BHR.L Regulatory News (BHR)

28 March 2014

Beacon Hill Resources Plc / AIM: BHR / Sector: Mining

Beacon Hill Resources Plc ("Beacon Hill" or "the Company")

Audited Results for the year ended 31 December 2013 &

Post Period End Funding Update Regarding Expansion of Minas Moatize Coking Coal Mine

Beacon Hill Resources Plc, the AIM listed coal producer, announces its audited results for the year ended 31 December 2013 and gives an update relating to funding for the expansion of the Company's flagship project, the Minas Moatize Coking Coal Mine ("Minas Moatize"), since the financial year end.

OVERVIEW:

During the Period:

· Significant progress made towards establishing Minas Moatize as a Tier One cash cost coking coal mine within the next 12-15 months

· Further progress made towards securing end to end rail export logistics infrastructure, including long term rail allocation on the Sena Railway line and conclusion of a US$21 million rolling stock transaction for five locomotives and 90 wagons

· Washplant production capacity increased by 300% to 1.8Mt per annum with the successful commissioning of the Phase 2A washplant and with the production of the first export grade coking coal and thermal coal

· 31% increase in JORC Resource and economic viability of the mine for 15 years life of mine confirmed at reduced coal prices

· 25 year mining contract with the Government of Mozambique signed including participation rights for EMEM, the Government of Mozambique sovereign wealth fund

· Improvement in financial performance - reduced loss before tax to US$18.9m on a turnover of US$2.4 million (2012: loss of US$45.1 million on turnover of US$1.1 million)

Post Period End:

· $20 million Debt Facility offer (non-binding) post period end for the expansion of the washplant to 2.8 Mt per annum run of mine ("ROM") capacity

· Appointment of highly experienced Chief Financial Officer, Adrian Bock

Rowan Karstel, CEO, commented:

"The Beacon Hill team remain centred on developing a low capex, low opex coking coal mine at Minas Moatize, capable of generating attractive returns to investors during all phases of the resources cycle. We are confident that Minas Moatize has all the right attributes, including significant tonnage with a limited strip ratio and high quality coking coal properties, to achieve this objective so our focus is set on developing the optimum processing parameters and logistics chain to deliver a Tier One cash cost asset.

"In line with this strategy, I am delighted to report that we have received a non-binding offer for a $20 million debt facility for the expansion of the Minas Moatize washplant to 2.8Mt per annum run of mine, which, if secured, will enable the Company to accelerate development at the mine. I look forward to providing further updates regarding this funding in due course."

Post Period End Funding Update

Post period end the Company has undertaken and completed a technical and legal due diligence for the purpose of securing new project finance debt funding (the "Debt Facility") that would fund the Phase 2B/2C washplant at Minas Moatize, excluding associated rail related capital expenditure. The due diligence reports were completed in January 2014 and the Board is pleased to announce that it has since received a non-binding offer for a $20 million Debt Facility for the expansion of the washplant to 2.8Mt per annum run of mine ("ROM") capacity. Whilst the Debt Facility remains subject to a number of pre-conditions including satisfactory conclusion of due diligence, the Board remains optimistic that it will be able to complete the required finance for the washplant and is working towards concluding due diligence and addressing long lead items arising from the technical due diligence including an updated environmental management plan, hydrological study and final EPC legal contract with the washplant contractor. Any rail related capital expenditure and working capital outside of the washplant capital items, which is expected to require a further US$10 million, would therefore be required to be funded by mezzanine debt, equity or from a sale of a minority stake in the Project. In addition the Company has entered into early stage discussions with interested parties regarding the potential sale of a minority stake in Minas Moatize Limitada ("MML"), Beacon Hill's Mozambican subsidiary which owns the Project.

The target remains, if successful, to drawdown the Debt Facility in H2 2014 and to achieve commercial production of coal and exports from the expanded facility in H2 2015 after a period of ramp-up and commissioning. An important condition precedent for the funding was also achieved in the delivery of the Company's rolling stock announced on 25 March 2014.

Granting of Management Share Options and Performance Incentive - 2014

Pursuant to the Company's Global Share Option Plan ("Option Scheme"), the Board of Beacon Hill announces that it intends to grant options over 25,651,548 Ordinary Shares to Rowan Karstel, the Company's Chief Executive Officer, at an exercise price of 0.66 pence per share. The options to be issued are subject to time and performance vesting conditions as agreed with the remuneration committee of the Company.

Appointment of Chief Financial Officer

The Board is pleased to announce the appointment of Adrian Bock, as Chief Financial Officer with immediate effect. Adrian is a qualified Chartered Accountant with a wealth of experience in Corporate Finance, mergers and acquisitions, change management as well as operations and risk management. Following the completion of his articles in 1997, Adrian gained practical experience in the United Kingdom, working for amongst others, Accenture Consulting and Deutsche Bank. He returned to his native South Africa in 2001 and founded a niche corporate finance and advisory company, where he was involved in advising both listed and non-listed companies. More recently he served as executive director at Trustco Group Holdings, where he was instrumental in successfully raising ZAR 165 million from DFI's to be deployed in the Loan Book of the company and also listed Trustco's ZAR 1 billion bond program on the JSE (the first Namibian private company to do so), and lead the team to secure the first draw down thereon in the amount of ZAR 200 million. Adrian joins Beacon Hill from Transafrica Capital, an Africa focused Private Equity company, where he was the Chief Operating Officer.

After successfully building the Beacon Hill finance function over the past 18 months, Stefanie Cronje, will conclude her contract on 28 May 2014 ensuring a well-managed handover process. The Board is sincerely grateful to Stefanie for her tremendous effort in transforming Beacon Hill's finance function. As CFO, Stefanie was responsible for the successful migration of the finance team from Australia to South Africa, the introduction of the Pastel accounting system and significant improvements in management and financial reporting.

Audited Results for the year ended 31 December 2013

Beacon Hill today announces that the Company's audited financial results for the year ending 31 December 2013 are available on the Company's website (www.bhrplc.com) and will be posted to shareholders shortly. An extract of the financial results is detailed below.

Chairman's Statement

Despite a challenging global environment for coal producers, FY2013 was a transformational year for the Company's flagship project, Minas Moatize. The new executive management team made an immediate impact delivering both key strategic and operational milestones and a substantial improvement in our financial performance compared to FY2012. Some of the notable achievements included:

· MML made significant progress with its end to end rail export logistics infrastructure as it secured a long term rail allocation on the Sena Railway line and concluded a US$21 million rolling stock transaction for five locomotives and 90 wagons;

· MML increased production capacity 300% to 1.8Mt per annum with the successful commissioning of the Phase 2A washplant and with the production of the first export grade coking coal and thermal coal;

· MML increased its JORC Resource by 31% and confirmed the economic viability of the mine for 15 years life of mine, even at reduced prices, with an updated Reserve Statement released in the third quarter; and

· MML signed a 25 year mining contract with the Government of Mozambique including participation rights for EMEM, the Government of Mozambique sovereign wealth fund.

The year also presented a number of macro-economic challenges beyond the control of management or the Board, most notably the price of seaborne hard coking coal. The Australian Platts Low Volatility Hard Coking Coal benchmark fell to a low of US$133 per ton in June 2013 and remained in this range for the remainder of the second half of 2013. With prices in Q1 2014 falling further, the Board does not anticipate any meaningful recovery in demand or price until 2015. With this in mind, and due to the late delivery of the rolling stock, the Board took the decision to delay the ramp up of the mine and delay export operations until the Phase 2B and 2C expansion project is completed in H1 2015. This would ensure, with Phase 2B and 2C expansion, that MML will be a Tier 1 globally competitive producer even at current depressed prices. With hindsight, and observing coal prices since that decision, that action has now been proven to be the correct course of action for all stakeholders.

In summary, the progress the Company has made in logistics and mining operations this year has not been reflected in our share price or valuation. The challenging global environment for coal prices and coal demand has unfortunately overshadowed our strategic and operational achievements.

Nonetheless, we are fortunate to have a world-class coking coal deposit which is expected to have a very competitive mining cash cost per ton after the completion of phase 2B and 2C expansion during H1 2015. The key to demonstrating the value of our Company is to continue executing our growth plan and to become one of the lowest cost coking coal producers. Our management team is therefore focused on achieving increased volume, operating and logistics efficiencies in our expansion project.

The Board is working on various funding options to commit a further US$30 million in capital expenditure to achieve this vision. This is expected to include the US$20m debt facility mentioned above and/or a sale of a minority stake in the Project to a strategic investor during 2014. The commodity business is cyclical and sometimes painful, but I am confident our management, employees and stakeholders will remain focused on our objective to create long term shareholder value in Beacon Hill.

I would like to take the opportunity to thank our management, employees and shareholders for their continued hard work and support. I look forward to progressing further in 2014.

Justin Farr-Jones

Chairman

27 March 2014

Strategic Review

Minas Moatize Coal Mine

Beacon Hill operates Minas Moatize in the Tete Province of Mozambique through its wholly owned subsidiary Minas Moatize Limitada ("MML"). The mine is one of three operating in Mozambique's Moatize Coal Basin, which is one of the largest developing coking coal regions in the world.

Safety Achievements at end of December 2013

Resources and Reserves

JORC Reserve statement

An updated Joint Ore Reserves Committee (JORC) coal reserve statement for Minas Moatize was published in September 2013. The statement:

· demonstrated that the mineable Reserve remains economically viable and robust despite current depressed coking and thermal coal prices; thus the project is expected to be able to weather downturns in the resources cycle;

· indicated a total run of mine (ROM) proven and probable reserve (air dried basis) of 39.38Mt;

· indicated a proven and probable saleable reserve of 16.16Mt, of which at least 8.3Mt is coking coal; and

· confirmed that Minas Moatize has a mine life of up to 15 years.

Together with the current and planned development work at Minas Moatize and access to an economically efficient logistics solution, the reserve statement contributes to demonstrating Beacon Hill's advancement in achieving its intention of developing Minas Moatize into a tier 1 mining asset.

Production

Mining commenced in Q1 2013 to build a sufficient stockpile for the washplant that commenced processing operations in May 2013. Operations and production expansion in 2013 remained focused on the lower Upper Chipanga with a total of approximately 108,181 tonnes ROM coal mined and some 40,926 tonnes of saleable coal produced from the mine's existing washplant ("Phase 2A CHPP"). The strip ratio at Minas Moatize is 0.55 block cubic metres (BCM) per ton, supporting the Company's expectation that it will be one of the lowest mining cash cost coking coal producers in the world.

Production was increased in Q3 2013 to cater for the increased processing capacity at the washplant however the Board decided to suspend operations in mid-November 2013 due to record-low coking coal prices and the delay in the delivery of rolling stock for export operations. MML currently operates at a "tier 2/3" production cost (with existing 1.8MT capacity) and by upgrading the wash plant (Phases 2B and 2C) to 2.8Mt the mine is anticipated to become a "tier 1" cost producer which is capable of generating a return to shareholders even at current coal prices. As set out above, the Company is currently negotiating a senior debt facility to fund these upgrades in 2014 and has since received a non-binding offer for a $20 million Debt Facility for the expansion of the washplant to 2.8Mt per annum ROM capacity.

Washplant

The commissioning of the washplant progressed well with throughput reaching a peak of 205 tons per hour for limited phases. A number of usual commissioning items arose and our mine management team set about systematically addressing them into Q4 2013. The purpose of the commissioning period is to identify with the plant manufacturer and equipment providers any performance issues, to balance the plant at various processing loads, and more importantly to learn of any improvements to be added to the scope of work for the Phase 2B and 2C expansion project.

Expansion Project

The primary focus for 2014 is to fund and commence the Minas Moatize washplant Phase 2B and 2C expansion project and move the mine from a "tier 2/3" to a "tier 1" production cost asset. Current spot coking coal prices are the lowest they have been in 10 years, but are expected to recover by Q3 2015 when the upgraded Minas Moatize plant is expected to have commenced production.

The second capital focus will be to complete the off-load siding in Beira and thereby complete the logistic value chain.

With the arrival of the rolling stock in Beira during March and April 2014 and the washplant upgrade expected to be finalised in H1 2015, management is in the process of securing a sub-lease agreement for the rolling stock, for a period of between 12 and 18 months to reduce the working capital requirements of the Company during the upgrade period.

Further work will be conducted on the Company's exploration interests, namely the Changara Coal Project in Tete, Mozambique and Arthur River Magnesite Project in Tasmania, to move the assets up the value chain. The pig iron opportunity in Tete, Mozambique, will be further explored with the intention of increasing the Company's stake in the asset.

In order to realise the expansion projects and complete the anticipated five-year strategy of the Group additional funding will be required. The Directors remain confident that the required funding will be obtained although no formal arrangements are currently in place.

Corporate

Australian Securities Exchange ('ASX') Listing

On 23 January 2014, Beacon Hill voluntarily removed its quotation on the ASX under the code BHU. The rationale behind the delisting is due to the limited number of shareholders and poor liquidity of the Company on the ASX. The Company expects to also reduce administrative overheads that were connected to maintaining the listing.

Share Capital and Cash Position

The Company has a total of 1,649,463,109 ordinary shares in issue, 3,625,000 warrants and 82,071,652 options. The Company had US$8.7m in cash at 31 December 2013.

Financial Results

The financial statements for the year ended 31 December 2012 were presented in pounds sterling. The Directors have decided to present the financial statements for the year ended 31 December 2013 in US dollars as it is the currency most relevant to our investors given the nature of what is currently the Group's core activity, the operation of Minas Moatize. Coal is an internationally traded commodity with a pricing structure universally expressed in US dollars, many of the Group's costs are denominated in US dollars as are the majority of the Group's borrowings. It is therefore considered the most appropriate presentational currency for the Group financial statements.

Beacon Hill is reporting a significantly reduced loss before tax of US$18.9m on a turnover of US$2.4 million (2012: loss of US$45.1 million on turnover of US$1.1 million) for the 2013 financial year, compared to 2012.

Revenue represents proceeds from the sale of coal to African markets.

Direct costs include mining and processing costs associated with the open pit mining operation, including wages, haulage and handling costs, fuel and depreciation of plant. As a result of lowered production during H1 2013 and the construction of Phase 2A, coupled with an aggressive restructuring plan, the new executive management team reduced operational costs significantly which narrowed the gross loss to US$4.2 million (2012: US$14.2 million). The gross loss of US$4.2 million reflects the low volume of sales for the year relative to the productive capacity.

The loss includes exceptional write-downs of US$2.0 million in respect of the carrying values of the Changara Coal Project (2012: US$6.08 million). The Board is obliged periodically to review the Company's projects to determine if there has been any impairment in their values. Following such a review, and in respect of the Changara Coal Project, it is the Board's opinion that the prevailing value of coal exploration licences has been adversely impacted by the decline in coal prices over the past 12 months. The Board has accordingly evaluated the degree to which the values of these projects have been impaired and made appropriate provisions in the financial statements.

The restructuring plan embarked on towards the end of November 2012 resulted in administrative expenses being reduced by US$1.3 million from US$9.8 million in 2012 to US$8.4 million in 2013. Included in the 2013 administrative costs are one-off restructuring costs relating to the reorganisation of the Group and streamlining of employee costs.

Finance costs increased during 2013 to US$3.98 million (2012: US$0.4 million) due to the following:

· Interest on convertible loan notes and other loans no longer being capitalised which increased the finance cost by US$1.99 million (2012: US$Nil);

· The accretion of convertible loan notes are no longer being capitalised increasing the finance cost by US$1.2 million (2012: US$ Nil); and

· An increase in the discount charge relating to the site restoration provision to US$0.7million (2012: US$0.4 million).

The Company raised equity of US$20.7 million during March and April 2013 that included shares to contractors in lieu of fees of US$6.0 million. Additional funding of US$8.0 million was acquired in October 2013 and December 2013 from the issue of convertible loan notes. Trade receivable include US$4.5 million in relation to contractor shares issued in April 2013.

At 31 December 2013, the Company had cash of US$8.7 million (2012: US$1.97 million) and net assets of US$60.2million (2012: US$56.7 million).

Going Concern

At 31 December 2013 the Group had US$8.7 million of cash and US$4.5 million of prepaid contractor costs. The Group will need to raise additional funds in the next 12 months to fund working capital and the Phase 2B and 2C expansion and to finance the servicing of the rolling stock lease. Management is currently involved in negotiations to sub-lease the rolling stock for up to 12 months to offset this cost, but no signed agreement is currently in place. The funds may be in the form of equity, convertible debt, bank debt or vendor funding and the Directors are considering a number of funding options. Post period end the Group has undertaken and completed a technical and legal due diligence for the purpose of securing a new project finance debt funding that would fund the Phase 2B and 2C wash plant, excluding associated rail related capital expenditure. The due diligence reports were completed in January 2014 and the Board is pleased to announce that it has since received a non-binding offer for a $20 million debt facility for the expansion of the wash plant to 2.8Mt per annum ROM capacity. Whilst the debt facility remains subject to a number of pre-conditions including satisfactory conclusion of due diligence, the Directors remain optimistic that it will be able to complete the required finance for the wash plant and is working towards concluding due diligence and addressing long lead items arising. In addition the Group has entered into early stage discussions with interested parties regarding the potential sale of a minority stake in the Minas Moatize project. The Directors are confident that sufficient funds will be available in due course, although no formal arrangements are currently in place to fully meet the funding requirement. As a result, there is material uncertainty regarding the Group's ability to raise further additional finance, and this may cast doubt over the Group's ability to continue as a going concern. In addition the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

Chief Executive Officer

Rowan Karstel

27 March 2014

FINAL REPORT

FOR THE YEAR ENDED 31 DECEMBER 2013

AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

AUDITED CONSOLIDATED BALANCE SHEET

Company number: 5696680

AUDITED CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE ACCOUNTS

1 Accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared on the historical cost basis, subject to the fair value of certain financial liabilities at fair value through profit and loss, on the basis of going concern and in line with International Financial Reporting Standards (IFRS) and IFRIC interpretations issued by the International Accounting Standards Board (IASB) adopted by the European Union and in accordance with applicable UK law.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period of revision and future periods if the revision affects both current and future periods.

Going concern

At 31 December 2013 the Group had US$8.7 million of cash and US$4.5 million of prepaid contractor costs. The Group will need to raise additional funds in the next 12 months to fund working capital and the Phase 2B and 2C expansion and to finance the servicing of the rolling stock lease. Management is currently involved in negotiations to sub-lease the rolling stock for up to 12 months to offset this cost, but no signed agreement is currently in place. The funds may be in the form of equity, convertible debt, bank debt or vendor funding and the Directors are considering a number of funding options. Post period end the Group has undertaken and completed a technical and legal due diligence for the purpose of securing a new project finance debt funding that would fund the Phase 2B and 2C wash plant, excluding associated rail related capital expenditure. The due diligence reports were completed in January 2014 and the Board is pleased to announce that it has since received a non-binding offer for a $20 million debt facility for the expansion of the wash plant to 2.8Mt per annum ROM capacity. Whilst the debt facility remains subject to a number of pre-conditions including satisfactory conclusion of due diligence, the Directors remain optimistic that it will be able to complete the required finance for the wash plant and is working towards concluding due diligence and addressing long lead items arising. In addition the Group has entered into early stage discussions with interested parties regarding the potential sale of a minority stake in the Minas Moatize project. The Directors are confident that sufficient funds will be available in due course, although no formal arrangements are currently in place to fully meet the funding requirement. As a result, there is material uncertainty regarding the Group's ability to raise further additional finance, and this may cast doubt over the Group's ability to continue as a going concern. In addition the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

Functional and presentational currency

The Group financial statements are presented in US dollars, and all values are rounded to the nearest thousand dollars ('000) except where otherwise indicated.

The financial statements for the year ended 31 December 2012 were presented in pounds sterling. The Directors have decided to present the financial statements for the year ended 31 December 2013 in US dollars as it is the currency most relevant to our investors given the nature of what is currently the Group's core activity, the operation of the Minas Moatize coal mine. Coal is an internationally traded commodity with a pricing structure universally expressed in US dollars and many of the Group's costs are denominated in US dollars. The majority of the Group's borrowings are denominated in US dollars. It is therefore considered that the most appropriate presentational currency for the Group financial statements is the US dollar.

The comparative financial statements for the year ended 31 December 2012 and for the year ended 31 December 2011 have been restated using exchange rates for the statement of financial position of £1: US$1.6260 and £1: US$1.5528, being the closing rates at 31 December 2012 and 31 December 2011 respectively and for the income statement and cash flow statement of £1: US$1.5893 being the average rates for the year ended 31 December 2012.

The functional currency of the parent Company remains unchanged and continues to be pounds sterling. The presentational currency of the parent company-only figures has thus remained pound sterling to continue to reflect this.

2 Operating segments

The following tables present revenue, loss and certain asset and liability information regarding the Group's business segments for the year ended 31 December 2013 and for the year ended 31 December 2012.

Of the total non-current assets of US$101.6 million (2012: US$100.9 million) none were held in the United Kingdom (2012: none).

All external revenues were generated in Africa.

The current year sales are split between Coking Coal and Thermal Coal on the following basis; US$0 and US$2.4 million (2012: US$0 and US$1.1 million respectively).

3 Revenue 2013 2012

US$'000 US$'000

Revenue disclosed in the income statement is as follows:

Sales of coal to third parties 2,380 1,071

________ ________

4 Loss per share

The calculation of basic loss per ordinary share attributable to equity holders of the parent Company, is based on a loss of US$19.2 million (2012: US$45.1 million) and on 1,649,463,109 ordinary shares (2012: 1,110,834,153), being the weighted average number of ordinary shares in issue during the year.

There is no difference between diluted loss per share and the basic loss per share as the Group reported a loss for the year.

The Company has issued share options and warrants over ordinary shares and convertible loan notes, all of which could potentially dilute basic earnings per share in the future. Further details are given in notes 18, 19 and 24.

5 Subsidiaries

The consolidated financial statements include the financial statements of Beacon Hill Resources Plc and the following subsidiaries:

Proportion of voting rights

and of equity interest

2013 2012

Minas Moatize Limitada Mozambique 100%* 100%

Midwest 2001 Limitada (formerly Nongo,

Limitada) Mozambique 99% 99%

Baetica Limitada Mozambique 100% 100%

Tasmania Magnesite NL Australia 100% 100%

BHR Mining Limited Isle of Man 100% 100%

Beacon Hill Resources Pty Limited (formerly

Carnegie Services Australia Pty Limited) Australia 100% 100%

BHR Mining Limited United Kingdom 100% 100%

BHR Mining Mauritius Limited Mauritius 100% 100%

Cambridge Investments BV Mauritius 100% 100%

BHR Ventures Mauritius Limited Mauritius 100% 100%

BHR Coal Mauritius Limited Mauritius 100% 100%

BHR Investments Mauritius Limited Mauritius 100% 100%

BHR Projects Mauritius Limited Mauritius 100% 100%

Minas Moatize SA (Pty) Ltd Mauritius 100% 100%

* The mining contract signed on the 3rd April 2013 with the Mozambique Government includes a term meaning they have a 5% free carry in the shareholding of Minas Moatize Limitada. As at 31 December 2013 none of this shareholding has been taken up.

Nature of business

The principal activity of Minas Moatize Limitada is coal mining.

The principal activity of Tasmania Magnesite NL and Midwest 2001 Limitada is mineral exploration.

The principal activity of the other subsidiaries is the provision of management services and investment holding.