Beacon Hill starts coking coal production at Minas Moatize - update
Thursday, March 29, 2012 by Natasha Barr
Mozambique-focused coal miner Beacon Hill Resources (LON:BHR
) said it hopes to agree a formal allocation on the upgraded Sena rail line which is due for completion this summer.
The company is entering formal talks with the Mozambique government to take about 0.5 million tonnes capacity on the railway.
Neighbouring coal miners Vale and Rio Tinto are also negotiating for an allocation on the railway.
Capacity on the line to the Port of Beira is increasing to 6.5 million tpa from 2 million tpa and is expected to reach 12 million tpa by the year end.
“We look forward to getting a formal allocation which is clearly an important step for us going forward,” said Beacon Hill chairman Justin Lewis.
Using rail would significantly decrease the company’s costs.
The trucking operation used currently costs $55/tonne from the mine to the port of Beira, but this would fall $25/ tonne by rail.
Beacon Hill posted a loss of £7.4 million in 2011 up from £5.0 million as it increased spending on the ramp-up production at its Minas Moatize mine.
“The cash at this time of year is at its low point as we move forward into to ramping up production to achieve the higher levels of productions later in the year when we will be more cash generative,” said group finance director Tim Jones.
The miner started producing coking coal at its Upper Chipanga Pit at Minas Moatize this week with first shipments due by the middle of the year.
Its coking coal prices are set at about a 10 per cent discount the global benchmark.
Lewis added “We still have a very viable and profitable business even if we were to continue trucking for the foreseeable future.”
Broker Canaccord added the company had also revised short term production expectations, setting a minimum target for coking coal exports of 100kt for 2012 due to trucking capacity and after a wet weather delay affected pre-stripping.
The broker added that despite the modest planned output, momentum is expected to be maintained by the first coking coal exports, the drilling results from the 70 times larger Changara project and the next stage of expansion of the existing wash plant. The broker has a price target of 308 pence.
Last month, Beacon Hill published a definitive feasibility study for Minas Moatize indicating a net present value of US$662 million and a mine life of 11.5 years.
Drilling will also start this month on Changara, which is expected to give a major boost to the company’s resource base.
"Our position in the world-class coking coal Tete Province of Mozambique has been strengthened through our acquisition of majority ownership of the Changara Coal Project, which covers a tenement 70 times the size of our current operation in the region,” Lewis added.
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