecovery and grade and whether sample bias mayhave occurred due to preferential loss/gain offine/coarsematerial.

• Thecoredintervalswerecomparedtothegeophysicalloginordertodeterminesampleintervalsandcoreloss.

• The drilling contractor was responsible for ensuring thatcorerecoverywasmaximized.

• Due to the nature of the deposit, core recovery wasgenerallynotaffectedbycoalquality.

• Core recovery records were reported on the written coredescriptionsheetsforeachcorehole.Theaveragerecoveryfrom1992 to1998was typically in the80%to100%rangeandwastypicallybetterthanthatachievedduringtheCNRLtenureperiod

Logging • Whether core and chip samples have beengeologically and geotechnically logged to a level ofdetail to support appropriate Mineral Resourceestimation,miningstudiesandmetallurgicalstudies.

• Whether logging is qualitative or quantitative innature.Corephotography.

• The total length and percentage of the relevantintersectionslogged.

• All core was logged using similar logging criteria includedlithology, weathering, core quality/hardness andobservationofstructuralfeatures.

• The logging with respect to the down hole logs isquantitative and core photographs are available in someinstances.

• All boreholes, where conditions permitted, weregeophysicallyloggedwithsomeorallofthefollowingtools:deviation,gamma,density,caliper,neutron,dip.

• Geophysical logging operators routinely calibrated theirtoolsbetweenprograms.

• Thegeophysicallogswereusedtodeterminethelithologicalintervals in rotary holes where no core was retrieved. In

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Criteria JORCCodeexplanation Commentarygeneral, coal was determined by its low response on thedensity tool (~<1.8 g/cc). Once determined if the intervalwas coal or not, a lithotype for rock intervals wasdetermined by observing the gamma log response, whichhadthelowestresponseincleansandstoneswithlittleclaycontentandthehighest response inshalesdueto thehighclaycontent,whichcontainedKthatemitsradiation.

Sub-samplingtechniquesandsamplepreparation

• If core,whether cut or sawn andwhether quarter,halforallcoretaken.

• If non-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-sampling stages tomaximise representativeness ofsamples.

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

• Whether sample sizes are appropriate to the grainsizeofthematerialbeingsampled.

• Allsamplestakenwereofwholecore.• Ofthefewrotarysampledholes,noneoftheanalyticaldata

wereusedintheresourceestimate.• Qualitycontrolwasprovidedviareferencingthegeophysical

log.Theanalyticalresultswerecheckedforreasonablenessagainst thegammaanddensity results. There shouldbeadirectrelationshipbetweendensityandashcontent.

• Whole core material of each seam or ply, either as singlesamples or a series of samples by depth increments,weresent to the laboratory for analysis. All coal core sampleswerebaggedonsitebeforebeingtransportedtoLoringandBirtleyLaboratoriesinCalgaryforcoalqualitytestwork.

Qualityofassaydataandlaboratorytests

• The nature, quality and appropriateness of theassaying and laboratory procedures used andwhetherthetechniqueisconsideredpartialortotal.

• Forgeophysical tools,spectrometers,handheldXRFinstruments, etc, the parameters used indeterminingtheanalysisincludinginstrumentmakeand model, reading times, calibrations factorsappliedandtheirderivation,etc.

• Nature of quality control procedures adopted (egstandards, blanks, duplicates, external laboratorychecks) and whether acceptable levels of accuracy(ielackofbias)andprecisionhavebeenestablished.

• Both Loring Labs and Birtley Laboratories are ISO 9001certified, adhere to ASTM preparation and testingspecificationsandhavequalitycontrolprocessesinplace.

Verificationofsamplingandassaying

• Theverificationofsignificantintersectionsbyeitherindependentoralternativecompanypersonnel.

• Theuseoftwinnedholes.• Documentation of primary data, data entry

procedures,dataverification,datastorage(physicaland electronic) protocols.

• Discussanyadjustmenttoassaydata.

• Theverification in termsofcoalqualitywasbycomparisonof analytical resultswith the geophysical log. The samplingand analytical results were overseen and reviewed byqualifiedgeologists.

• Anomalouslythickintersectionsinthedatasetwerecheckedtoensurecorrectness.

• Twinning of holes is generally not required except in theabsenceofageophysicallog.

• In general all core logs and intervals were recorded usinghandwritten logs, some of which were transcribed intospreadsheetsorothersoftware.

• Datapriorto1992havepapergeophysicallogs,howeverallhole drilled from 1992 – 1998 have log asci (.las) files indigitalformat.

• AllofthedatahasbeenstoredinanMSAccessdatabase.Locationofdatapoints

• Accuracyandqualityof surveysused to locatedrillholes(collaranddown-holesurveys),trenches,mineworkings and other locations used in MineralResourceestimation.

• Specificationofthegridsystemused.• Qualityandadequacyoftopographiccontrol.

• All drillholeshavebeen surveyedusing total station surveyequipment.Extensivedocumentationofsurveytraversesisavailableaspartoftherecord.

• AlldatapointsusedintheresourceestimateweresurveyedinNAD27.ThesewereconvertedtoNAD83forthepurposesofthisstudyandfuturework.

• Topographic contours at 2m intervals provide appropriatetopographiccontrol.

Dataspacinganddistribution

• DataspacingforreportingofExplorationResults.• Whether the data spacing and distribution is

sufficient to establish the degree of geological andgrade continuity appropriate for the MineralResource andOre Reserve estimation procedure(s)

• Average drillhole spacing for Tenas is 110 m, 125 m forGoathorn and 135m for Telkwa North. The average coreholespacing(withqualitydata)is237minTenas,173minGoathorn,and157minTelkwaNorth.

• Theresourceclassificationisbasedonanassessmentofthe

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Criteria JORCCodeexplanation Commentaryandclassificationsapplied.

• Whethersamplecompositinghasbeenappliedgeological(seamthickness)andcoalqualitycontinuity.Thishasthenbeensummarisedusingthedistancefromnearestacceptable data point (drillhole) for coal seam thicknessidentification and an assessment of the confidence in coalseam continuity / correlation. The drillhole spacing andcontinuitiesareconsideredappropriatetodefineMeasured,IndicatedandInferredResourcesonthefollowingbasis:

o Measured = within 75 m of drillhole utilized inthemodel(thatis,holesidentifiedasappropriateforuseinthecurrentresourceestimate);

o Indicated=within75mto150mofdrillhole;o Inferred=within150mto300mofdrillhole.

Orientationofdatainrelationtogeologicalstructure

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

• If the relationship between the drilling orientationandtheorientationofkeymineralisedstructures isconsideredtohave introducedasamplingbias,thisshouldbeassessedandreportedifmaterial.

• Drilling was oriented on cross sections at 25 m spacingorientedperpendiculartolocaltrend.

• Drillingwasverticalandcoalseamsdipatbetween0and65degrees. Seam thickness intercepts are corrected to truefromapparent thicknessusing the locally interpreted seamdip.

Samplesecurity

• Themeasurestakentoensuresamplesecurity. • Noknownspecialsamplesecuritymeasureswereappliedatthetimeofsamplesubmissiontothelaboratories,

Auditsorreviews

• The results of any audits or reviews of samplingtechniquesanddata.

• extensive checks and comparisons between data has beenundertaken to verify and validate data for this resourceestimate

Section2 ReportingofExplorationResultsCriteria JORCCodeexplanation CommentaryMineraltenementandlandtenurestatus

• Type, reference name/number, location andownership including agreements or material issueswith third parties, such as joint ventures,partnerships, overriding royalties, native titleinterests,historicalsites,wildernessornationalparkandenvironmentalsettings.

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

• Coaltenureisheldintheformofcoallicenses(22parcelsfor5579Ha)and freeholdcoal (5parcels for1301Ha).Thecoallicenses are held byCarbonDevelopmentCorporation (CDC)andBulkleyValleyCoalLimited(BVCL).

• Thepropertyandlicenseownershipareunderajointventureagreement signed between CDC owner Altius Minerals andTelkwaCoalLimited.

• Thetenureissecureandmaintenancepaymentsarealluptodate.

• Theonlyknownimpedimenttoobtainingalicensetooperatewill be negotiationswith select land holders in the area fordevelopment.

Explorationdonebyotherparties

• Acknowledgment and appraisal of exploration byotherparties.

• In theperiod from1979 to1998a totalof867documenteddrillholes were completed on the Telkwa property by CNRLandManalta. Of those, 525 were drilled using conventionalrotarymethods,while310werecored.In47ofthedrill-holes,59 piezometers were selectively installed at variousstratigraphic levels. 32 surficial bore-holes have also beencompleted to date on the property. In addition, there arereportsof about30holesbeingdrilledbyCyprusandCanexsporadicallyintheperiodfrom1969to1978;thisdatahasnotbeencompiledduetothepoorqualityoftherecords.

• Additionally, surface geophysics has been conductedperiodicallybybothCNRLandManaltawith the intentionoftracingcoalseamsonsurface.

Geology • Deposit type, geological setting and style ofmineralisation.

• Thesemedium to high volatile bituminous coal deposits arepartoftheRedRoseformationoftheSkeenaGroup.

• The SkeenaGroup sediments of the Telkwa Coalfield are anerosional remnant of Lower Cretaceous sedimentary rockwhichwere initiallydepositedwithina largedeltaic complexalong the southern flanks of the Bowser Basin. ThroughoutlateJurassicandearlyCretaceoustimetheBowserBasinwasthe focus of rapid sedimentation, subsidence and increasedtectonic activity, which resulted in thick accumulations ofcoal-bearingsedimentaryrock.

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Criteria JORCCodeexplanation Commentary

• The geology type classification for Canadian coal deposits is“moderate to complex”. Minimum open pit mineablethickness for moderate coal deposits is 0.5 m; and forcomplex0.8m.

• Themain economic seams range fromaminimummineablethicknessof0.5/0.8mto9minthickness.

DrillholeInformation

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

• EastingandNorthingofthedrillholecollar• ElevationorRL(ReducedLevel–elevationabovesea

levelinmetres)ofthedrillholecollar• Dipandazimuthofthehole• Downholelengthandinterceptiondepth• Holelength• Iftheexclusionofthisinformationisjustifiedonthe

basis that the information is notMaterial, and thisexclusion does not detract from the understandingof the report, theCompetentPerson should clearlyexplainwhythisisthecase.

• ModernexplorationoftheTelkwaProjectstartedwithCyprusAnvil Mining in 1978 and since then over 800 explorationdrillholes and 3 bulk samples have been carried out on theproperty.

• Other ancillary activities such as trenching, geologicalmappingandsurfacegeophysicshavealsobeencarriedout.

Dataaggregationmethods

• InreportingExplorationResults,weightingaveragingtechniques, maximum and/or minimum gradetruncations (e.g. cuttingof high grades) and cut-offgradesareusuallyMaterialandshouldbestated.

• Where aggregate intercepts incorporate shortlengths of high grade results and longer lengths oflow grade results, the procedure used for suchaggregation should be stated and some typicalexamples of such aggregations should be shown indetail.

• The assumptions used for any reporting of metalequivalentvaluesshouldbeclearlystated.

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

maximuminternal“parting”of0.3mformoderateand0.5mforcomplex.

• Seamcompositesweremadefromcompositingoflithologicalintervals(CoalorParting)honouringtheseamcode.

• Coal quality intervals are cross referenced with the seamcomposites

Relationshipbetweenmineralisationwidthsandinterceptlengths

• TheserelationshipsareparticularlyimportantinthereportingofExplorationResults.

• Ifthegeometryofthemineralisationwithrespecttothe drill hole angle is known, its nature should bereported.

• Ifitisnotknownandonlythedownholelengthsarereported, there shouldbea clear statement to thiseffect (e.g. ‘down hole length, true width notknown’).

• Composited seam intervals were assigned a dip from ageologicalsectionandthetruethicknessoftheintervalswasestablished

Diagrams • Appropriate maps and sections (with scales) andtabulationsof interceptsshouldbeincludedforanysignificant discovery being reported. These shouldinclude, but not be limited to, a plan view of drillhole collar locations and appropriate sectionalviews.

• Diagrams have been developed for the project by SRK inaccordancewithJORCCoderequirements.

• Diagrams include location maps, drillhole plots and geologycross-sections.

Balancedreporting

• Where comprehensive reporting of all ExplorationResults is not practicable, representative reportingofbothlowandhighgradesand/orwidthsshouldbepracticed to avoid misleading reporting ofExplorationResults.

• Notapplicable.Whilefulldetailsofalltheexplorationresultshave not been released, there are no significant ormaterialissuesnotsummarisedinthisTable1.

Othersubstantiveexplorationdata

• Other exploration data, ifmeaningful andmaterial,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 Telkwacoals and have been extracted fromeach of the threemainresource areas. On each, a complete suite of coal qualityanalyses was performed, including testing on a variety ofsimulatedpreparationplantproducts.

• In1983,a219tonnebulksamplewascollectedfrom7majorseamswithin theGoathornEast (Pit 3) area. In1989, abulksamplewasextractedfromtheBowser (TelkwaNorth–EastPit)areaviaalarge-diametercoringprogram.And,in1996,an

21

Criteria JORCCodeexplanation Commentary80tonnebulksamplewascollectedfromthethreemineableseamsinTenasarea.

• Total sulphurand three formsof sulphur (organic, inorganic,andsulphate)havebeenestimated for thevariousseamssoastodeterminethepotentialforwatertreatment.

Futurework • The nature and scale of planned furtherwork (e.g.tests for lateral extensions or depth extensions, orlarge-scalestep-outdrilling).

• Anyadditionalworkwill involvedrillingmainly in supportofacidrockdrainageandgeotechnicalevaluations.

Section3 EstimationandReportingofMineralResourcesCriteria JORCCodeexplanation CommentaryDatabaseintegrity

• Measures taken to ensure that data has not beencorrupted by, for example, transcription or keyingerrors, between its initial collection and its use forMineralResourceestimationpurposes.

• Datavalidationproceduresused.

• By overlaying the geophysical log density data on thelithological intervals, the coal intercepts were assigned adensityvaluewhichwasthencheckedforreasonableness(i.e.densityfromgeophysicsshouldbebetween1.3and1.8g/cc).

• Downhole geophysical data was used to validate and verifyseam 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.

• ForData capture and current database storageMSAccess isutilized, along with cataloguing and electronic filing of allpertinentdatastoredontheSRKserver.

Sitevisits • Comment on any site visits undertaken by theCompetentPersonandtheoutcomeofthosevisits.

• AsitevisitwasconductedonApril11,2017by:o RonParent–ResourceCompetentPerson(SRK)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.

Geologicalinterpretation

• Confidencein(orconversely,theuncertaintyof)thegeologicalinterpretationofthemineraldeposit.

• Nature of the data used and of any assumptionsmade.

• The effect, if any, of alternative interpretations onMineralResourceestimation.

• The use of geology in guiding and controllingMineralResourceestimation.

• The factors affecting continuity both of grade andgeology.

• There is a high level of confidence in the geologicalinterpretation, especially in areas of the resource that havebeenincludedinthereserves.

• Stratigraphicsequenceiswellunderstoodandcorrelationsarerelatively straightforward: the current interpretation hasmodifiedtheseamnomenclatureinplaces.

• Structure and faulting are commonly shallow dipping withpredominantly normal faulting up to 100m displacement.LocalthrustfaultingisobservedintheGoathornarea.

• Limitsofthedepositsneedtobebetterdefined;sincesomeofthe sub-crop or structurally controlled boundaries have notbeenfullydefined.

• No alternative interpretations are considered as the currentinterpretationiswellsupportedbyavailabledata.

• The geological model is a thickness model, whose data iscomposited from drillhole seam intersections and confirmedbygeophysicallogintercepts.

• Thecoalqualityparametersdonotaffectthequantityofcoal,buttherecoveryandgenerationofasuitableproduct.

Dimensions • The extent and variability of theMineral Resource

expressedaslength(alongstrikeorotherwise),planwidth, and depth below surface to the upper andlowerlimitsoftheMineralResource.

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

• GoathornEastis5kmby2kmreachingamaximumdepthof650mforlowermost1Seam.

• GoathornWestis1.5kmby800mreachingamaximumdepthof300mlowermost1Seam.

• TelkwaNorthis1.6kmby3.6kmreachingamaximumdepthof300mforthelowermost2Seam.

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Criteria JORCCodeexplanation CommentaryEstimationandmodellingtechniques

• The nature and appropriateness of the estimationtechnique(s)appliedandkeyassumptions,includingtreatment of extreme grade values, domaining,interpolationparametersandmaximumdistanceofextrapolation from data points. If a computerassisted estimation method was chosen include adescription of computer software and parametersused.

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

• The assumptions made regarding recovery of by-products.

• Estimation of deleterious elements or other non-gradevariablesofeconomicsignificance(egsulphurforacidminedrainagecharacterisation).

• In the case of blockmodel interpolation, the blocksize in relation to the average sample spacing andthesearchemployed

• Any assumptions behind modelling of selectiveminingunits.

• Coal quality and seam thickness parameters were estimatedusing inverse distance squared within the seam wireframeswhichcontrolthedistributionofinterpolatedvaluesin3D

• Themodel isof thecoalseamsonlyandthe interburdenhasbeenmodelledbydefaultbuttosufficientdetailtoassistwithwasterockcharacterisationandwasterockmanagement.

• The current resource estimate is comparable with previousresourceestimatescompletedin1989,1997,and2015

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

• Themodelblocksizerangesfrom5to25malongstrike(TenasandTelkwaNortharerotated),5to10mdowndipand5minheight.

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

Estimationandmodellingtechniques(continued)

• Any assumptions about correlation betweenvariables.

• Descriptionofhowthegeologicalinterpretationwasusedtocontroltheresourceestimates.

• Discussion of basis for using or not using gradecuttingorcapping.

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

• A key assumption utilized in the resource estimate was therelationship between ash content on an air dried basis andbulkdensityusedforconversionofvolumetotonnes.

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

• Themainvalidationmethodusedwasacomparisonbetweenwireframe solids volumeand volumegenerated from the3Dblockmodelaftercoding.

• The model accurately represents the drilled seam truethicknessesto+/-0.1matagivenXYlocation.Theelevationsmayvaryup to3matanydrillhole intercept. This isdue tothe sectional nature of the modelling process, projecting allseamintersectionsamaximumof12.5mtothenearestcrosssection.

Moisture • Whetherthetonnagesareestimatedonadrybasisor with natural moisture, and the method ofdeterminationofthemoisturecontent.

• The tonnages are estimated on an air-dried basis, while themoisturecontentmeasurementsareavailablewithinthecoalqualitytestingresults.

Cut-offparameters

• Thebasisof theadoptedcut-offgrade(s)orqualityparametersapplied.

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

• To assist in developing the coal reserves, coal yields werebasedonwashabilitytestingatacut-pointof1.6g/cc.

• Cleancoalobjectiveoftheprocesswillbe8.5%withatargetsaleableproductattheportat10%moisture.

Miningfactorsorassumptions

• 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 regardingmining methods and parameters when estimatingMineral Resources may not always be rigorous.Wherethisisthecase,thisshouldbereportedwithan explanation of the basis of the miningassumptionsmade.

• Minimumcoalply thickness=0.5m forTenasand0.8m forGoathornandTelkwaNorth.

• Maximumincludedpartingthickness=0.3mforTenasand0.5mforGoathornandTelkwaNorth

• Minimumcoal:rockratio=2:1• Theresourcesareallconsideredpotentiallysurfacemineable,

and restricted to a 20:1 BCM:tonne cut-off strip ratio depth.Despite there being previous underground mining on theproperty, no underground resources are considered at thistime.

Metallurgicalfactorsorassumptions

• The basis for assumptions or predictions regardingmetallurgicalamenability. It isalwaysnecessaryaspart of the process of determining reasonableprospects for eventual economic extraction toconsider potential metallurgical methods, but theassumptions regarding metallurgical treatment

• Metallurgical amenabilitywas simulated from testworkusingindustrystandardmodelsforcoalbeneficiation

• Ashcontentofdilutionisassumed80%,sizingofAshassimilartosizingofcoalandwithadensityof2.5g/cc.

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Criteria JORCCodeexplanation Commentaryprocesses and parameters made when reportingMineral Resources may not always be rigorous.Wherethisisthecase,thisshouldbereportedwithan explanation of the basis of the metallurgicalassumptionsmade.

Environmentalfactorsorassumptions

• Assumptions made regarding possible waste andprocess residue disposal options. It is alwaysnecessary as part of the process of determiningreasonable prospects for eventual economicextraction to consider the potential environmentalimpacts of the mining and processing operation.While at this stage the determination of potentialenvironmentalimpacts,particularlyforagreenfieldsproject, may not always be well advanced, thestatus of early consideration of these potentialenvironmental impactsshouldbereported. Wheretheseaspectshavenotbeenconsideredthisshouldbe reported with an explanation of theenvironmentalassumptionsmade.

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

• ThePropertyhostsbothNAGandPAGseaminterburdenandoverburden rock. Tenus, Goathorn and Telkwa North havebeen characterized to estimate NAG and PAG rock in eachphase.

• The ratio of NP to MPA, NPR was used as the basis forclassifyingeachinterburdenandtheoverburdenzoneasNAGorPAG.MuchoftherockisNAG

• Methods used to estimate NP and MPA in the 1990s aredifferent from those used currently and to varying degreesover-estimatebothNPandMPAresultinginuncertaintyinthethresholdNPRusedtodelineatePAGandNAGstrata.

• TheratioselectedtodefinePAGrockisNPR≤3.0whichallowsfor the uncertainty in NP. A lower valuemay be suitable asunderstandingofthemineralogicalcharacteristicsoftherockimproves.

• To assign estimated volumes to NAG or PAG, the sampleswithin eachphase and seam interburden / overburdenwerebinnedintothreeNPRgroups,<2.0,from2.0to3.0,and>3.0.If the < 2.0 NPR sample lengthwasmore than 40% of totalsamplelengthforagiveninterburdenandphasethentherockwaslabelledasPAG.

• Theintentofthemineplanwastoscheduleandmaximizetheopportunity for backfill PAG rock into the pits as early aspossibleandminimizeamountofexternalstorageofPAGrock

• There isnoTailingsManagementFacility.BothCCRandfinesrejectswillbeco-emplacedwithPAGrock

• AwatertreatmentfacilityisplannedformanagingpHofPAGwater

• OptimizationofPAGmanagementincludingblendingPAGrockintoNAGrockand/orsubmergingPAGshouldbeinvestigatedinfuture

Bulkdensity • Whether assumed or determined. If assumed, thebasis for the assumptions. If determined, themethodused,whetherwetordry,thefrequencyofthe measurements, the nature, size andrepresentativenessofthesamples.

• The bulk density for bulkmaterialmust have beenmeasured bymethods that adequately account forvoid spaces (vugs, porosity, etc), moisture anddifferences between rock and alteration zoneswithinthedeposit.

• Discussassumptionsforbulkdensityestimatesusedintheevaluationprocessofthedifferentmaterials.

• The bulk density (BD) was assumed based on an empiricalrelationshipwiththeairdriedashforhighvolatilebituminouscoal. This empirical formula was extracted from Table 1 ofGeologicalSurveyofCanadaPaper88-21:

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

Classification • The basis for the classification of the MineralResourcesintovaryingconfidencecategories.

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

• Whether the result appropriately reflects theCompetentPerson’sviewofthedeposit.

• The resource classification is based on an assessment of thegeological(seamthickness)andcoalqualitycontinuity.

• This has then been summarised using the distance fromnearest acceptable data point (drillhole) for coal seamthickness identification and an assessment of the confidenceincoalseamcontinuity/correlation.

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

o Measured=within75mofdrillholeutilized inthemodel (that is holes identified as appropriate foruseinthecurrentresourceestimate);

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

24

Criteria JORCCodeexplanation Commentary

• The surface resources (those resources considered to haveprospects tobeopenpitmineable)are restricted towithina20:1COSRbcm/tonnecoal fromsurface,which isconsideredreasonableforcoalofthistype.

Auditsorreviews.

• The results of any audits or reviews of MineralResourceestimates.

• Peer review by SRK personnel was carried out on thegeological interpretation. Noexternalauditor reviewof theresource estimate for this model was carried out. Theresourceestimatesaresimilartothosefrompreviousstudiesperformed with the same data and any differences are notdeemedtobematerial.

Discussionofrelativeaccuracy/confidence

• Where appropriate a statement of the relativeaccuracy and confidence level in the MineralResourceestimateusinganapproachorproceduredeemedappropriatebytheCompetentPerson.Forexample, the application of statistical orgeostatistical procedures to quantify the relativeaccuracy of the resource within stated confidencelimits, or, if such an approach is not deemedappropriate, a qualitative discussion of the factorsthat could affect the relative accuracy andconfidenceoftheestimate.

• The statement should specifywhether it relates toglobal or local estimates, and, if local, state therelevant tonnages, which should be relevant totechnical and economic evaluation.Documentationshould include assumptions made and theproceduresused.

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

• The resources estimates are assumed to bewithin +/- 15 to25% on a global basis (or over an assumed annual miningvolume) and this accuracy is considered appropriate for theclassification classes of Indicated and Measured CoalResources,andappropriate to supportat leastaPFS levelofstudyandreserveassessment.

Section4 EstimationandReportingofOreReserves Criteria JORCCodeexplanation CommentaryMineralResourceestimateforconversiontoOreReserves

• Description of theMineral Resource estimate usedasabasisfortheconversiontoanOreReserve.

• Clear statement as to whether the MineralResourcesarereportedadditionalto,orinclusiveof,theOreReserves.

• ThecoalresourcesusedforthedevelopmentofreserveswasestimatedbyRonParent,PGeo,pertheprocessesreportedinSections1to3ofthisTable1.

• Thecoalresourcesarereportedinclusiveofthecoalreserves.

Sitevisits • Comment on any site visits undertaken by theCompetentPersonandtheoutcomeofthosevisits.

• Ifnositevisitshavebeenundertaken, indicatewhythisisthecase.

• AsitevisitwasconductedonApril11,2017by:o RonParent–ResourceCompetentPerson(SRK)o BobMcCarthy–ReserveCompetentPerson(SRK)o EdSaunders–Geotech(SRK)o DavidMaarse–WaterLead(SRK)o KarlHaase–Processing(Sedgman)

• Thevisitconsistedofanaerialtourviahelicopterandagroundtour on accessible roads. The core storage facility wasobservedaswellasseveraloutcropsandwatercourses.

Studystatus • The type and level of study undertaken to enableMineralResourcestobeconvertedtoOreReserves.

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

• Manalta Coal previously completed a pre-feasibility study(PFS)ontheTelkwaCoalProjectin1997.

• This coal reserve is based upon a PFS where geologicalconfidence is sufficient and mine engineering has beencompleted to a level required to determine technical andeconomicviability,supportedbyamineplanandschedule.

• Modifying factors considered material to the developmentandeconomicextractionofthecoalresourcehavebeentakenintoaccount.

Miningfactorsorassumptions

• The method and assumptions used as reported inthePre-FeasibilityorFeasibilityStudytoconverttheMineral Resource to anOre Reserve (i.e. either byapplicationofappropriatefactorsbyoptimisationorbypreliminaryordetaileddesign).

• The choice, nature and appropriateness of theselected mining method(s) and other mining

• The project uses a combination truck and shovel open cutminingaswellasdozerpushinginTenastoexecuteanup-dipminingmethod.

• The basis of design is a Lerchs-Grossman economic pitoptimization combined with a cut-off strip ratio analysis todetermine the ultimate pit limits. The ultimate pit shell wasthen developed into a detailed pit design and broken into

25

Criteria JORCCodeexplanation Commentaryparameters including associated design issues suchaspre-strip,access,etc.

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

• ThemajorassumptionsmadeandMineralResourcemodel used for pit and stope optimisation (ifappropriate).

• Theminingdilutionfactorsused.• Theminingrecoveryfactorsused.• Anyminimumminingwidthsused.• ThemannerinwhichInferredMineralResourcesare

utilised inmining studies and the sensitivity of theoutcometotheirinclusion.

• The infrastructure requirements of the selectedminingmethods.

practicalpitphasesandminingcuts.• Conventional mobile equipment (excavators and large haul

trucks) is used for overburden mining and waste rockstripping. In Tenas, waste rock over the lU/1 Seam is dozerpushedontominedoutfootwalls.

• Coal loss and dilutionwere assumed for the contacts at thehangingwallandfootwallofeachseam.Coallossanddilutionthickness applied to the Tenas deposit was 7.5 cm for eachcontact (15cmtotalperseam).Dilutionandcoal loss fortheGoathorn and Telkwa North pit were set at 10 cm for eachcontact(20cmtotalperseam).

• Theminimumseamthicknessforminingwassetat0.8mforalldeposits.

• PitslopecriteriaweredevelopedbySRKaspartofthePFSandwerelargelydrivenbytheslopeoftheseambeddingineachsector of the pit. Many pit walls are simply foot wallsdaylighting into theoverburdenand topography.Wherehighwall benching is required, the bench face angles aredeterminedbytheslopeofthebeddingplainand8mbenchesarerequiredoveramaximumheightof45m.Thus,pitslopesvaryfrom35to60degrees.Pitslopesinareaswithidentifiedfaults that reduce the rock mass strength were adjustedappropriately.

• Coal resourceswith limited geological certainty are classifiedas inferred and cannot be converted to Coal Reserves. Thus,any inferred coal resources are considered as waste in thisstudy and there are no inferred resources included in theproductionscheduleorcoalreserveestimate.

• The financial evaluation of the proposed mine plan andscheduleissufficienttosupporteconomicviabilityoftheCoalReserve.

• The primary infrastructure required for the development ofthe open cuts at Telkwa are water containment andmanagement facilities. Numerous ditches are required forboth containing contact water and diverting non-contactwater from the mining areas. Contact water is collected insedimentationpondsbeforedischarge.Contactwatercomingfrom potentially acid generating sources is collected inseparatepondsfortreatmentbeforedischarge.

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 test work undertaken, the nature ofthe 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 three-circuit approachwithcustomisedequipmentsizingtoallowfornominalthroughputforthisspecificcoal

• All metallurgical processes and technology have been usedextensivelywithinthecoalindustryworldwide

• Testwork to date was completed under Australian Standardmethods at the time of the testwork and is suitable for thislevelofstudy

• In-seamdilutionisincludedinthesampletestingandprocesssimulations

• Ithasbeenassumedthattheorganicliquidsusedforfloat-sinkhashadnoeffectonthecoalproperties

• Twobulksampleshavebeencompleted in thepastwithonepilot scale testwork being completed. Pilot testwork wascompleted on a 19 mm x 0 mm size fraction using a DSMheavy media cone for 19 mm x 0.6 mm and two stagespiral/water only cyclone for below 0.6mm fraction. Due tothetestworkpractices,thispilotwashwasnotsuitableforuseasaframeworkforthisstudyandtheresultswerenotusedintheanalysis.

• 1998 and 1996 bulk samples were used in the processsimulationsandit isbelievedfromtheseresultsthatthecoalisfairlyhomogeneouswithinseams,howeverfurthertestworktoconfirmthisassumptionisrecommended

• Thecurrentproposedplantwillproduceacleancoalwhichis

26

Criteria JORCCodeexplanation CommentaryofPCImarketable specificationand thecoal reserve isbasedon these coal specifications – ROM coal is based on 5%moistureandultimatesaleablecoalis10%moisture.

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, thestatusofapprovals forprocess residuestorageandwastedumpsshouldbereported.

• Forgeochemistrydata, refer to section titled“Environmentalfactorsorassumptions”

• Existingdataonbackgroundsurfaceandgroundwaterqualityandflowhasallowedforthedevelopmentofaconceptualsitewaterbalanceandpreliminarywaterqualitymodelling.

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

• In addition,due to the conservativenessof thewaterqualitymodelutilizingMDLwheremeasurementswerebelowMDL,anumberofparameterswerepredictedtoexceedBCWQG.Itisanticipated that with better water quality data using lowerMDLsthatthemodelcanberefinedandtheparameterscouldachievecompliance

• Ifnecessary, thewater treatmentplantcouldbedesigned toincorporate additional design measures, operating pH,polishingunits,reagentsforco-precipitationofelements.

Infrastructure • The existence of appropriate infrastructure:availability of land for plant development, power,water, transportation (particularly for bulkcommodities), labour, accommodation; or theeasewith which the infrastructure can be provided, oraccessed.

• The Telkwa Site is served by the following infrastructure forthedevelopment:

o A 138 kV power line is to the east and a 25 kVpowerlineistothenorthoftheproperty.

o Ahighcapacitymainrail lineownedandoperatedbyCNrailwhichisalreadyinuseforthetransportofcoalunittrainsisapproximately7kmeastoftheproperty.InitialdiscussionbetweenAllegianceandCN rail haveoccurredandCNhasagreed that therailcapacityissufficientforthisproject

o TheportofPrinceRupertis located375kmtothewestandhassufficientcapacityforthisproject

• The project is located to nearby towns of Smithers, Telkwa,andHoustonforthesupplyandaccommodationoflabour

• The site is currently serviced by a Forestry Service Road andcurrenttopographywillallowtheconstructionofadedicatedcoalhaulroadbetweentherailandtheproposedplantsite

• The proposed plant site will be on crown land with a coallicenseownedbytheproponent

Costs • The derivation of, or assumptionsmade, regardingprojectedcapitalcostsinthestudy.

• Themethodologyusedtoestimateoperatingcosts.• Allowances made for the content of deleterious

elements.• The derivation of assumptions made of metal or

commodity price(s), for the principal minerals andco-products.

• Thesourceofexchangeratesusedinthestudy.• Derivationoftransportationcharges.• Thebasisforforecastingorsourceoftreatmentand

refining charges, penalties for failure to meetspecification,etc.

• The allowances made for royalties payable, bothGovernmentandprivate.

• The costing of the PFS has assumed an Owner Operatedapproach, wherein, all infrastructure and equipment ispurchasedbyAllegianceCoalLtd.(ACL)andoperatedbyACL.

• Costs are developed from first principles wherever possible,utilizing inputs from engineering firms and vendors. ThedesignsuponwhichthesecostsarebasedaretoPFSlevel.

• Engineeringworkhasbeenundertakentoestablishthecapitalcost requirement for the project, including the mine,processing plant, and rail, as well as other supportinginfrastructure.

• Capitalcostsfortheprojectaresupportedbyworkconductedby:

o SRK Consulting – mining, water management,watertreatment

o Sedgman –process plant and mine infrastructurearea

o AECOM–railinfrastructureo LexEngineering–powerlineconstruction

• Operatingcostsarebasedonworkby:o SRKConsulting–allminingcostsinclusiveofmobile

equipment, support services and labour, watermanagementandwatertreatment

o Sedgman–processingandmineinfrastructureareao ACL – site general& administrative costs, rail and

port

27

Criteria JORCCodeexplanation Commentary

Revenuefactors

• The derivation of, or assumptions made regardingrevenue factors including head grade, metal orcommodity price(s) exchange rates, transportationand treatment charges, penalties, net smelterreturns,etc.

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

• ACLplans toproduceaPCIqualitycoalatanaveragerateof1.8Mt.

• Commoditypricing for theprojectwasadvisedbyACLbasedonthestudyconductedbyKobieKoornhof&Associates.

• An average price of US$110/t coal productwas assumed fortheTelkwaProject.

• Anexchangerateof1.33CA$:US$wasappliedtocalculatetherevenue.

• Commodity price and exchange rate have been agreedbetweenSRKandACLrepresentatives.

• PrivateroyaltytoAltiusMineralwasappliedatarateof3.0%onrevenue.

Marketassessment

• The demand, supply and stock situation for theparticular commodity, consumption trends andfactors likely to affect supply anddemand into thefuture.

• Acustomerandcompetitoranalysisalongwith theidentification of likely market windows for theproduct.

• Price and volume forecasts and thebasis for theseforecasts.

• For industrial minerals the customer specification,testing and acceptance requirements prior to asupplycontract.

• Per Kobie Koornhof and Assoc., the coal to be produced atTelkwacanbeclassifiedasamediumvolatile(midvol)PCIcoalandas such isexpected to findamarket in the internationalsteelindustry.

• ThecoalwillcompeteprimarilywithPCIcoalsfromAustralia,and toa lesserextentwithcoals fromRussiaandVenezuela.Thesecoalsareevaluatedbasedonthecarboncontentinthecoal, which gives an indication of the extent to which aparticularcoalcanbeusedtoreplaceacertainamountofthecokethatisusedintheblastfurnacefortheproductionofhotliquidiron.

• Competitorcoalsare:o UltralowvolPCIo LowVolPCIo MidvolPCIo HighVolPCI

Economic • Theinputstotheeconomicanalysistoproducethenetpresentvalue(NPV)inthestudy,thesourceandconfidence of these economic inputs includingestimatedinflation,discountrate,etc.

• NPV ranges and sensitivity to variations in thesignificantassumptionsandinputs.

• Anafter-taxtechnical-economicmodel(TEM)waspreparedbySRK Consulting to test the economic viability of the CoalReserve.

• TheTEMtookintoaccountprojectrevenue,freightandsellingcosts,royaltytoAltiusMinerals,capitalcosts,operatingcostsandcorporate/administrativecosts.

• The project economics were evaluated using a standarddiscounted cash flow method at a nominal mid-perioddiscountrateof10%.Aninflationrateof1.8%wasappliedtoworkingcapital,depreciationandtaxestimates.

• The economic analysis was conducted in Canadian dollars.Results are reported inUS dollars using an exchange rate of1.33CAD:USD.

• Basedontheeconomicanalysis,thecurrentmineplanresultsinapositivepost-taxNPV10%ofUS$243MandanIRRof30%.

• Sensitivity analyses showed that the project canwithstand a30%decrease in commodity prices resulting in positivepost-taxNPV10%of $3Mand IRR of 10%. The projectwould alsosustainpositivereturnwitha30%increaseofbothcapitalandoperating costs resulting in a post-taxNPV10%of $68Mand15%post-taxIRR.

Social • Thestatusofagreementswithkeystakeholdersandmattersleadingtosociallicencetooperate.

• The Property is within the traditional territory of theWet’suwet’en Nation (OW). In April 2017, the companysignedaCommunicationandEngagementAgreementwiththeOW, the first of four agreements to be signed. The nextagreementistheProjectAssessmentAgreement.

• Thecompanyhascommencedengagementwithseveraloftheland owners, stakeholder groups and local and provincialgovernment. A comprehensive community engagementstrategyisbeingdeveloped

• The company has engaged local community, Smithers andTelkwaenvironmentalexpertisetocarryoutthebaselinedataprograms

Other • To theextent relevant, the impactof the following • While not expected to remain material, residual risks, early

28

Criteria JORCCodeexplanation Commentaryon the project and/or on the estimation andclassificationoftheOreReserves:

• Anyidentifiedmaterialnaturallyoccurringrisks.• The status of material legal agreements and

marketingarrangements.• The status of governmental agreements and

approvalscriticaltotheviabilityoftheproject,suchas mineral tenement status, and government andstatutory approvals. There must be reasonablegrounds to expect that all necessary Governmentapprovals will be received within the timeframesanticipatedinthePre-FeasibilityorFeasibilitystudy.Highlight and discuss the materiality of anyunresolved matter that is dependent on a thirdparty on which extraction of the reserve iscontingent.

identifiedrisksassociatedtotheprojectinclude:o Environment: Until ACL has completed an

environmental affects assessment of the Project,targeted for Q3 2018 after completion of itsbaseline studies, ACL cannot be certain as to theimpactoftheProjectontheenvironment.

o WaterManagement:Relatedtotheenvironmentalimpact,oneareaofconcerniswatermanagement.The Project has several streams within its vicinitywhich all feed into a major river system. Thestreamsarespawninggroundsforsalmon.Ensuringthat the Project discharges clean surface waterback into the river system is a matter of highpriority.

o Permitting: There isnoguarantee that theProjectwill be granted all permits required to operate amine.There isalwaysuncertaintyanddoubtas towhether Government ministries will support aparticularminingactivity.

o Coalperformance:unlessanduntilaparticularcoalhas been tested for its performance in a blastfurnace,thereremainsanuncertaintyastohowitwillactuallyperform,andthismayhaveanimpactoncoalpricing.

Classification • Thebasis for the classification of theOre Reservesintovaryingconfidencecategories.

• Whether the result appropriately reflects theCompetentPerson’sviewofthedeposit.

• TheproportionofProbableOreReserves thathavebeenderived fromMeasuredMineralResources (ifany).

• ProvedandProbableCoalReservesaredeclaredbasedontheMeasured and Indicated Mineral Resources contained withthepitdesignandscheduledintheLOMplan.

• The financial analysis showed that the economics of Telkwaarepositive.

• NoProbableCoalReserveshavebeenderivedfromMeasuredMineralResources.

Auditsorreviews

• TheresultsofanyauditsorreviewsofOreReserveestimates.

• Noexternalrevieworauditshavebeencompletedonthiscoalreserveestimate.

• SRK and the PFS team performed high level reviews of keyinputssuchaswashabilitytoensureappropriateness.

Discussionofrelativeaccuracy/confidence

• Where appropriate a statement of the relativeaccuracy and confidence level in the Ore Reserveestimate using an approach or procedure deemedappropriatebytheCompetentPerson.Forexample,the application of statistical or geostatisticalprocedures toquantify the relativeaccuracyof thereserve within stated confidence limits, or, if suchan approach is not deemed appropriate, aqualitative discussion of the factors which couldaffect the relative accuracy and confidence of theestimate.

• The statement should specifywhether it relates toglobal or local estimates, and, if local, state therelevant tonnages, which should be relevant totechnical and economic evaluation.Documentationshould include assumptions made and theproceduresused.

• Accuracyandconfidencediscussions shouldextendto specific discussions of any applied ModifyingFactors that may have a material impact on OreReserve viability, or for which there are remainingareasofuncertaintyatthecurrentstudystage.

• It is recognised that this may not be possible orappropriate in all circumstances. These statementsofrelativeaccuracyandconfidenceoftheestimateshould be compared with production data, whereavailable.

• TherelativeaccuracyandconfidenceleveloftheCoalReserveestimateisinherentintheReserveClassification.

• The accuracy of the reserve estimate is subject to geologicaldataandmodellingprocedurestoestimatethecoal resourceandtomodifyingfactorassumptionsfordilutionandloss.Theaccuracycanonlytrulybeconfirmedwhenreconciledagainstactualproduction.WhileTelkwaisnotinproductionandsuchreconciliation is not possible, the assumptions are based onsound principles and experience from mines with similarconditions.

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