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Commodity price slump main reason for Beacon Hill Resources' fall, says chairman

Last updated: 23:41 09 Dec 2014 AEDT, First published: 00:41 10 Dec 2014 AEDT

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The impact of the huge drop in the coal price has been the 'paramount' reason for the 98% drop in Beacon Hill Resources (LON:BHR) share price over the last year, the miner's chairman Justin Farr-Jones told a conference call.

It comes after yesterday's announcement that it was aiming to raise €5mln early next year through an open offer early in 2015 to existing private shareholders as part of a restructuring, which will also see a US$14.5 million institutional fund-raising.

The fund-raising plans are subject to shareholder approval on December 17, which if it does not attain, will spell the potential end of the road for the company.

Rowan Karstel, chief executive, told the call that when he joined the firm three years ago, the price was around US$220 to US$250 a tonne of coking coal, yet now it was around US$110 a tonne.

That price has around a 70% or 80% impact of the valuation of a firm's asset, he pointed out. In this case, this is the Minas Moatize mine in Mozambique.

Farr-Jones said the share price drop had been a big concern for the entire board.

"Everyone has been a loser in this process ," he said.

The commodity price fall has been the main culprit, however, he said, especially when one considered the company's achievements over the past year to 24 months.

These include procuring rail access, a 25 year mining contract from the Mozambique government and procuring five locos and 90 wagons for the railway along with a 30% upgrade to the JORC resource, he said.

Karstel told Proactive on Monday that once the restructuring had been approved, Beacon Hill could move  on to building a Tier one asset.

What’s more, he highlighted that the timing of the ramp-up of the firm's wash-plant, which it aimed to build in May 2015 with commissioning a year later, would coincide with when it expects the coal market to turn.

Beacon Hill shares are today down 20% at 0.02p each.

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