28 Sep 2009 12:00
Beacon Hill Resources plc / Ticker: BHR / Index: AIM / Sector: Mining
28 September 2009
Beacon Hill Resources plc
('Beacon Hill' or 'the Company' and its subsidiaries together 'the Group')
Acquisition of Tasmania Magnesite NL
Placing to raise £1 million and Re-Admission to AIM
Beacon Hill Resources Plc, the AIM listed resource company, is pleased to announce that it has conditionally agreed to acquire the entire issued share capital of Tasmania Magnesite NL ('Tasmania Magnesite') ('the Acquisition') together with a fundraising of £1 million. The Acquisition of Tasmania Magnesite is line with the Company's strategy of acquiring resource assets with near term production potential to generate value for shareholders.
Overview:
Tasmania Magnesite owns the third largest recorded magnesite deposit in Australia with a JORC compliant measured and inferred resource of 39 million tonnes ('Mt') of magnesite
Tasmanian Magnesite to be acquired for a consideration of 5,000 million Beacon Hill shares. This values Tasmania Magnesite at £12.5 million, based up on the placing price of 0.25 pence per share
Coffey Mining has provided a valuation range of A$69 million-A$83 million based solely upon the potential value of the deposits in the ground
Production potential within 24 months
Associated fund raising of £1million for development and working capital
Management strengthened to implement the development of the project and manage growth
Beacon Hill Chairman Justin Lewis said, "Tasmania Magnesite has a defined asset containing 39Mt magnesite resource, 13Mt to measured JORC standard, the third largest in Australia. The assets are close to infrastructure with good grid-based power and transportation and have an independent in ground value of between A$69-83 million. We believe by implementing our defined development plan, we can add significant value to the project, both by upgrading the inferred resource through further exploration and drilling, and by bringing the asset into production, which we envisage as achievable within 24 months.
"The market dynamics for magnesite have changed considerably and the availability of this commodity, particularly crucial in steel production, has become more constrained, providing us with this opportunity. We therefore believe that with this asset, a defined development plan, management experience and the increased capital from a fund raising, we are in a strong position to create value for our shareholders."
For further information on the Company, visit: www.bhrplc.com or contact:
| Justin Lewis | Chairman, Beacon Hill Resources Plc | +61 (0) 3 8637 1540 |
| William Vandyk | Astaire Securities Plc | +44 (0) 20 7448 4400 |
| Hugo de Salis | St Brides Media & Finance Ltd | +44 (0) 20 7236 1177 |
| Susie Callear | St Brides Media & Finance Ltd | +44 (0) 20 7236 1177 |
Further Information
Beacon Hill Resources plc, the AIM listed resource company, is pleased to announce that it has conditionally agreed to acquire the total issued share capital of Tasmania Magnesite NL ('Tasmania Magnesite') ('the Acquisition') together with a fundraising of £1 million. The Acquisition of Tasmania Magnesite is line with the Company's strategy of acquiring resource assets with near term production potential to generate value for shareholders.
Under the terms of the Acquisition agreements, the Company has conditionally agreed to acquire the entire issued share capital of Tasmania Magnesite for a total consideration to be satisfied by the issue of 5,000,000,000 new Ordinary Shares. This values Tasmania Magnesite at £12.5 million based up on the placing price of 0.25 pence per share. The Acquisition is conditional, inter alia, upon the passing of the resolutions to be proposed at the general meeting and Admission.
Background to the Acquisition
Tasmania Magnesite holds two retention licences to a magnesite deposit situated in the north-west of Tasmania which, according to Geoscience Australia, an Australian governmental body, is the third largest recorded magnesite deposit in Australia. The resource currently has a JORC compliant measured and inferred resource of 39 million tonnes (13 million tonnes being measured, the remainder inferred.)
Following the Acquisition, it is the Company's intention to develop Tasmania Magnesite's licences by continued exploration, converting the retention licences into mining licences, obtaining the necessary environmental approval and carrying out feasibility studies with the aim of commencing mining operations within the next 24 months and by the development of a processing operation to create magnesia, in joint venture with another party. The Company is currently in early stage discussions with two parties to create a joint venture entity with one of them, to construct and operate a calcination plant to process magnesite into more valuable forms of magnesia. It is intended that the joint venture entity would enter into an exclusive off-take agreement with the Company to provide raw material for the plant.
Magnesia is used in the industrial sector for a variety of different purposes and the principal forms are:
calcinated magnesia ('CCM') which is used as a chemical in a number of markets including agriculture (fertiliser and feedstock), nickel, copper and cobalt, pulp and paper, waster and water treatment; and
dead burned magnesia ('DBM') and electrofused magnesia ('EFM'), which are used mainly in the refractory industry to line furnaces and are an essential raw material for the production of steel, cement and glass.
The Directors consider that the acquisition of Tasmania Magnesite is an important step in the Company's development since the disposal of its West African assets in November 2008. Having reviewed the deposits and considered their potential value, they have formed the view that the Acquisition would offer the potential for future growth in shareholder value, for the following reasons:
the assets contain a 39Mt magnesite resource (13Mt to measured JORC standard), the third largest in Australia;
further upside potential exists by upgrading the inferred resource through further exploration and drilling;
the areas covered by the Tasmania Magnesite's licences are well understood and have been explored previously but not exploited;
the assets are close to infrastructure with good grid-based power and transportation;
the directors believe that mining operations could be commenced within 24 months; and
significant value could be added through upstream processing of the mined material via the construction and operation of a calcination plant.
The independent competent person's report by Coffey Mining has given Tasmania Magnesite and its assets a benchmark valuation range of A$69 million - A$83 million based solely upon the potential in-ground value of the deposits. The Directors believe that further capital value can be created through development of the deposits.
The Placing
In conjunction with the Acquisition, the Company intends to raise £1.0 million (before expenses) by way of a placing of 400,000,000 new ordinary shares of 0.01 pence each in the Company ('Ordinary Shares') at a price of 0.25 pence per share ('the Placing'). The Placing is conditional upon, inter alia, completion of the Acquisition and admission of the enlarged share capital of the Company to trading on AIM ('the Admission'). In addition, the Company has entered into a facility agreement with Consolidated Resources and Mining Pty Limited to provide a facility of up to £1.0 million for the period of 2 years from Admission.
The Acquisition is classified as a reverse takeover of the Company under the AIM Rules for Companies and therefore requires the approval of the Shareholders at a general meeting of the Company.
Rahul Singh is a Director of the Company and is also a significant beneficial owner of shares in, and a director of, Tasmania Magnesite and Geoffrey Chalmers is a Director of the Company and a shareholder of Tasmania Magnesite. The Acquisition and the entry into the Facility Agreement also constitute related party transactions, pursuant to Rule 13 of the AIM Rules for Companies. The Directors, other than Rahul Singh and Geoffrey Chalmers (the 'Independent Directors') consider, having consulted with the Company's Nominated Adviser, Astaire Securities Plc, that the terms of the Acquisition and the Facility Agreement are fair and reasonable insofar as the shareholders in the Company are concerned.
Background to Tasmania Magnesite
Tasmania Magnesite is an unlisted Australian company which was incorporated in January 1997 and holds two Retention Licences over Magnesite deposits located in the Lyons River and Arthur River areas of North-West Tasmania.
The Deposits were originally discovered by Tasmanian government geologists in 1925. In 1970, Mineral Holdings Australia Pty Limited ('MHA') was granted an exploration licence (EL 43/70) covering an area that included the Deposits and over the next three years explored the Deposits in association with various joint venture partners. During the intervening period up to 1981, MHA continued surface exploration which resulted in the discovery of Magnesite outcrops in the Lyons River, 4km along strike to the south of the Arthur River Deposit. Between 1982 and 1988 ConZinc Rio Tinto Australia Limited ('CRA'), in joint venture with MHA, carried out exploration, metallurgical testing and feasibility and marketing studies with the view to assessing the deposit as a source of DBM, CCM and direct shipping ore. In 1997 the joint venture was terminated, and in the same year MHA sold the Retention Licences to Tasmania Magnesite. In 1998 Tasmania Magnesite was purchased by Crest Magnesium Limited ('Crest'). Further studies and exploration were undertaken, but Crest (now called Agri Energy Limited ('Agri Energy') was unable to secure a joint venture partner to mine the site. Agri Energy's core business model then moved away from minerals into energy and certain of the Vendors purchased Tasmania Magnesite from Agri Energy on 28 June 2007.
A substantial amount of exploration and other work has been performed on the areas covered by the Retention Licences over the years. This exploration work has identified two Magnesite deposits, the Arthur River Deposit and the Lyons River Deposit. Exploration on the south side of the Arthur River Deposit has defined a JORC compliant measured resource of 13 million tonnes of Magnesite. To the north, exploration has defined an inferred resource of 10 million tonnes. Exploration on the Lyons River Deposit has identified an inferred resource of 15.8 million tonnes.
Proposed Director
Conditional upon Admission the Company is appointing Murray d'Almeida, aged 61, as a non-executive director. Murray has over 30 years of national and international business experience. He founded the Retail Food Group Australia and was instrumental in the growth of that company's brands, Donut King and BB's Coffee in Australia and internationally. He has also been involved in the restaurant, wholesaling, farming, mineral exploration and liquor industries.
Murray is currently a director of a number of companies including Bartercard Australia Pty Limited and Hyperion Asset Management Limited, a leading Australian equities manager listed on the ASX, in addition to which he is a member of the Federal Government's Area Consultative Committee for the Gold Coast and Regions, the Gold Coast's Regional Economic Development Advisory Board and a Griffith University Business School Advisory Board. He has held previous positions as Chairman of Allied Brands Limited and Environmental Clean Technologies Limited (both ASX listed entities), and as a director of Bartercard PLC, Golden Pacific Resources Limited, Capricorn Resources NL, Queensland Rugby Union, the Australian Small Business Association and Franchisors Association of Australia and New Zealand. Murray will receive a fee of £25,000 per annum to act as a non-executive director and his appointment can be terminated on 1 months' notice given by either him or the Company.
In addition, the Company will be appointing Jim Kerr as a consultant, conditional on Admission. Jim is a professional geologist with experience in the exploration of gold, copper, nickel sulphide, nickel laterite, platinum group metals, diamonds and uranium. Jim was until recently managing director of AIM listed Lithic Metals and Energy Plc, an African focused resources company and was formerly Exploration Manager at ASX listed Oropa Limited, managing the company's exploration efforts in Indonesia (gold and copper) and India (diamonds and gold).
Current trading and prospects
The Company has not had any trading operations since the disposal of its West African mining operations in November 2008. The Group has today announced its interim results for the six month period ended 30 June 2009. During the period the Company recorded a loss of £176,863. Cash at the bank as at 30 June 2009 was £160,054. Since 30 June 2009 the Group has been focused on completion of the Acquisition.
Following the completion of the Acquisition, although the Directors intend to continue to review other potential projects, the Company's primary focus will be the development of the operations in Tasmania to allow production to begin within the next 24 months, and the creation of a joint venture to construct and operate a calcination plant.
Financial Information
On 26 June 2009, the Company released its final results for the year ended 31 December 2008 and published its Annual Report and Accounts on 29 June 2009. Copies of the 2008 Annual Report & Accounts can also be obtained from the Company website, www.bhrplc.com.
The Company has today announced its interim results for the six months ended 30 June 2009.
Tasmania Magnesite has not traded since it was acquired by the current owners in 2007 and therefore the financial information on the Company is minimal. For the year ended 30 June 2009, Tasmania Magnesite reported a loss of A$(122,292) on nil revenue and as at 30 June 2009 had net assets of A$527,689.
General Meeting
The Company is today publishing an AIM admission document which contains a notice convening a general meeting of the Company ('General Meeting') at the offices of Memery Crystal LLP, 44 Southampton Buildings, London WC2A 1AP on 14 October 2009 at 10.00 a.m at which resolutions will be proposed to, inter alia, approve the Acquisition, Placing and Admission.
If the resolutions are duly passed at the general meeting of the Company to be held on 14 October 2009 ('GM'), trading in the existing Ordinary Shares will be cancelled and it is expected that the enlarged share capital of the Company will be admitted to trading on AIM on 15 October 2009.
**ENDS**