Photo by: Megan van Wyngaardt
JOHANNESBURG (miningweekly.com) – Coal asset developer Beacon Hill says its flagship Minas Moatize mine, in northern Mozambique, will likely remain on care and maintenance until coal prices recover and the project’s expanded wash plant is completed by early next year.
The plant was placed on care and maintenance in November 2013, when coking coal prices fell significantly below the current cost of production ahead of the completion of the wash plant expansion project.
“The depressed market for coal prices globally has meant that the project will likely remain on care and maintenance, with a key focus to re-enter production as a tier-one cost producer.
“Therefore, with no anticipated production during the second half of 2014, focus of the board and management will be solely on debt and equity expansion project funding, logistics and restructuring the existing debt on the balance sheet,” chairperson Justin Farr-Jones said in an interim results statement for the six months ended June 30.
Beacon Hill expected prices to remain subdued for the second half of 2014, as the market rebalanced demand and supply, predicting premium low-volatile spot prices to average $120/t between July and December.
Noting that there were “significant hurdles to overcome”, he added that the group aimed to also conclude the sub-lease of its rail allocation to offset rail costs, as well as complete a new $20-million senior debt equity facility to fund capital expenditure.
Beacon Hill would also restructure the $25-million existing senior and subordinated debt and look to raise up to $17-million in additional equity or working capital to execute the engineering, procurement and construction management contract for the expansion project.
Farr-Jones outlined that significant progress had been made at Minas Moatize during the first half of 2014, despite the “very challenging” pricing environment for coal.
“Notably, the company shipped and commissioned five new locomotives and 89 purpose-built wagons with a value of $21-million, which are to be leased on a ten-year basis, and completed the commissioning of the coal loading facility with our joint venture partner, following 12 months of infrastructure development,” he said.
The company was now focussed on pursuing the Phase 2B/2C implementation for the fourth quarter of the year to deliver the 3.2-million-ton run-of-mine volume that was expected to reduce unit production costs to that of a tier-one global hard coking coal producer.
The screening of the thermal coal stockpile at Minas Moatize, meanwhile, started during the period, with some 5 901 t sold to customers.
In total, Minas Moatize received sales proceeds of $331 000 at an average selling price of $56/t over the six months.
“The main customers are industrial cement and tobacco producers in Malawi and Mozambique. It is estimated that the company will sell all of the coal still on stock by December or earlier,” commented CEO Rowan Karstel.
Beacon Hill reported a loss for the six months of $9.6-million.