BHR.L Regulatory News (BHR)

Beacon Hill Resources plc / Ticker: BHR / Index: AIM / Sector: Mining

16 May 2011

Beacon Hill Resources plc ('Beacon Hill' or 'the Group')

Final Results

Beacon Hill Resources plc, the AIM listed coal producer, announces its results for the year ended 31 December 2010.

Overview

·; Completed acquisition of 100 per cent interest in Minas Moatize coal mine in Tete, Mozambique - provided full operational and financial control of the only operating coal mine in the globally significant emerging coking coal district of the Moatize Basin

·; Exploration programme completed at Minas Moatize and increased total JORC compliant Coal Resource by 59% to 79.77 million Gross Tonnes in situ - doubled estimated mine life to 14 years, in turn doubling the net present value of the mine

·; Advanced development of a large open pit coal mine at Minas Moatize capable of producing 4Mtpa Run of Mine coal

·; Solid progress with regard to a long term logistics solution - Memorandum of Understanding signed with railway operator and storage infrastructure secured to commence the export of coal

·; Secured long term off-take agreement with Global Coke Limited for coking coal fraction related to market prices at the time of sale

·; Intention to capitalise on first mover advantage in Tete and acquire additional coking coal assets, with potential acquisition of coal licence area 1165L having the potential to significantly increase the Group's resource inventory and transform the Group into one of the leading operators in Mozambique

·; Mining Lease granted over the Arthur River Project, Tasmania, which allows for the continued development of the project and entry into the next phase of development

·; 16 hole drill programme progressing well, due to be completed in Q3 2011 - results to feed into a scoping study

Justin Lewis, Executive Chairman, commented "It has been an exciting 12 months with a number of significant developments in addition to the acquisition of the Minas Moatize coal mine. This includes an almost doubling of the mineable resource at Minas Moatize, in turn doubling the mine life and significantly increasing the net present value of the mine. The development of a large open pit mine at Minas Moatize capable of producing 4Mtpa Run of Mine ('ROM') coal continues to progress well and remains on track for commencement of mining in Q1 2012.

"Finally, the signing of a Memorandum of Understanding to acquire an additional coking coal licence area has the potential to bring a significant additional resource to the Group. I am pleased to report we have already received indicative proposals which if completed, would allow the Group to complete the acquisition from existing cash resources and new debt facilities."

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Unaudited preliminary announcement of final results for the year ended 31 December 2010

Chairman's Statement

2010 was a year of rapid growth for the Group, heralding our move into production through the acquisition of the Minas Moatize coal mine in the globally significant coking coal region of Tete in Northern Mozambique.

It has been an exciting 12 months with a number of significant developments in addition to the acquisition of Minas Moatize, including the expansion of the Minas Moatize coal resource, the ongoing development of a large open pit mine at Minas Moatize capable of producing 4Mtpa Run of Mine ('ROM') coal, and the signing of a Memorandum of Understanding to acquire an additional coking coal licence area.

Operations

Following the acquisition of Minas Moatize in May 2010 the Group has had an active period of rapidly advancing development of a significant open pit mine with the potential of producing up to 2.35 Mtpa of saleable coal.

The coal resource at Minas Moatize now stands at 80 million tonnes. This resource upgrade almost doubled the estimated life of the mine to 14 years, further underpinning the economics of the mine and fuelling our confidence in its value accretion potential for the Group.

Development of the main open pit mine has been the Group's principal focus and is now on target for mining to commence in Q1 2012. All of the geological work is now complete and the appointment of TWP Australia Pty Limited ('TWP') to finalise the Definitive Feasibility Study ('DFS') is a further major step in the process. During the year the Group also entered into an offtake agreement with Global Coke Limited in respect of the coking coal produced from the main open pit. This was a significant step in providing a long term customer for the coal produced.

In addition, the Group has made investment in the existing underground mine and the associated infrastructure, continuing production pending commencement of an initial open pit, which is expected to begin production shortly.

The development of a logistics chain remains a key focus, and we remain proactive in evaluating the most efficient and cost effective way to establish a long term solution. The Group continues to develop alternative logistics solutions and remains targeted on a first export shipment of coal in Q2 2011.

The Moatize basin of Mozambique is generally considered as one of the most significant new coking coal areas in the world, and in line with this, we are committed to using our first mover advantage in the region to further increase our presence. The potential acquisition, subject to due diligence and funding, of coal licence area 1165L would transform the Group from a smaller producer in Mozambique to one of the leading operators in the region.

We continue to progress the due diligence process and I am pleased to report that the Group has received several indicative offers of debt finance to assist with the funding of the acquisition, in conjunction with exiting cash resources.

In Tasmania, the Group's Arthur River Magnesite project continues to progress well following the granting of a Mining Lease in August 2010. The Group is currently undertaking a drilling programme, with to date, 4 out of 16 holes complete. The results will feed into a scoping study on the project which is anticipated to be completed in Q3 2011.

Financial Results

The Group took management control of the Minas Moatize coal mine in May 2010. The acquisition of a 100 percent interest in Minas Moatize concluded on 30 November and the final instalment of the consideration was paid on 8 December 2010. For the period 1 May 2010 to 30 November 2010, 49% per cent of the results of Minas Moatize Limitada ('MML') were incorporated into the Group results and from 1 December 2010, 100 per cent of the results of MML are incorporated into the Group results.

For the year under review, the Group reported a loss of £5.0m upon turnover of £0.5m. The revenues represent the sale of part of the existing production to local markets with the balance of production being stockpiled for future export. During this period the Group made significant investment in the development of the Minas Moatize main open pit operation whilst still operating the existing underground mine and selling a portion of the coal into local markets.

As at 31 December 2010 the Group had cash of £4.8m and net assets of £28.4m. During the year the Group undertook a number of financings, including the placement of £8.7m of convertible loan notes in July 2010, and the placement of ordinary shares with institutional and other investors in December 2010 to raise a further £23m to fund the acquisition of Minas Moatize. This has been followed by a further recent placement to raise a further £12.5m following the year end.

Outlook

Beacon Hill continues to develop rapidly as a Group as it focuses on building on its position as a new coal production company operating in the emerging globally strategic coking coal district of Tete, Mozambique.

Following the recent share placement Beacon Hill is more than fully financed and remains very well positioned to take advantage of our first mover position in Tete as we build our resource inventory and production capacity across our portfolio and generate significant value for our shareholders.

Finally, I would like to acknowledge and thank the directors, employees and contractors who have contributed significantly to the development of the Group over the last 12 months.

Justin Lewis

Executive Chairman

13 May 2011

Review of Operations

Mozambique Coal Assets

Minas Moatize

On 8 December 2010 the Group completed the acquisition of Minas Moatize Limitada and its immediate holding companies. At the same time, the Group acquired all outstanding minority interests leaving it with 100 per cent ownership of the mine.

Since taking management control of Minas Moatize, the Group has focused on developing a larger open pit mine that is targeted to mine 4Mtpa ROM, and produce 2.35Mtpa of saleable coking and thermal coal whilst continuing to produce from the existing underground mine and open pit over the next 8 months.

Main Mine Development

During the year under review the Group undertook an extensive drilling programme drilling 32 holes including 24 slim line HQ cored holes and 2 large diameter holes, totalling 3,355m of drilling. All of the cores have been extensively tested and the results have enabled the Gross resource at Minas Moatize to be increased to 80 million tonnes and the mineable resource to be increased to 57 million tonnes, from 25 million tonnes. This increased the estimated mine life to approximately 14 years.

The Group has progressed well in regard to developing the main open pit and is now seeking to commence mining from it in Q1 2012, with production of saleable coal in Q2 2012, building up to a ROM of 4Mtpa, producing 2.35Mtpa of saleable coal.

Following the completion of the drilling and testing programme we have now finalised the geo-technical work and finalised a geological model. A significant milestone was the recently announced appointment of TWP Australia Pty Limited ('TWP'), which will finalise the Definitive Feasibility Study. We have also entered into a Heads of Agreement with Basil Read for it to become the contractors to Build, Open and Operate (BOOT) the main Coal Handling and Preparation Plant as well as become the main Mining Contractor to the Mine.

During the year the group entered into an offtake agreement with Global Coke Limited for the coking coal produced from the main open pit. Discussions are currently being held with regard to a long term offtake for the export thermal coal and offtake arrangements relating to the domestic thermal coal will be entered into on a customer by customer basis.

Current production

Minas Moatize has continued to produce from the underground mine, which was closed and refurbished upon acquisition by the Group in the middle of 2010. Total production from the underground mine in the last six months of the year was 35,737 tonnes, with production peaking at about 2,000 tonnes per week. This included a three month ramp up period from June after the refurbishment, with production slowing towards the end of the year during a severe wet season.

This has enabled the coal to be produced for both the local markets as well as stockpiling coal for export markets. The underground mine however is coming to the end of its economic life, with further investment not economic for the short period prior to operations commencing from the main open pit and will be progressively shut down over the balance of the year.

Production will continue from an initial open pit area that has been pre-stripped in anticipation of the commissioning of the temporary wash plant, which is now anticipated to be completed at the end of this month. The temporary wash plant is in the final stages of installation, having been delivered to site. As announced in February, construction was initially delayed by a severe wet season but has been further delayed by the lack of availability of concrete which is currently in very short supply in Mozambique. However, in light of this delay, we have taken the opportunity to upgrade the capacity to 120 tonnes per hour ('tph'), from 80tph, which will extend its economic life and enable the wash plant to continue to be used following the commencement of production from the main mine.

Infrastructure

Logistical infrastructure and the ability to get product to market is a key challenge in Mozambique. Beacon Hill believes that it has a significant advantage in that it is currently the sole producer and has first access to the logistics.

It is our intention to use the Sena rail line that runs from Moatize to the port of Beira, which is in the final stages of a refurbishment as part of a public private partnership. Beacon Hill has entered into a Memorandum of Understanding with the current operator of the railway to move its coal and currently has coal stockpiled at Moatize station ready to move as soon as the rail upgrade in finalised. At the Port of Beira, the Group has also secured storage infrastructure in order to commence the export of coal.

In parallel with this, the Group is also exploring other export routes and methods, including trucking, to ensure we are not dependent on one method of transport. It remains our aim to complete a maiden shipment in the first half of this year.

Licence 1165

Beacon Hill recently announced that it has entered into an Memorandum of Understanding to acquire a 100 per cent interested in a new coal licence area 1165L in the Moatize Basin in Tete, Northern Mozambique. Completion of this acquisition would see a significant expansion of the Group's existing coal resources with the addition of an estimated resource of 450 million tonnes of coal.

The Group is currently finalising a development plan for the licence area that will initially focus on completing an exploration programme and confirming the size of this estimated resource as well as the quality of the coal.

The Group requires approximately US$45 million to complete the acquisition of Licence 1165L, and is currently undertaking a formal process to identify funding partners, which is progressing well and has already received indicative proposals which if completed, would allow the Group to complete the acquisition from existing cash resources and new debt facilities.

Tasmania Magnesite

Overview and Strategy

Beacon Hill holds a Mining Lease and a retention licence over two magnesite deposits, known as the Arthur River Project and the Lyon River Project, in north-west Tasmania, Australia. The Group acquired a 100 per cent interest in these projects through the acquisition of Tasmania Magnesite NL in October 2009. The current focus is on the development of the Arthur River Project.

The Arthur River Project has a defined JORC compliant measured resource of 13Mt of magnesite and an inferred resource of 10Mt. Together with the Lyon River Project, the combined resource is 39Mt, the third largest in Australia.

Beacon Hill is currently focused on the Arthur River Project which is now covered by a Mining Lease. The strategy in the short term is to complete a scoping study that will confirm the economics of any mining operation. It has always been the intention of the Group to bring on board a partner to assist in both the development of the mine and the processing and marketing of any end product.

Progress

A key milestone achieved during the year was the granting of a Mining Lease over the Arthur River Project. This has allowed the continued development of the project and entry into the next phase of development.

The Group is currently undertaking a scoping study that it anticipates completing in Q3 2011. This study will focus upon confirming the economics of the whole project as well as developing an initial mine plan.

A drilling programme of 16 drill holes is currently underway. Five of these holes will be specifically drilled for hydrology data with the balance to provide further resource availability data enabling an initial mine design to be undertaken for the scoping study. Early resource holes are targeted at determining the width of a dolerite dyke detected by previous drilling. Initial results indicate the dyke may be smaller than original estimates with subsequent greater magnesite resource availability.

The scoping study will include capital and operating cost estimates for the mine design, transport logistics & infrastructure and the costs associated with the calcining capacity for alternative locations. A market driven product and sales analysis will also form part of the final scoping study.

The scoping study will provide the basis for moving forward to a full feasibility including the submission of a development proposal and environmental management plan to secure mining approval, the completion of the approved drilling programme and the securing of a joint-venture and or off-take partners for the project.

Audited Consolidated Income Statement

for the year ended 31 December 2010

Audited Consolidated Statement of Comprehensive Income

for the year ended 31 December 2010

Audited Consolidated Statement of Changes in Equity

for the year ended 31 December 2010

Audited Consolidated Balance Sheet

at 31 December 2010

Audited Consolidated Cash Flow Statement

for the year ended 31 December 2010

The financial information set out above does not constitute the company's statutory accounts for 2010 or 2009. Statutory accounts for the years ended 31 December 2010 and 31 December 2009 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for 2010 and 2009 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 December 2009 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 December 2010 will be delivered to the Registrar in due course.