Name and Location
Minas Moatize coal expansion project, Tete, Mozambique.

Client
Beacon Hill Resources plc, through its subsidiary, Minas Moatize Limitada.

Project Description
Minas Moatize has a Joint Ore Reserves Committee-compliant resource of 86.8-million tonnes.

The project proposes to develop a large-scale openpit mine, which will extract and process about 3.2-million tons a year of run-of-mine coal at steady-state production and produce 1.4-million tonnes of saleable coal a year over 14 years, 672 000 t of which will be coking coal and 768 000 t export thermal coal (5 400 kcal spec).

Minas Moatize signed a line access agreement with the Sena line with Portos e Caminhos de Ferro de Moçambique, or CFM, in March 2013, giving the company access to 7.7% of the line capacity.

The company signed an operating lease with Thelo Rolling Stock in February 2013 for five Grindrod locomotive and 90 Transnet Engineering wagons, which will operate on the Sena line.

Value
The original project capital for the wash plant was estimated at $100-million; however, Beacon Hill has identified a strategy to deliver an estimated 80% reduction in the proposed capital expenditure associated with the expansion of Minas Moatize wash plant.

Duration
Phase 2A (1.8-million-ton plant feed) of the wash plant upgrade was completed in May 2013.

Owing to low commodity prices and to reduce the effect of negative cash burn, Beacon Hill has put the plant on care and maintenance until phases 2B and 2C of the wash plant upgrade have been completed.

Phases 2B and 2C are scheduled to start during the fourth quarter of 2014, with a 12-month construction schedule.

Latest Developments
Since the wash plant will be upgraded in 2015, the mine is in the process of signing a sublease for the rolling stock for the next 12 to 18 months. The mine is waiting for final customs clearance for the wagons and the signing of a consent letter before the transaction will be finalised.

Beacon Hills Resources is in the process of restructuring the balance sheet of the company. One of the objectives is to acquire a senior debt facility and discussions are well advanced.

Beacon is considering investor interest in acquiring a stake in the company or in its Minas Moatize coking coal project.

The company is working with its adviser, Investec, to assess its options after several strategic investors expressed an interest in possibly acquiring shareholdings in the developing project or its operator.

However, with discussions at an early stage, Beacon CEO Rowan Karstel has warned that there is no certainty that the discussions will lead to an agreement on valuation or a transaction.

This comes as Beacon strengthened its $2.5-million cash balance by about $1.2-million through a planned £1.5-million conditional placement of ordinary shares and the receipt of about $1.1-million in value-added tax refunds.

The company raised the funds through the placing of up to 600-million ordinary shares at 0.25p apiece. About £745 000 of the funds were used to refinance the final settlement of all amounts outstanding in the convertible loan from Darwin Strategic.

The balance will provide additional working capital for the fourth quarter as Beacon completes the financial due diligence for the Minas Moatize expansion project debt funding, which is expected to be concluded within a month, with the final relevant approvals sought shortly thereafter.

The updated opencut environmental management plan has been translated into Portuguese and submitted to the Department of Environment, and the engineering, procurement and construction contract for the expansion of the wash plant has been finalised.

Further, discussions to update the 2011 offtake contract to the satisfaction of the senior debt lender are continuing.

Key Contracts and Suppliers
Global Coke (offtake agreement); Tayanna Mozambique (excavation and coal-extraction works); Vitol Coal SA (marketing agreement): Thelo Rolling Stock, RRL Grindrod Locomotives, Transnet Engineering (rolling stock) and Global Rail (wagon maintenance).

On Budget and on Time?
Yes.

Contact Details for Project Information
Beacon Hill Resources, tel +27 12 683 8875 or email info@bhrplc.com.
Thelo Rolling Stock, tel +27 11 290 2300.
RRL Grindrod Locomotives, tel +27 12 386 4590 or fax +27 12 386 4611.
Transnet Engineering, tel +27 86 172 7427.
Global Rail, tel +27 82 653 6363 or email marius@globalgroup.org.