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 for 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 were scheduled to start during the fourth quarter of 2014, with a 12-month construction schedule.

Latest Developments
Beacon Hill, which is in default on interest payments, was placed into administration on January 13.

The Centurion-headquartered company has been unable to secure viable funding following its failure to obtain the required 75% shareholder support for a remedial plan that it put forward at a general meeting on December 17 last year.

Owing to its “significant liabilities”, shareholders of the company are not expected to receive any proceeds from the administration process, which will be carried out under joint administrators Graham Bushby and Phillip Sykes of Baker Tilly Restructuring and Recovery, London.

Beacon Hill chairperson Justin Farr-Jones has said that in light of the urgent requirement for additional working capital and the default on interest payments, owing to certain holders of the group's outstanding convertible loan notes, the only course of action for the board has been to place the company and its wholly owned subsidiary BHR Mining Limited into administration.

At this stage, however, the company's principal wholly owned operating subsidiary in Mozambique, Minas Moatize Limitada, is being excluded from the administration process to allow Beacon Hill, its administrators and its senior debt facility provider, Vitol Coal SA, to keep the Minas Moatize mine as a going concern and identify potential acquirers.

"Minas Moatize remains an excellent project with significant milestones achieved and we sincerely hope that a suitable acquirer will be found to enable this attractive asset to recommence economic mining operations over the longer term," says Farr-Jones.

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.