London-listed coal producer Beacon Hill Resources expects to start construction on Phases 2B and 2C of the coking coal washing plant in September at its Tete-based Minas Moatize coking coal project, assuming all fundraising and final financing proposals for the project proceed according to plan.

Beacon Hill, through its subsidiary company, Minas Moatize Limitada, is operating a coking coal mine in the Tete province of Mozambique. Beacon Hill acquired management control of the mine in May 2010 and has developed the mine into an opencast operation, which currently extracts and processes about 1.8-million tonnes a year of run-of-mine (RoM) coal at steady-state production.

The company has a defined development plan in place to increase production to 3.2-million tonnes a year of saleable RoM coal over 12 years, 20.6% of which will be coking coal. Currently, the defined Joint Ore Reserves Committee-compliant resource is 86.8-million tonnes.

The Process Plant Upgrade
Phase 2A of the current coal handling and preparation plant (CHPP) upgrade, which was completed in May 2013, has a design capacity of 1.8-million tonnes a year, or about 150 000 t/m, says the company.

The CHPP consists of an RoM crushing and screening section; a coarse beneficiation section, comprising a primary and secondary dense-media cyclone producing two products – coking coal at 10.5% ash and thermal coal at 5400 Kcal/kg; and a fines beneficiation section, comprising a reflux classifier to produce coking coal, and a spiral circuit to produce thermal coal.

“For Phases 2B and 2C, the CHPP design capacity will be 3.2-million tonnes to allow for mining delays and operational fluctuations,” the company tells Mining Weekly, adding that the Phase 2B and 2C expansions will comprise a high-gravity primary module, a low-gravity secondary module, a spiral circuit, a flotation and filtration circuit and two thickeners, one for the dense-media plant and one for the flotation tails. The phases are expected to be complete in September 2015,” notes the company.

It adds that the practical coking coal yield will be 20.6%, while export thermal yield of 5 400 K/cal will be 23.4%.

Financing Developments

Mining Weekly reported in March that, while total capital expenditure (capex) for the Minas Moatize expansion project (process plant section) was initially estimated at $100-million, Beacon Hill had identified a strategy to deliver an estimated $75-million reduction in the proposed capex.

Meanwhile, Beacon Hill CEO Rowan Karstel attributed delays in securing financing for the pro- ject to increased concerns about the current coal market, which resulted in a much higher diligence threshold to achieve senior debt, with only the most financially robust projects capable of achieving funding, according to Creamer Media’s Research Africa Channel.

Nevertheless, Mining Weekly reported that Beacon Hill was confident in its ability to secure additional financing for the project, having received a nonbinding proposal for export finance senior debt on the basis of an agreed term sheet.

The company also told Mining Weekly that it expected to obtain a binding definitive financing offer for Phases 2B and 2C after the conclusion of due diligences and internal approvals by the end of June 2014, with funding likely to take place during the third quarter of 2014.

Meanwhile, owing to low commodity prices, and to reduce the impact of negative cash burn, the company suspended its Minas Moatize operations in November last year, with plans to further reduce its cost base until Phases 2B and 2C of the wash plant upgrade have been completed, the company says.

Further, while there is currently an oversupply in the coking coal market, compounded by a lower growth forecast for China and current prices being at a six-year low, Beacon Hill expects the coal price to recover in the near future, since the fundamentals for coking coal are strong, the company says.

“Current spot coking coal prices are the lowest they have been in six years, but are expected to recover by the third quarter of 2015, when the upgraded Minas Moatize plant is expected to have started production,” Karstel noted in the company’s audited results report, which was released at the end of March this year.

Earlier that month, Karstel stressed the positive outlook for coal at the Heavy Haul Rail Africa 2014 conference, adding that, according to the latest forecasts, coke exports out of Mozambique were expected to increase to ten- million tons by 2020.

He also stated that the major differential was that Brazil and India, which collectively comprised nearly 50% of the future global coking coal demand growth, were markets Mozambique was well suited to serve.

Other Developments

Beacon Hill also stated in its result report that, with the arrival of the rolling stock in Beira during March and April, and the wash plant upgrade expected to be finalised in the third and fourth quarters of 2015, the company was securing a sublease agreement for the rolling stock. The sublease agreement would be for between 12 and 18 months to help to reduce the working capital requirements of the company during the upgrade period.

In addition, the company reported that there would be addi- tional work on the company’s exploration interest, during 2015, at the Changara coal project, also located in Tete, which would see the assets move up the value chain.

Beacon Hill acquired the Changara coal project in December 2011. The project covers a licence area of 184 km2, which is 70 times the size of Minas Moatize. The first-phase drilling programme, which comprised 17 planned holes, started in 2012.

An initial five exploratory holes were drilled to a shallow depth of up to 200 m across the 184 km2 licence area using an air-flush percussion method.“These initial shallow holes, while very widely spaced across a large area, provide early guidance of the geological structure present in the area; they also provide the basis for further drilling below the sandstone,” says the company.

Mining Weekly reported last year that Beacon Hill subsidiary BHR Investments entered into an agreement to acquire, in stages, a stake of up to 70% in a prospecting and exploration licence for potential pig iron mineralisation in the Tete province.

Beacon Hill further stated that the pig-iron opportunity in Tete, Mozambique, would be explored to increase the company’s stake in the asset.

Beacon Hill is also looking to establish, together with Global Coal as a joint venture partner, a metallurgical coke plant at Minas Moatize. It would be a non- recovery metallurgical coke plant with the added benefit of 24 MW of power generation in Phase I. There is enough coking coal to support a second phase of the “metallurgical coke” plant and cogen opportunity up to 48 MW, Beacon Hill concludes.