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Beacon Hill to focus on wash plant expansion

World Coal,

Beacon Hill Resources intends to focus on securing a senior debt facility to progress its wash plant expansion at the Minas Moatize mine this year.

Commenting on the company’s Q4 2013 results, CEO Rowan Karstel explained: "Our strategy to establish an economically robust coking coal project at the Minas Moatize Mine continued to advance during the period. A key milestone for us was the successful commissioning of the Phase 2A Expansion and wash plant upgrade, and the production of good quality hard coking coal.

“In line with the coking coal prices being at record lows, and to reduce the effect of negative cash burn, it was decided to suspend operations in the middle of November 2013 and focus on the development of the Phase 2B and 2C wash plant. With this in mind, the primary focus for 2014 will be to secure a senior debt facility in order to progress the Phase 2B and 2C wash plant expansion,” Karstel added.

Low coal prices
The Mozambique-based mining company explained that completion of the expansion is necessary in the current low coal price environment and will move Minas Moatize into the top rank of mines in terms of efficiency.

Beacon Hill has received a proposal for export finance-backed funding, which will be used to refinance the existing secured loan with Vitol Coal as well as provide capital for the Phase 2B and 2C wash plant expansion. Technical and legal due diligence reports for this are largely complete.

Coal market
“Further confirmatory work is ongoing and the revised guidance is to receive a definitive offer for funding during this quarter. Funding would therefore likely take place in Q2 2014,” the company added.

Beacon Hill Resources said this was later than expected due to the state of the coal market currently, which has resulted in a much higher diligence threshold to achieve senior debt.

Karstel added: “We expect that the result of this expansion will be that Minas Moatize will move from a tier 2/3 to a tier 1 asset in cost terms and will be able to compete, and deliver attractive financial returns, during downturns in the commodity cycle and generate considerable further upside as coking coal prices recover."

Edited from various sources by Katie Woodward

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