Coal miner Beacon Hill Resources has made impressive progress in developing its Minas Moatize mine in Mozambique.
In two years, the project has grown from an operation producing small amounts of unwashed coal for the domestic market to an open-cast operation that is on track to produce on average 2.2 million tonnes of saleable coking and thermal coal a year.
After shipments of thermal coal started at the end of last year, the company is now working towards its first shipment of coal to off-take partner, Global Coke.
The development of Minas Moatize is still only in its early stages. Even so, last month Beacon Hill spelt out how it intends to boost output from the current start up level of 600,000 tonnes per year to over 4 million tonnes per annum. Given that the operation at Tete was little more than a small underground mining operation two years ago, it’s a plan that deserves to be taken seriously, though to achieve the next stage of its plans, Beacon Hill requires a couple of things to go in its favour.
Beacon Hill existing trucking transport solution allows it to move up to 500,000 tonnes per annum of coal to the port of Beira. To increase production to 2.2 million tonnes per annum of saleable product in line with the third stage of its expansion, though requires access to the Sena rail link being upgraded between Tete and the port.
Tete is tipped to become one of the largest coal producing regions in the world, but in getting access to the infrastructure currently being put into place there it is jostling with some of the giants of the industry.
Analysts said Beacon Hill has stated publicly it hopes to get an allocation by the end of the year which, if it does come through would be a major trigger for the current share price. The other thing that could go in Beacon favour would be an improvement in the coal market.
Beacon Hill currently trucks its coal to Beira for export but while this works for the higher priced coking coal, to make the most of its thermal exports it needs to transport them in larger quantities by rail to the port.
Prices for thermal coal have struggled recently, though the company was sufficiently sanguine about its financial situation to state firmly two weeks ago that it would not need new equity to fund the Phase III expansion at Minas Moatize.
The long term attractions of the region were also franked this month when another mining giant, Anglo American paid USD 555 million to buy a majority stake in the Revuboè project in Tete. This deposit is huge, with a reported JORC resource of 1.4 billion tonnes of hard coking and thermal coal and the potential to export 6 million tonnes to 9 million tonnes per year.
Last month, Beacon announced it had speeded up the stage two phase of the expansion at Minas Moatize and was starting the upgrade of the wash plant this month. As a result, the mine will operate as a profitable and cash flow positive operation from as early as 2013. The phase three ramp up to 4 mpta will require a new coal washing plant to be built at a cost of up to USD 150 million.
Beacon Hill said discussions are already underway with a number of banks and project financiers to fund the capital requirement with the talks focused on a debt facility or a build own and operate contract.
The definitive feasibility study in February recommended a drilling program to provide test data for a new plant which has also now been completed. The additional drill data will help with washability testing, geotechnical work and a potential upgrade to the current JORC reserves and resources.
Mr Justin Lewis Beacon Hill’s chairman said the additional test work would enable it to optimise the design of the Phase III wash plant and the overall pit design.
He said that “A successful outcome of the tests will result in a further improvement of the overall economics of the project through higher coking coal yields.”
Source - Proactive Investor
(www.coalguru.com)
