🕐18.10.12 - 10:54 Uhr

BEACON HILL RESOURCES - POSITIVE PROGRESS REPORTED IN QUARTERLY REPORT




18 October 2012 BEACON HILL RESOURCES PLC (BEACON HILL OR THE GROUP) QUARTERLY REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2012
HIGHLIGHTS AND POST QUARTER UPDATE
Minas Moatize Mine n Phase II Expansion commenced in August 2012 and is on schedule for completion by year end.

The Expansion is expected to enable a threefold increase in plant feed capacity to 1.8Mtpa ROM coal and will support the production of hard coking coal at a higher and consistent yield n Construction of the Phase II expanded washplant is reaching its final stages in South Africa and will undergo cold commissioning later this month ahead of being transported to site in Tete n Mining has continued from the Upper Chipanga Pit with approximately 64,000 tonnes of ROM coal mined in the quarter n 20,000 tonnes of coal has been trucked to the Port of Beira where it is stockpiled in preparation for shipment n Optimisation work has continued for Phase III of Minas Moatize Expansion throughout the quarter, which is aimed at increasing production to 4Mtpa ROM coal, including: - Initial washability, liberation and flotation testing results to optimise the design of the Phase III CHPP have been received and are being analysed; - Upgrading the Minas Moatize JORC Coal Resource and Reserve due to be completed in Q1 2013
Logistics n Logistics negotiations remain ongoing, including identification of available rolling stock n Formal negotiations have commenced with Portos e Caminhos de Ferro de Mo�ambique, E.P (CFM) with respect to finalising an allocation on the Sena rail line.

These are progressing well and the Group is confident of securing an initial allocation by the end of the year n Memorandum of Understanding (MoU) with a multinational group with Mozambican coal mining operations to jointly develop multi-user coal handling infrastructure along the Sena rail line including a rail loading facility outside the town of Moatize and the development of joint facilities at the Port of Beira
Corporate n Rowan Karstel appointed as Managing Director, Coal Division.

Proposed to join the Board as Group Managing Director following an interim period, with the operational management team located in Southern Africa.

Rowan Karstel has over 20 years experience in the coal industry having worked for BHP Billiton, Xstrata and Optimum Coal in South Africa and around the world. n Justin Lewis, Chairman to revert to a non-executive role by year end following this appointment. n David Premraj currently responsible for Corporate Development at Beacon Hill joins the Board.

David through his previous roles at Macquarie Bank brings analytical and debt funding expertise to the Group.

David is also a representative of one of the Groups founding shareholders. n A leading bank has been mandated to provide new secured loan facilities on the basis of an agreed term sheet.

This new facility will provide additional working capital funding through to the completion of the Phase II Expansion as well as be used to repay in advance the existing secured loan with Vitol Coal SA on improved terms.

It is anticipated that these facilities will be scalable when the Board decides to commence the Phase III Expansion of Minas Moatize n Strategic investment by key contractors for an aggregate of approximately US$4m by subscribing for 54,892,016 ordinary shares at an issue price of 4.5 pence per share in the Group together with a further placement of 4,500,000 ordinary shares pursuant to a subscription agreement previously entered into on 2 March 2010
Justin Lewis, Chairman of Beacon Hill, commented, "The Phase II Expansion and wash plant upgrade is progressing to schedule and remains on track to be completed later this year.

Our overall ambition remains to achieve a rail allocation on the Sena rail line as soon as possible, which we believe will lead to a substantial re-rating of the Group.

Whilst we have made significant progress with the washplant fabrication, the Board is monitoring the ongoing South African drivers strike which may impact the final timetable for completion of commissioning.

We are focussed on enlarging the scale and economics of our primary project, the Minas Moatize Mine in Mozambique, and I am pleased to report that over the quarter we have made solid progress in this regard on an operational and corporate level.

The appointment of Rowan Karstel is an important development for the Group bringing on board a wealth of coal industry experience and will also mean that now our senior operational management team will be solely based in Southern Africa nearer the mining operations
The Group also continues to look at its long term financing requirements and we are pleased to announce that we have mandated a leading bank to provide new secured debt facilities on the basis of an agreed term sheet which will be used to refinance our existing secured facilities on improved terms as well as provide additional working capital for the Phase II Expansion.

In addition, in light of prevailing coal prices and our own reduced coal production and regional coal sales in recent months, the Group is pleased to have entered into agreements with three principal contractors whereby they have collectively invested US$4 million in Beacon Hill.

This financing, in the absence of the banking facilities mentioned above, goes a long way to providing any additional working capital now required for Phase II and demonstrates the confidence of our key partners in our operations and their continued commitment to the Group."
MINAS MOATIZE MINE
Minas Moatize Expansion The Minas Moatize Expansion is being undertaken in three phases: Phase Timing Description Transport ROM (Mtpa) Estimated Capex Phase I Current Current operations (Phase I CHPP)
Road 0.6 Nil Phase II H1 2013 Expansion of Phase I CHPP (Phase II CHPP)
Road or Rail* 1.8 $5m Phase III H2 2014 New Life of Mine Washplant (Phase III CHPP) Rail / Road 4.0 $150m (owner operator) $18m (BOO and contract mining) *Rail will be used when available.

Existing trucking operation will be sufficient to transport Phase II production Throughout the quarter optimisation work continued for Phase III of the Minas Moatize Expansion, which is aimed at increasing production to 4Mtpa ROM, producing on average 2.2Mtpa of saleable coking and thermal coal for the life of mine.

Optimisation work included a drilling programme that was recommended in the Definitive Feasibility Study (DFS).

The drilling programme included 19 holes and the core samples from this drilling programme have been forwarded to laboratories for:
a) Washability, liberation and flotation testing to optimise the design of the Phase III CHPP b) Upgrading the Minas Moatize JORC Coal Resources and Reserve c) Geotechnical investigations to optimise the pit design and the foundation design for the Phase III CHPP
Phase II Expansion Phase II of the Minas Moatize Expansion, involving the immediate upgrade and expansion of the existing wash plant, commenced in August 2012.

The plant upgrade is designed to increase the recovery of coking coal by further liberating the coking coal fraction and to enhance recovery of the high coking quality fines.

The plant upgrade will also result in the plant processing capacity increasing threefold from 600,000tpa ROM Coal to 1.8Mtpa ROM Coal. The Phase II wash plant upgrade is on schedule and remains on track to be completed in December 2012.

The wash plant has been designed and is in the final stages of being built in Witbank, South Africa.

Once constructed, the plant will undergo cold commissioning at the fabrication plant, whereby all the major components of the plant will be tested and operated using water for a continuous period of 120 hours.

Following cold commissioning, the plant will be dismantled and transported to site in Tete, where it will be constructed and fully commissioned prior to full production. The wash plant upgrade is designed to increase the recovery of coking coal by further liberating the coking coal fraction and to enhance recovery of the high coking quality fines.

In addition, the plant upgrade will result in the plant processing capacity increasing threefold from 600,000tpa ROM Coal to 1.8Mtpa ROM Coal. The current wash plant operations at site have now been suspended in order to allow the contractors to progress the ground work, civil engineering and other preparation work for the new wash plant components.

Whilst the Group continues to work towards having the upgrade wash plant complete in December, the Group notes the current South African drivers strike and is monitoring developments closely.

Whilst the Group does not believe it will currently affect proposed timing it, if the action was to escalate, it may impact on the commissioning timetable. Beacon Hill plans to commence operations from the upgraded Phase II wash plant in late December and to ramp up plant feed throughout the first quarter of 2013.

An initial coking coal shipment is currently targeted to take place towards the end of Q1 2013.

The Group anticipates that the completion of the wash plant upgrade and the Phase II Expansion should see the Minas Moatize Mine able to operate profitably from the beginning of 2013 based upon a trucking logistics solution and without any further significant capital expenditure. Production Operations during the September quarter remained focused on mining from the Upper Chipanga Pit where the Group continued to expand production, mining approximately 64,020 tonnes ROM coal producing approximately 26,370 tonnes of saleable coal from the mines existing wash plant (Phase I CHPP). Production (tonnes) Q1 12 Q2 12 Q3 12 YTD 2012 Run of Mine 29,230 98,080 64,020 191,330 Saleable Coal 9,640 15,700 26,370 51,710
During the quarter, coal has continued to be trucked to the Port of Beira and the Group is currently stockpiling circa 20,000 tonnes at the port in readiness for a shipment which is anticipated to take place shortly. As noted above, washing operations have been suspended to facilitate the commencement on the washplant upgrade.

However mining operations will continue to the end of the year, in particular the stripping of new areas to allow for the production ramp up as part of the Phase II Expansion.
Phase III Expansion The Board remains committed to Phase III of the Minas Moatize Expansion.

The commencement of Phase III is targeted for H2 2014, however Phase III will be subject to key milestones being achieved including a rail allocation, finalisation of the design of the Phase III CHPP and securing the required financing, which as noted below the Group is making progress on.
LOGISTICS Sena Railway The Group has commenced detailed negotiations with CFM with respect to attaining access to the Sena rail line and CFM providing transportation services on the line.

Whilst these negotiations remain non-binding, the Group is seeking to reach an agreement with CFM prior to the end of the year in relation to an allocation of rail capacity.

CFM is currently in the process of finalising the upgrade of the Sena line to an initial capacity of 6.5Mtpa, which is anticipated to be completed by the end of November 2012.
Rail Infrastructure Minas Moatize Limitada (MML), a wholly owned subsidiary of Beacon Hill, has entered into a MoU with a multinational group with Mozambican coal mining operations to jointly develop multi-user infrastructure to allow coal to be transported along the Sena Rail line from Moatize to the Port of Beira.

Pursuant to the agreement, the parties intend to work together to jointly develop and utilise the following facilities: � A coal storage and rail loading facility outside the town of Moatize, utilising some of MMLs existing loading infrastructure; � Storage facilities at the Port of Beira, with a dedicated spur line to the Sena rail line; and � The joint procurement and management of locomotives and rolling stock for use on the Sena rail line
Access to the Sena rail line, together with the use of this new infrastructure, will enable Minas Moatize to increase export volumes and to significantly lower operating costs.
Storage and Rail Loading Facility at Moatize MML owns a rail loading facility and land parcel at Moatize, located 3km from Minas Moatize, and its partner has recently acquired the two adjacent sites.

The parties intend to jointly develop these sites into a storage and rail loading facility to be used by both parties.

The parties have commenced a feasibility study.
Storage Facilities at the Port of Beira MML currently utilises a dedicated stockpile area within the Port of Beira, over which it has exclusive use with direct access to the quayside for loading.

Pursuant to the MoU, it is exploring the development of a larger bulk facility, with direct access to the Sena rail line that will consist of rail unloading, stockpiling and ship loading infrastructure.

MML will continue to utilise its dedicated stockpile area in the short term with a view to jointly using the expanded site once a dedicated spur line from the Sena rail line is built.
ARTHUR RIVER MAGNESITE PROJECT In May 2012, Beacon Hill announced the results of the Preliminary Scoping Study for the Arthur River Magnesite Project.

The Scoping Study results provide a strong platform to move the project forward and towards securing a joint venture (JV) and / or off-take partner to fund the development of the project.

The Group continues to identify potential off-take and JV partners to fund its development and the Group has reduced expenditure on the project, particularly in light of the current political uncertainties of operating in the North West of Tasmania.

In the meantime the Group will continue to assess all options which may include an outright sale.
CHANGARA COAL PROJECT No further exploration work has been undertaken at Changara since the completion of the initial drill holes early in the quarter.

The Group is continuing to access the results from these holes with a view to undertaking some further drilling following the end of the rainy season in the new year.
CORPORATE Bank Funding The Group has mandated a leading bank during the quarter to provide new secured loan facilities on the basis of an agreed term sheet.

This mandated facility, if completed will be used to provide additional working capital for the Group through the completion of the Phase II Expansion as well as repay in advance the existing secured loan with Vitol Coal SA on improved terms.

In addition it is intended that the facilities are scalable in the event the Board decides to commence the Phase III Expansion following the receipt of a rail allocation of the Sena rail line.

It is anticipated that these facilities will be capable of drawdown before the end of the year but in the event they are not, the Group will look to source additional funding from existing facilities available to the Group and or from new sources of funding. Strategic Investment and Issue of Equity The Board is pleased to announce that it has entered into agreements with three principal contractors for them to invest, at their request, strategically in Beacon Hill and the Minas Moatize Project.

Pursuant to the agreements, they will subscribe for 54,892,016 ordinary shares of 0.25 pence each in the Company (Ordinary Shares) at an issue price of 4.5 pence per share.

The Board believes that these subscriptions signify an important vote of confidence in the Phase II Expansion and the project overall. In addition, pursuant to a subscription agreement with Fortrend Securities Pty Limited (Fortrend) previously announced on 2 March 2010, the Group has also placed 4,500,000 ordinary shares of 0.25 pence each at a price of 4.3 pence per share.

The Group has also granted Fortrend options over 1,125,000 ordinary shares exercisable at 4.68 pence per share for a period of 3 years.

The facility with Fortrend provides for further drawdown requests of up to approximately $4.5 million in equity if required. Application has been made for a total of 59,392,016 ordinary shares arising from the strategic investments and Fortrend subscription (the New Shares) to be admitted to trading on AIM and it is expected that admission will occur on 23 October 2012. Cash Position Beacon Hills cash position as at 30 September 2012, prior to the issue of New Shares was approximately US$1.2m. The new secured loan facilities described above if completed prior to year end, together with the issue of New Shares will satisfy the Groups working capital requirements through commencement of production from the Phase II washplant.

It is anticipated that these facilities will be capable of drawdown before the end of the year but in the event they are not, the Group will look to source additional funding from existing facilities available to the Group and/or from new sources of funding. Share Capital Following Admission, the New Shares will represent 0.53 per cent of the enlarged issued share capital of the Company, which will then comprise 1,110,834,153 Ordinary Shares.

In addition the Company has in issue 19,770,000 warrants and 60,462,084 options. **ENDS** For further information please contact: For further information, please contact:
Beacon Hill Resources Plc
Justin Lewis, Chairman +61 3 9627 9910
Canaccord Genuity Limited (Nominated Adviser)
John Prior / Sebastian Jones +44 20 7523 8350 St Brides Media & Finance (UK Media Enquiries)
Susie Geliher () / Elisabeth Cowell () +44 20 7236 1177
Glossary
BOO Build, Own & Operate CFM Mozambique Ports & Railways CHPP / Washplant Coal Handling and Preparation Plant (CHHP) or Washplant is used to wash / process coal into a higher value product that is saleable into global export markets Coking Coal Also known as Metallurgical Coal is a high quality coal used in the steel production industry DFS Definitive Feasibility Study Fines Coal that is less than 2mm Flotation A method to separate coal in the coal processing process FOB Free on Board: The seller is responsible for transporting the coal to the port and loading the coal onto the vessel JORC Joint Ore Reserves Committee: The JORC Code is the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves Liberation The amount of physical breakage or crushing required to separate materials of different material densities (i.e.

to separate the clean coal from the rock) Phase I CHPP Current wash plant that has a capacity to process 0.6Mtpa of ROM Coal Phase II CHPP Upgraded and optimised Phase 1 CHPP that will have the capacity to process approximately 1.2Mpta of ROM coal Phase III CHPP New life of mine wash plant that will have capacity to produce up to 3 products simultaneously and process approximately 4Mtpa ROM Coal ROM Run of mine coal as received from the mine Thermal Coal Steaming coal intended for use in the steam and power generation industry
Notes BEACON HILL RESOURCES Beacon Hill Resources Plc is focused on building a portfolio of near-term production projects in commodities relating to the steel production industry.

Beacon Hill is dual listed on the AIM market of the London Stock Exchange (Code: BHR) and the Australian Securities Exchange (Code: BHU). Beacon Hill has three projects: 1.

Minas Moatize Project, Mozambique 2.

Changara Coal Project, Mozambique 3.

Arthur River Magnesite Project, Australia Minas Moatize Project Beacon Hill, through its subsidiary Minas Moatize Limitada, owns and operates the Minas Moatize Coal Mine, which is one of three operating coal mines producing and selling coal in the Tete Province of Mozambique. In February 2012, Beacon Hill published the DFS for the Minas Moatize Expansion, which demonstrated strong economics for the project.

Financial modelling, based on a 4Mtpa ROM operation producing on average 2.2Mtpa of saleable coking and thermal coal using a 13% discount rate, demonstrates a pre-tax NPV13 of US$662 million and a post-tax NPV13 of US$428 million. The Minas Moatize Expansion is being undertaken in three phases: Phase Timing Description Transport ROM (Mtpa) Phase I Current Current operations Phase I CHPP Road 0.6 Phase II H1 2013 Expansion of Current Washplant Phase II CHPP Road or Rail* 1.8 Phase III H2 2014 New Life of Mine Washplant Phase III CHPP Rail / Road 4
*Rail will be used when available.

Existing trucking operation will be sufficient to transport Phase II production Changara Coal Project Beacon Hill acquired majority ownership in a joint venture to explore and develop the Changara Coal Project in the Tete Province of Mozambique in December 2011.

The Changara Coal Project covers a licence area of 184km2, which is 70 times the size of Minas Moatize.

The project is located in the heart of the highly prospective coking coal basin of the Songo Area of the Tete Province. The joint venture is a further step in Beacon Hills wider expansion strategy in the globally significant coking coal region of Tete and will provide the Group with an opportunity to invest in a longer term development project that has the potential to considerably enhance its resource base. Arthur River Magnesite Project Beacon Hill has recently completed the Preliminary Scoping Study for the Arthur River Magnesite Project in Tasmania, Australia.

The Study has indicated that the Project has robust financial potential and provides a strong platform to move forward towards a full Feasibility Study and securing a joint venture (JV) and / or off-take partner to fund the development of the Project. Financial modelling, using a discount rate of 10% (real), demonstrates a pre-tax NPV of A$42 million based on a mine life of 17 years and a 292,000dtpa ROM operation producing on average 100,000tpa of calcined magnesia. More details on Beacon Hill can be found at www.bhrplc.com.
COMPETENT PERSONS STATEMENT The Competent Person for reporting of coal resources, Peet Meyer of PC Meyer Consulting Pty Limited, who is a member of the Geological Society of South Africa (GSSA) and the Fossil Fuel Foundation.

Peet Meyer has more than 21 years experience in the southern African coal industry of which he has spent more than 5 years in the Mozambique Coalfields.

He has the appropriate relevant qualifications and experience to be considered as a Competent Person as defined in the Standards on Mineral Resources and Reserves - Definitions and Guidelines (2004). The Competent Person for reporting of coal reserves, Mr.

Simon Griffiths, who is a Member of The Australian Institute of Mining and Metallurgy (AusIMM) and Society for Mining, Metallurgy, and Exploration, Inc.

(SME) has sufficient experience which is relevant to the style and mineralisation and type of deposit under consideration and the activity to which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The Coal Resources and Reserves are reported in compliance with the guidance as defined in Appendix 5A of the ASX Listing Rules being the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves (the JORC Code), 2004 Edition. Mr Meyer and Mr Griffiths have consented to being named as the authors of the Resource and Reserve Statements respectively in this announcement.
FORWARD LOOKING STATEMENTS Certain statements made during or in connection with the communication, including, without limitation, those concerning the economic outlook for the coal mining industry, expectations regarding coal prices, production, cash costs and other operating results, growth prospects and the outlook of Beacon Hill operations, its liquidity and the capital resources and expenditure, contain or comprise certain forward-looking statements regarding Companys development and exploration operations, economic performance and financial condition. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes is the regulatory environment and other government actions, fluctuations in coal prices and exchange rates and business and operational risk management.

For a discussion of such factors, refer to the Companys most recent annual report and half year report.

The Company undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after todays date or to reflect the occurrence of unanticipated events.
[cid:image001.png@01CDAD11.1CB42630]



Products & Services | Jobs