Beacon Hill still keen to acquire in Mozambique

Coal miner Beacon Hill Resources (LON:BHR) is looking for new properties to acquire in Mozambique now that production has started at Minas Moatize.

First shipments of thermal coal departed the port of Beira this week, Peter Wilson, chief operating officer of subsidiary BHR Mining said, while the group will start to export hard coking coal, by truck, in the first quarter of 2012.

The group is also close to completing a  definitive feasibility study to expand the mine, he added, that will include mine design, a mine plan and infrastructure as well as boosting washplant capacity from 120 tonnes per hour to between 350-400.

Heads of agreement, meanwhile, have been signed with South African contractor Basil Read to operate the mine as it ramps up production next year.

The target is to increase production to 4 million tonnes a year (Mtpa) run-of-mine coal over the following 12 months producing 2.35Mtpa of saleable coal for export and domestic markets.

That will include a total of 920,000 tonnes coking coal, and 880,000 tonnes export quality thermal coal. The remainder will be sold domestically at the mine gate or will be sold to neighbouring countries.

Once the contractor takes over it will free up more time for the BHR team to focus on new properties, said Wilson.

The group recently dropped plans to acquire another licence in the Moatize area due to the concerns over the quality of the coal, but there are other options.

“There are a lot of properties still available in Mozambique and it is just a matter of getting the right ones,” Wilson said.

He said the firm hadn’t noticed any impact on demand from the global economic concerns even though steel makers are among the biggest consumers of coal.

The output from Minas Moatize, which is in the Tete Province of Northern Mozambique, is primarily sold to India, where the smaller type of ship that uses port of Beira is ideal, he says.

The group's first shipment of 10,650 tonnes of thermal coal from Minas Moatize was trucked to Beira ahead of being shipped.  Longer term, the group's intention is to utilise the Sena rail line. 

Minas Moatize is a member of Taskforce One, together with VALE, Rio Tinto and government agency CFM, which is finalising terms of reference to complete the refurbishment of the Sena rail line to an initial capacity of 6.5 Mtpa in mid-2012 and then to a fully operational capacity of 12 Mtpa later in the year.  

Beacon Hill recently revised its offtake agreement with partner Global Coke, which will now take 600,000 tonnes per year instead of all of the coking output from Minas Moatize.

Wilson said the relationship with Global Coke is still good, but having initially wanted to be an investor in the Minas Moatize project Global Coke is now happier to be just a customer.

The new agreement includes a change of ownership clause. Earlier this year, Beacon Hill rejected an approach form an unnamed party at 16.25p per share that valued the company at £120 million.

At the time, the company said the offer in no way reflected the company’s value but did highlight the fact that coal prices had remained very strong and demand for security of supply of coking coal was at an all time high.

Last week, Beacon Hill announced it would seek a dual listing in Australia to broaden its market exposure and widen shareholder interest in the AIM-listed group.

No new money will be raised through the listing, with the company to submit its application to the Australian Securities Exchange (ASX) in the first quarter of next year. The group will retain its listing on AIM.

Shares are currently 9.15p, valuing the group at £89 million.