BHR.L Regulatory News (BHR)

1 December 2014

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

Beacon Hill Resources Plc

 ("Beacon Hill" or the "Company")

Financing and Restructuring Update

Proposed Variation and Conversion of approximately US$13 million of Convertible Loan Notes, Up to £1.5 million Fundraising, Share Capital Reorganisation and Notice of General Meeting

Beacon Hill, the coking coal developer focused on the Minas Moatize Coking Coal Mine in Tete, Mozambique ('Minas Moatize'), is pleased to announce an update on its financing arrangements and the restructuring of its existing debt, aimed at significantly strengthening and de-risking the Group's balance sheet, in order to provide a more solid foundation for future growth as it targets the recommencement of more economic and competitive coking coal production in 2016.

Highlights:

· Conditional subscription agreed to raise up to £1.5 million (US$2.3 million) gross to provide sufficient working capital for the Group until the end of Q1 2015

· Commitments received to convert or postpone the maturity of US$13.2 million in convertible loan notes thereby significantly de-risking the Group's balance sheet

· Capital reorganisation which includes, inter alia, a one for 1,000 share consolidation, to facilitate the proposals and future funding activities

· Proposed new senior debt facility of US$20 million at an advanced stage of negotiation

· Intention to raise approximately a further US$14.5 million of new equity in Q1 2015, alongside the restructuring of the existing senior debt facility and introduction of the proposed new DFI facility, to fund the Minas Moatize expansion project

· Assuming successful completion of these initial proposals and the remaining funding objectives, the Company is targeting re-commencement of more economic and competitive coking coal production in 2016, at a Tier 1 cash cost, following completion of the planned Minas Moatize expansion project

Rowan Karstel, CEO of Beacon Hill, commented:

"Reaching agreement to convert the majority of the outstanding convertible loan notes into equity is a significant step forward for Beacon Hill as it seeks to establish a financially robust and stable foundation for its future growth. The rationalisation of our existing unsustainable debt structure, which has been achieved through the welcome support of our key stakeholders, including our existing senior debt provider and noteholder, Vitol Coal S.A., will substantially strengthen the Company's balance sheet as we endeavour to secure both the new US$20 million senior debt facility from the DFI and additional equity funding required to proceed with the development of Minas Moatize into a Tier 1 cash cost coking coal project.

"We are cognisant of the fact that these proposals will result in significant dilution for the Company's existing shareholders. However, in light of the continuing depressed market conditions for coking coal and ongoing suspension of our mining operations, we believe that such measures are essential to ensure the Company's survival as we seek to secure the further financing to enable us to deliver on our washplant expansion project and resume more economic and competitive production in 2016."

Capitalised terms used but not defined in this announcement have the meanings set out in the Appendix to this announcement.

OVERVIEW OF THE PROPOSALS

In light of the suspension of the Company's mining operations since late 2013, sustained adverse global coal market conditions and protracted funding negotiations in respect of the planned Minas Moatize washplant expansion project, the Company's existing debt that funded the first 1.8 Mtpa ROM phase of the Minas Moatize project is in urgent need of restructuring.

The Board is of the opinion that the proposed restructuring of the Company's existing debt and raising of additional short term working capital will facilitate the finalisation of the proposed new senior debt facility from the DFI and associated significant equity fundraising required to fund the second phase of the Minas Moatize 3.2 Mtpa expansion project and enable the Company to re-enter production in 2016 as a Tier 1, globally competitive cost producer. Without the restructuring, there is a material risk that the Company would fail to retain the support of its current senior debt provider in Q1 2015 and fail to attract the necessary additional capital it requires to complete its planned globally competitive Tier 1 coking coal project.

As part of this proposed restructuring, the Board is pleased to announce that it has reached agreement with the holders of approximately US$12.0m of the Convertible Loan Notes issued historically by the Company and its subsidiary, BHRM, including Latitude Zero Financial Investment Fund ("Latitude") and Vitol Coal S.A. ("Vitol"), that all of the principal and accrued interest due to them under such Convertible Loan Notes will be Converted into new ordinary shares in the Company at a price of 0.01 pence per Existing Ordinary Share. The Conversion is therefore taking place at an 88 per cent. discount to the Company's middle-market closing share price of 0.08 pence on 28 November 2014, being the last Business Day prior to the date of this announcement. The holders of the majority of the balance of the Convertible Loan Notes, with outstanding principal of approximately US$1.2m, have agreed to extend the maturity date of such Convertible Loan Notes by three years to 30 June 2018.

In addition, the Board announces details of a Fundraising, pursuant to which Darwin Strategic Limited (the "Investor") has conditionally agreed to subscribe up to £1.5m (US$2.3m) (before expenses) for the equivalent of up to 20,000,000,000 Existing Ordinary Shares and up to 6,666,667,000 Warrants at a price equivalent to 0.0075 pence per Existing Ordinary Share. The Subscription is therefore taking place at a 25 per cent. discount to the Conversion Price.

In order to facilitate these Proposals, the Board also proposes to effect a Share Capital Reorganisation, the effect of which will be to consolidate the Company's Existing Ordinary Shares into New Ordinary Shares on a one for 1,000 basis whilst retaining the existing nominal value of the Existing Ordinary Shares.

The Conversion or extension of the maturity of the majority of the Convertible Loan Notes is an important condition precedent to the proposed new US$20m senior debt facility that the Company is currently negotiating with the DFI. The Fundraising is expected to provide sufficient working capital for the Group until the end of Q1 2015, by which time a final decision on the DFI facility is currently expected to have been made by the DFI.

Whilst the Company is confident in its ability to be able to satisfy the conditions precedent to completion and drawdown of the proposed DFI facility (including, inter alia, the completion of these Proposals, the restructuring of the existing US$10m senior debt facility from Vitol and the Company completing a significant equity fundraising) there can be no guarantee that it will be able to do so. Furthermore, there can be no guarantee that, even if the Company is able to satisfy all of the abovementioned conditions precedent, the DFI will ultimately agree to provide funds on the basis currently envisaged. In the event that the proposed DFI facility is not finalised, the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available, it is highly likely that the Company will be forced into administration.

The Fundraising and the Conversion or extension of the maturity of the majority of the Convertible Loan Notes are each conditional upon the passing of the Resolutions to be proposed at a General Meeting to be held at the offices of Memery Crystal LLP, 44 Southampton Buildings, London, WC2A 1AP at 10.00 a.m. on 17 December 2014.

As explained below, completion of the Fundraising is also conditional upon Vitol providing an undertaking to the Company to extend the payment date of the US$4.1 million which is currently due for repayment on 30 January 2015 under its US$10m senior debt facility to no earlier than 31 March 2015. There is no obligation on Vitol to do so and no guarantee that it will do so.

BACKGROUND TO THE COMPANY AND ITS OPERATIONS

The Company is focussed on building and developing a portfolio of near term production projects in commodities relating to the steel production industry. The Company's flagship project is the Minas Moatize Coking Coal Project, which is an operational coal mine in the Tete Province of Mozambique.

The Company took management control of the mine in May 2010, and has developed the mine into an open cast operation. The Company has delivered on a number of key operational milestones, including:

· Upgrading of the project's JORC-compliant resource base to 86.8 million tonnes in January 2013, and the identification in September 2013 of a total Run of Mine proven and probable reserve (Air Dried Basis) of 39.38 million tonnes (thereby implying a life of mine of up to 15 years);

· Installation of a new management executive team in March 2013;

· Execution of a 25 year mining contract with the Government of Mozambique in April 2013;

· Completion of the initial Minas Moatize wash plant upgrade to 1.8 Mtpa and commencement of first coking coal production in May 2013;

· Completion of long term rail access agreement to the Sena Railway in February 2013 and delivery of 5 new locomotives and 90 wagons to Mozambique in March and April 2014; and

· Sub-lease of the Company's entire rail fleet of 5 locomotives and 90 wagons on the Sena Line for a minimum term of 12 months with an extension option (on terms expected to fully offset the Company's own lease costs for the period) as announced in October 2014.

The abovementioned sub-lease of the Company's rolling stock was entered into as a result of the Company's mining operations being suspended in late 2013 pending the completion of the washplant upgrade in response to the significant fall in global coking coal prices over the last two years. The Board has further concluded that these difficult trading conditions are likely to persist for another year during 2015, with a recovery in coking coal prices only likely to commence from 2016 onwards.

As a result, the Board considers that the Company's best operational strategy, subject to obtaining sufficient funding (further detail on which is set out below), is to continue to minimise its operating losses by suspending mining operations at Minas Moatize until the expansion project is complete. The Minas Moatize expansion project will increase the Company's wash plant capacity to 3.2 Mtpa and is expected to reduce the Company's FOB cash cost to approximately US$110 per saleable tonne. An envisaged cash cost at this low level will allow the Company to become a globally competitive producer even at the current depressed market prices for coking coal. Assuming the successful completion of the expansion project by 2016 which is conditional, inter alia, on the completion of the Company's overall refinancing strategy, the Company is expected to be in a position to restart production in 2016.

In addition to the Minas Moatize Coking Coal Project, the Company holds mineral tenure over two large, high grade magnesite deposits at Arthur River and Lyons River in north-western Tasmania, Australia and majority ownership in the Changara Coal Project, which is a coal exploration project in the Tete Province of Mozambique.

UPDATE ON THE PROPOSED NEW SENIOR DEBT FACILITY FROM THE DFI

In March 2014, the Company received a US$20 million non-binding offer from the DFI to provide the project finance for the Minas Moatize expansion project. The Company has been working with the DFI since April on their various due diligence requests and procedures that are required to be completed by the DFI as part of their funding approval process. The Company understands that this due diligence process is now almost complete and anticipates receiving a formal credit committee approved offer from the DFI in the near term.

Approval of the DFI project finance facility is dependent on the satisfaction of a number of conditions precedent, including, inter alia, the completion of these Proposals, the restructuring of the existing senior debt facility from Vitol and the Company completing a significant equity fundraising.

Shareholders should therefore note that, even if all the Resolutions are passed and these Proposals are completed, there is no guarantee that the Company will be able to secure the proposed project finance facility from the DFI as there can be no certainty that the Company will successfully satisfy the abovementioned latter two conditions precedent. Furthermore, there can be no guarantee that, even if the Company is able to satisfy all of the abovementioned conditions precedent, the DFI will ultimately agree to provide funds on the basis currently envisaged (or at all). In the event that the proposed new DFI facility is not finalised, the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available, it is highly likely that the Company will be forced into administration.

CONVERSION OR EXTENSION OF THE MAJORITY OF THE OUTSTANDING CONVERTIBLE LOAN NOTES

Background

Between July 2012 and December 2013 the Company and its wholly-owned subsidiary, BHRM, issued approximately US$13.0m of Convertible Loan Notes to Latitude, Vitol and certain other investors. The Convertible Loan Notes were issued in tranches of British Pounds Sterling, US Dollars and Australian Dollars, and with conversion prices ranging from 1.75 pence to 5.5 pence or, in the case of those Convertible Loan Notes denominated in Australian Dollars, 8.2 Australian cents, as summarised in the table below.

Interest is payable quarterly but, in the case of the Convertible Loan Notes issued in December 2013, may at the election of BHRM instead be capitalised. The Convertible Loan Notes are convertible into ordinary shares in the Company at the election of the relevant Noteholder at any time up until maturity.

Conversion

It has been agreed with the holders of approximately US$12.0m of the Convertible Loan Notes, including Latitude and Vitol, that, conditional upon the passing of the Resolutions, all of the principal (including any capitalised interest) and all interest accrued but unpaid at the time of Conversion under such Convertible Loan Notes will Convert into an expected aggregate of the equivalent to 88,502,098 New Ordinary Shares at 10 pence per New Ordinary Share (following the Share Capital Reorganisation). The precise number of New Ordinary Shares to be issued upon Conversion will depend upon the interest that accrues ahead of such Conversion but the precise number is not expected to deviate materially from the expected number stated above on the assumption that Conversion occurs immediately after the Share Capital Reorganisation on 17 December 2014 and that LIBOR does not vary from its rate as at the Business Day immediately prior to the date of this announcement.

It is recognised that this Conversion Price is substantially below the originally agreed conversion prices for those Convertible Loan Notes. However, in light of the Company's current financial position, particularly with respect to conserving its limited cash and progressing steps towards restructuring its balance sheet, including ultimately replacing the existing senior debt facility from Vitol with the DFI facility (assuming all conditions precedent are satisfied, of which there can be no guarantees), it is considered necessary by the Directors to agree with the relevant Noteholders to Convert their Convertible Loan Notes now at a lower conversion price rather than the Company being required to repay them on maturity or seek to refinance them before maturity, neither of which options are viewed as being viable alternatives by the Board at this stage. A further driver behind the Conversion Price is the fact that, by agreeing to Convert, the Converting Noteholders are surrendering their claim to seniority over ordinary equity holders in the event of a winding up of the Company.

Without the Conversion, the Board does not believe that it will have any reasonable prospect of finalising the proposed DFI facility or that it will be able to secure any alternative sources of potential funding on similar commercial terms and/or in a timely manner, in which event it is highly likely that the Company would be forced into administration.

In addition, each of the Converting Noteholders has agreed that they will not dispose of any interest in the New Ordinary Shares issued to them upon such Conversion for a period of twelve months from the date of Conversion (or, in the case of Latitude, from the date of the first Conversion of its Convertible Loan Notes), save in the event of an intervening court order or in respect of an acceptance of a takeover offer for the Company which is open to all Shareholders.

As the New Ordinary Shares being issued upon Conversion of the Convertible Loan Notes are being issued in satisfaction of the amounts owed under the Convertible Loan Notes the Company will receive no new cash proceeds from the issue of such New Ordinary Shares.

The allotment and issue of New Ordinary Shares upon the Conversion of the Convertible Loan Notes requires the approval of Shareholders under the 2006 Act, because the reduction in the conversion price of such Convertible Loan Notes means that more ordinary shares will be issued upon such Conversion than the number for which Shareholder approval was granted when the Convertible Loan Notes were originally issued.

Conversion of Latitude's Convertible Loan Notes

As at the date of this announcement, Latitude has an interest in 242,885,514 Existing Ordinary Shares representing approximately 6.24 per cent. of the Company's existing issued ordinary share capital. Latitude also has an interest in warrants over 3,000,000 Existing Ordinary Shares exercisable at 4 pence per Existing Ordinary Share at any time until 30 June 2015. Latitude holds Convertible Loan Notes with outstanding principal of US$8.7m which, with interest accrued up to and including the date of Conversion, would Convert into an expected 65,715,342 New Ordinary Shares (on the assumptions as to the date of Conversion and LIBOR stated above). Taking into account the shares to be issued upon completion of the Fundraising and the other Conversions, this would give Latitude an aggregate interest of in excess of 30 per cent. of the enlarged issued ordinary share capital of the Company.

Under Rule 9 of the Takeover Code any person who acquires, whether by a series of transactions over a period of time or not, an interest in shares in a company which (when taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of that company, or any person, together with persons acting in concert with him, who is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any other person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person will normally be required to make an offer to the holders of shares in that company to acquire all of the shares in that company not held by him or persons acting in concert with him. Such an offer would have to be made in cash, or be accompanied by a cash alternative, at not less than the highest price paid for any interest in shares by that person or by any person acting in concert with him within the 12 months prior to the announcement of such offer.

Latitude would not be prepared to agree to Convert its Convertible Loan Notes if as a result it was required to make an offer for the Company. Accordingly, it has been agreed with Latitude that upon completion of the Conversion, Latitude will only be issued with such number of New Ordinary Shares as, together with its existing holding, would result in it having an interest in not more than 29.9 per cent. of the Company's issued ordinary share capital at such time. Thereafter, the Company may, at the Company's sole election, in one or more tranches, Convert additional amounts outstanding under Latitude's Convertible Loan Notes and issue additional New Ordinary Shares to Latitude, provided that at such time Latitude would not as a result have an interest in more than 29.9 per cent. of the Company's issued ordinary share capital. Meanwhile, no further interest will accrue on the outstanding principal amount of those Convertible Loan Notes that have not been Converted. Provided that the initial Conversion of Latitude's Convertible Loan Notes takes place, Latitude has undertaken to defer the maturity of its unconverted Convertible Loan Notes until the date that is five years from the date of such initial Conversion, not to exercise its rights of Conversion under such Convertible Loan Notes until such date and not to exercise any of its 3,000,000 warrants or otherwise acquire any interest in ordinary shares of the Company if as a result it would be obliged to make a mandatory offer for the Company pursuant to Rule 9 of the Takeover Code (save where such acquisition falls within a dispensation to Rule 9 or is accompanied by an offer for the Company made in accordance with the Takeover Code). In all other material respects the terms of Conversion agreed with Latitude are identical to the terms of Conversion agreed with Vitol and the other Converting Noteholders.

Assuming that all of the Resolutions are passed at the General Meeting, and based on the assumptions as to the date of Conversion and LIBOR stated above, it is expected that immediately following the Share Capital Reorganisation a total of 42,536,756 New Ordinary Shares will be allotted and issued upon Conversion of which it is currently anticipated that 19,750,000 New Ordinary Shares will be issued to Latitude, leaving a balance of 45,965,342 New Ordinary Shares to be issued to Latitude at the sole election of the Company in accordance with the agreement summarised above. It is the Company's current intention that such balance would be issued to Latitude in one tranche at such time as the Company raises significant additional equity funds in conjunction with the completion of the proposed new senior debt facility with the DFI (assuming all conditions precedent are satisfied, of which there can be no guarantees). If prior to the Conversion more Existing Ordinary Shares are issued, for example as a result of the exercise by any person of options, warrants or other convertible instruments, then a commensurately larger number of New Ordinary Shares could be issued to Latitude upon the initial Conversion of its Convertible Loan Notes.

Extension of Maturity Date

Separately, it has been agreed with the holders of all of the Convertible Loan Notes denominated in Australian Dollars (equating to approximately US$1.2m) that, conditional upon the passing of the Resolutions, the maturity date of such Convertible Loan Notes will be extended by three years to 30 June 2018. In all other respects the terms of such Convertible Loan Notes, including their conversion prices (save for any consequential amendments due to the Share Capital Reorganisation), will remain unaffected.

One holder of Convertible Loan Notes with outstanding principal of approximately US$0.2m has not agreed to either Convert or extend the maturity date of those Convertible Loan Notes, which will remain with a maturity date of 30 June 2015 and with their existing conversion price (save for any consequential amendments due to the Share Capital Reorganisation).

TERMS OF THE FUNDRAISING

The Company has conditionally raised up to £1.5 million gross at 7.5 pence per New Ordinary Share for the allotment of up to 20,000,000 New Ordinary Shares to the Investor (equivalent to up to 20,000,000,000 Existing Ordinary Shares at 0.0075 pence per Existing Ordinary Share prior to the Share Capital Reorganisation).

The Investor is also to be granted 6,666,667 Warrants on the basis of one Warrant for every three Subscription Shares subscribed. Each Warrant is exercisable at a price of 15 pence per New Ordinary Share (equivalent to 0.015 pence per Existing Ordinary Share) for a period of three years from the date of grant.

In addition, the Investor may be granted Anti-Dilution Warrants exercisable at par value to protect it from dilution if the Company issues any further New Ordinary Shares (subject to certain exceptions) for cash at a price of less than 7.5 pence per share within 180 days of completion of the Fundraising.

The number of Subscription Shares and Warrants to be issued and granted upon completion of the Fundraising will be capped to the extent that, at the time of issue, the Investor (together with any persons acting in concert with it) would have an interest in more than 29.9 per cent. of the Company's issued share capital. If the issue of Subscription Shares does need to be capped then the balance of the Subscription Shares and Warrants would be issued four weeks later, again subject to the same 29.9 per cent. limit. To the extent that any remaining balance after the four week period would continue to breach the 29.9 per cent. limit, then the size of the Fundraising will be adjusted downwards accordingly and the proceeds of the Fundraising would be commensurately lower.

Notwithstanding the above, it is the Company's current expectation, based on the current Fundraising and Conversion assumptions and the Investor's existing holding in the Company, that upon completion of the Fundraising the Company will be able to issue all of the Subscription Shares and grant all of the Warrants to the Investor, which would result in the Investor (together with any persons acting in concert with it) having an aggregate interest in approximately 29.7 per cent. of the Enlarged Share Capital. The Company therefore expects, as at the date of this announcement, and assuming the Resolutions are approved and the Company is not in breach of any terms of the agreement governing the Fundraising, to receive the full £1,500,000 (gross) of the proceeds of the Fundraising. However, this amount would reduce to the extent that the Investor acquires any Existing Ordinary Shares (including by the exercise of any June 2014 Warrants, September 2014 Warrants or Anti-Dilution Warrants held by it) prior to the initial completion of the Fundraising.

The Investor has undertaken that it will not exercise Warrants or Anti-Dilution Warrants, or otherwise acquire any interest in ordinary Shares in the Company, if as a result it would be obliged to make a mandatory offer for the Company pursuant to Rule 9 of the Takeover Code.

The allotment and issue of the Subscription Shares, Warrants and any future Anti-Dilution Warrants requires (and the Fundraising is therefore conditional upon) the approval of Shareholders at the General Meeting, where Resolutions will be proposed to grant the Directors authority pursuant to the 2006 Act to allot such Subscription Shares, Warrants and Anti-Dilution Warrants.

The Fundraising is also conditional upon Vitol having undertaken to the Company to extend the payment date of the US$4.1 million which is currently due for repayment on 30 January 2015 under its US$10m senior debt facility to no earlier than 31 March 2015. There is no obligation on Vitol to do so. If Vitol does not provide this undertaking then, unless the Investor agrees to waive this condition (which it is not obliged to do) the Fundraising will not complete and the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available, it is highly likely that the Company will be forced into administration.

THE SHARE CAPITAL REORGANISATION

Terms of the Share Capital Reorganisation

Under English company law, a company is not allowed to issue shares at a price per share which is lower than the nominal value of its shares. The Subscription Price for the Fundraising is the equivalent of 0.0075 pence per Existing Ordinary Share, which is below the current nominal value of the Existing Ordinary Shares. In addition, the Directors consider that an issued share capital numbering billions of shares is not manageable or conducive to future fundraisings.

Accordingly, subject to Shareholder approval, the Directors propose to reorganise the Company's share capital as explained below with a view to reducing the number of ordinary shares in issue by a factor of 1,000 whilst maintaining the same low nominal value.

The terms of the proposed Share Capital Reorganisation are such that on the Record Time every 1,000 Existing Ordinary Shares of 0.01 pence each will be consolidated into one New Ordinary Share of 0.01 pence and one 'C' Deferred Share of 9.99 pence.

Save as explained below with regards to fractional entitlements, following the Share Capital Reorganisation each Shareholder will hold such number of New Ordinary Shares as is equal to 1/1,000th of the number of Existing Ordinary Shares that he or she held immediately beforehand, but the nominal value of the New Ordinary Shares will remain as 0.01 pence.

The New Ordinary Shares resulting from the Share Capital Reorganisation will have exactly the same rights as those currently accruing to the Existing Ordinary Shares under the Company's articles of association, including those relating to voting and entitlement to dividends.

The 'C' Deferred Shares created pursuant to the Share Capital Reorganisation will have no voting rights or rights to receive a dividend, will have only a very limited right to any distribution on a return of capital and are non-transferable. They will not be listed on AIM. Accordingly, the 'C' Deferred Shares will be practically worthless. The full rights attaching to the 'C' Deferred Shares are set out in Resolution 2 of the Notice of General Meeting, which, if passed, will amend the Company's Articles of Association to set out the rights of the 'C' Deferred Shares. Shareholders should note that the Company has Existing Deferred Shares in issue which similarly have no voting rights or rights to receive a dividend and only have a very limited right to any distribution on a return of capital, and so are similarly worthless. The 'C' Deferred Shares rank behind the Existing Deferred Shares upon a distribution of capital but it is extremely unlikely in practice that any class of deferred share would receive any distribution on a liquidation of the Company.

Resolutions 1 and 2 contained in the Notice of General Meeting at the end of the circular convening the General Meeting (the "Circular"), which will be posted to Shareholders today, will, if passed by Shareholders, effect the proposed Share Capital Reorganisation as detailed above. The passing of Resolution 1 effects the consolidation and redesignation of the Existing Ordinary Shares into New Ordinary Shares and 'C' Deferred Shares and the passing of Resolution 2 effects the amendments to the Company's Articles of Association to set out the rights of the 'C' Deferred Shares. If approved, the Share Capital Reorganisation will take place at 6.00 p.m. on 17 December 2014 and admission to trading and dealings in the New Ordinary Shares will become effective at 8.00 a.m. on 18 December 2014.

A copy of the Company's Articles of Association, showing the intended amendments to be made by Resolution 2, can be viewed at the Company's website - www.bhrplc.com - and will be made available for inspection at the General Meeting.

Fractional Entitlements

Under the Company's Articles of Association, if as a result of the Share Capital Reorganisation any Shareholders would become entitled to fractions of a New Ordinary Share, the Directors are entitled, on behalf of such Shareholders, to sell the shares representing the fractions for the best price reasonably obtainable and distribute the net proceeds of sale in due proportion amongst those Shareholders, provided that any amount otherwise due to a Shareholder which is less than £3 may be retained for the benefit of the Company. Given the Company's current share price it is not expected that any such amounts would be distributed to Shareholders. Shareholders who hold fewer than 1,000 Existing Ordinary Shares at the Record Time will not receive any New Ordinary Shares or 'C' Deferred Shares.

To facilitate the Share Capital Reorganisation, following the General Meeting but prior to the Record Time the Company Secretary will subscribe for such number of Existing Ordinary Shares (being fewer than 1,000 Existing Ordinary Shares) as is necessary to ensure that the Company's issued ordinary share capital is divisible by exactly 1,000.

Share Certificates and CREST entitlements

If you hold your Existing Ordinary Shares in certificated form you will receive a new share certificate representing your New Ordinary Shares following the Share Capital Reorganisation. If you hold your Existing Ordinary Shares in uncertificated form, the shares held in your CREST account will be updated accordingly.

Shareholders will not be issued with a share certificate in respect of the 'C' Deferred Shares.

CONSEQUENTIAL ADJUSTMENT TO OPTIONS, WARRANTS AND ANTI-DILUTION WARRANTS AND GRANT OF NEW ANTI-DILUTION WARRANTS

There are certain consequences of the Share Capital Reorganisation, the issue of the Subscription Shares at the Subscription Price and the Conversion.

First, as a result of the Share Capital Reorganisation, certain changes will be made to the terms of the Company's existing granted options, warrants and other convertible securities, including the June 2014 Warrants and the September 2014 Warrants and all Anti-Dilution Warrants previously granted and those Convertible Loan Notes that are not Converting under the Proposals. Essentially, due to the one for 1,000 consolidation of the Company's ordinary share capital, the number of ordinary shares into which such securities will convert will be reduced by a factor of 1,000 and the price at which ordinary shares may be subscribed for pursuant to such securities will be multiplied by a factor of 1,000 (except for the Anti-Dilution Warrants, which are always exercisable at the prevailing nominal value of the Company's ordinary shares).

Secondly, in accordance with their terms, the exercise price of any unexercised June 2014 Warrants and September 2014 Warrants granted to certain investors (including the Investor) in the fundraisings announced by the Company in June and September 2014 will automatically reduce to the Subscription Price of 7.5 pence (on a post-Share Capital Reorganisation basis).

Finally, the Investor, as an investor in the September 2014 fundraising, will in accordance with the terms of that fundraising be issued in aggregate 1,575,894 Anti-Dilution Warrants (on a post-Share Capital Reorganisation basis) as a result of the issue of New Ordinary Shares under the Conversion and the Fundraising, each entitling the Investor to subscribe for a New Ordinary Share at the nominal value of the New Ordinary Shares from time to time. The number of these Anti-Dilution Warrants exceeds the number that the Directors were authorised to grant at the time of the September 2014 fundraising and accordingly Resolutions 3(e) and 4(e) will, if passed, approve such grant.

Notwithstanding these consequences, the Independent Directors believe that the Share Capital Reorganisation, the Fundraising and the Conversion are all in the best interests of the Company and the Shareholders as a whole.

Following completion of the Proposals, the Company's existing historic share option awards to Directors, senior management and employees, which currently have minimal intrinsic value, will be reviewed and new retention and incentivisation arrangements considered by the Board's independent non-executive remuneration committee as well as the Company's full Board. Any new options granted to Directors, senior management and employees, together with existing outstanding options to such persons, would remain within the limit on the Company's share option plan, being no more than 15 per cent. of the Company's issued share capital from time to time.

GENERAL MEETING

Set out at the end of the Circular, which will be posted to Shareholders today, is a notice convening the General Meeting to be held at the offices of Memery Crystal LLP, 44 Southampton Buildings, London WC2A 1AP on 17 December 2014 at 10.00 a.m.at which the following Resolutions will be proposed:

Resolution 1 - an ordinary resolution to effect the Share Capital Reorganisation.

Resolution 2 - a special resolution to amend the Company's Articles of Association to set out the rights of the 'C' Deferred Shares.

Resolution 3 - an ordinary resolution to grant the Directors authority under section 551 of the 2006 Act to allot:

(a) New Ordinary Shares upon the Conversion of Convertible Loan Notes under the Proposals;

(b) the Subscription Shares;

(c) the Warrants;

(d) the Anti-Dilution Warrants which may potentially be granted to the Investor in future under the terms of the Fundraising;

(e) the Anti-Dilution Warrants to be granted as a consequence of the Proposals and in respect of which further Shareholder authority is required; and

(f) additional securities with a nominal value of up to approximately 15 per cent. of the issued share capital of the Company as enlarged by the issue of the Subscription Shares and full Conversion of the Convertible Loan Notes that are to be Converted.

Resolution 4 - a special resolution under section 570 of the 2006 Act to disapply the pre-emption rights on the allotment of equity securities pursuant to the 2006 Act in respect of the allotment of:

(a) New Ordinary Shares upon the Conversion of Convertible Loan Notes under the proposals;

(b) the Subscription Shares;

(c) the Warrants;

(d) the Anti-Dilution Warrants which may potentially be granted to the Investor in future under the terms of the Fundraising;

(e) the Anti-Dilution Warrants to be granted as a consequence of the Proposals and in respect of which further Shareholder authority is required;

(f) equity securities upon a rights issue, open offer or similar pre-emptive offer to Shareholders; and

(g) additional equity securities with a nominal value of up to approximately 15 per cent. of the issued share capital of the Company as enlarged by the issue of the Subscription Shares and full Conversion of the Convertible Loan Notes that are to be Converted.

The authorities referred to in each of Resolutions 3(a) to (e) inclusive and 4(a) to (e) inclusive will expire on the date falling five years from the date of the passing of those Resolutions. The authorities referred to in Resolutions 3(f), 4(f) and 4(g) will expire on the date falling 15 months from the date of the passing of those Resolutions or, if earlier, the conclusion of the 2015 Annual General Meeting of the Company.

Shareholders should note that the authorities in Resolutions 3(a) and 4(a) in relation to the allotment of New Ordinary Shares upon Conversion state a maximum nominal value of such New Ordinary Shares which has been calculated based on certain assumptions as to the number of such New Ordinary Shares that the Company will be required to issue upon Conversion, rounded up to allow for any reasonable variation. The precise number of New Ordinary Shares to be issued upon Conversion will depend upon the interest that accrues ahead of such Conversion but is not expected to deviate materially from the expected number on the assumption that Conversion occurs immediately after the Share Capital Reorganisation on 17 December 2014 and that LIBOR does not vary from its rate as at the Business Day immediately prior to the date of this announcement. In the unlikely event that a greater number of New Ordinary Shares was required to be allotted upon Conversion than were permitted under Resolutions 3(a) and 4(a) then such excess would be allotted pursuant to the general authorities to be granted under Resolutions 3(f) and 4(g).

Shareholders should also note that the authorities in Resolutions 3(d) and 4(d) include authority to grant up to 10,000,000 Anti-Dilution Warrants. However, depending on the terms at which the Company issues any New Ordinary Shares in circumstances that would require the Company to grant Anti-Dilution Warrants to the Investor, and the number of Subscription Shares still held by the Investor at the time, the number of Anti-Dilution Warrants that the Company is required to grant could exceed 10,000,000, in which case the Company has undertaken to the Investor that it would convene a further general meeting at which resolutions will be proposed to grant authority to the Directors to grant such additional Anti-Dilution Warrants.

Completion of the Fundraising and the Conversion or extension of maturity of the majority of the Convertible Loan Notes is conditional upon the passing of all of the Resolutions. If any Resolution is not passed then the Fundraising and such Conversion or maturity extension will not complete, the Company will most likely not have adequate working capital past the end of 2014, and the Company's ability to conclude the proposed new senior debt facility discussions with the DFI will be severely compromised.

As explained above, completion of the Fundraising is also conditional upon Vitol having undertaken to the Company to extend the payment date of the US$4.1 million which is currently due for repayment on 30 January 2015 under its US$10m senior debt facility to no earlier than 31 March 2015. There is no obligation on Vitol to do so and no guarantee that it will do so.

Shareholders should also note that there can be no guarantee that the Company will secure the proposed new senior debt facility from the DFI. The completion of such facility will be conditional upon, amongst other things, the completion of these Proposals, the restructuring of the existing senior debt facility from Vitol and the Company completing a significant equity fundraising. There is no certainty that the Company will be able successfully to satisfy all or any of these requirements.

RELATED PARTY TRANSACTIONS

Latitude

Latitude has an interest in 242,885,514 Existing Ordinary Shares representing 6.24 per cent. of the Company's existing issued ordinary share capital. Latitude also has an interest in warrants over 3,000,000 Existing Ordinary Shares which, following the Share Capital Reorganisation, will become warrants over 3,000 New Ordinary Shares exercisable at £40 per New Ordinary Share.

At Latitude's request, Cristian Ramirez was appointed to the Board as a Non-Executive Director in May 2013 to represent the interests of Latitude in the Company. As a result, Latitude is deemed to be a related party of the Company for the purposes of the AIM Rules for Companies.

Upon the full Conversion of its Convertible Loan Notes, Latitude will be entitled to be issued in aggregate an expected 65,715,342 New Ordinary Shares (on the basis of the assumptions as to the date of Conversion and LIBOR outlined above). As explained above, the initial Conversion of Latitude's Convertible Loan Notes will be capped at an expected 19,750,000 New Ordinary Shares which, upon such Conversion, will result in Latitude holding in aggregate 19,992,885 New Ordinary Shares representing approximately 29.9 per cent. of the Enlarged Share Capital. However, if prior to the Conversion more Existing Ordinary Shares are issued, for example as a result of the exercise by any person of options, warrants or other convertible instruments, then a commensurately larger number of New Ordinary Shares could be issued to Latitude upon the initial Conversion of its Convertible Loan Notes. Further Conversion of the balance of Latitude's Convertible Loan Notes will be at the sole discretion of the Company, at the same Conversion price of 10 pence per New Ordinary Share, provided that at no time may the Company Convert such Convertible Loan Notes if as a result Latitude would have an interest, in aggregate, in more than 29.9 per cent. of the Company's issued ordinary share capital. Save for this restriction, and the other restrictions on Latitude set out above, in all other material respects the terms of Latitude's Conversion are identical to those of the other Converting Noteholders.

Cristian Ramirez, who was appointed to the Board as a nominee of Latitude, has not taken part in the decision to recommend the Proposals. Such matters have been dealt with solely by the Directors other than Mr Ramirez (the "Independent Directors").

The Independent Directors consider, having consulted with the Company's nominated adviser, Strand Hanson, that for the reasons set out under the section headed "Conversion or extension of the majority of the outstanding Convertible Loan Notes" above, the terms of the Conversion of Latitude's Convertible Loan Notes are fair and reasonable insofar as Shareholders are concerned. In providing its advice to the Independent Directors, Strand Hanson has taken into account the commercial assessments of the Independent Directors.

Darwin Strategic Limited

Darwin, the Investor in the Fundraising, has in the previous 12 months held, in aggregate, over 10 per cent. of the issued ordinary share capital of the Company and is therefore deemed to be a related party of the Company for the purposes of the AIM Rules for Companies.

Darwin has subscribed for up to 20,000,000 Subscription Shares and 6,666,667 Warrants in the Fundraising, will receive in aggregate 1,575,894 Anti-Dilution Warrants on top of its existing holding of 127,265,103 existing Anti-Dilution Warrants (equivalent to 127,265 Anti-Dilution Warrants following the Share Capital Reorganisation) and the exercise price of the 99,999,999 June 2014 Warrants and 175,000,000 September 2014 Warrants held by Darwin (equivalent to 99,999 June 2014 Warrants and 175,000 September 2014 Warrants respectively following the Share Capital Reorganisation) will reduce to 7.5 pence.

The Directors consider, having consulted with the Company's nominated adviser, Strand Hanson, that for the reasons set out under the section headed "Terms of the Fundraising" above, the terms of the participation of Darwin in the Fundraising, including the consequential grant of Anti-Dilution Warrants and reduction in the exercise price of Darwin's June 2014 Warrants and September 2014 Warrants, are fair and reasonable insofar as Shareholders are concerned. In providing its advice to the Company, Strand Hanson has taken into account the commercial assessments of the Directors.

RECOMMENDATION

The Independent Directors consider the Proposals to be fair and reasonable and in the best interests of the Company and its Shareholders as a whole and accordingly the Independent Directors recommend that Shareholders vote in favour of all of the Resolutions at the General Meeting, as they intend to do in respect of their own shareholdings of 2,500,000 Existing Ordinary Shares, representing approximately 0.1 per cent. of the Company's existing issued ordinary share capital.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Notes:

1. References to times and dates in this announcement are to times and dates in London unless otherwise specified.

2. If any of the above times or dates should change, the revised times and/or dates will be notified to Shareholders, via an announcement through a Regulatory Information Service.

3. Temporary documents of title will not be issued.

**ENDS**

APPENDIX

Table of Definitions

Capitalised terms used but not defined in the body of this announcement have the meanings set out below.

References to "£", "pence" and "p" are to British pounds and pence sterling, the currency of the United Kingdom. References to "US$" are to United States Dollars, the currency of the United States of America. References to "A$" are to Australian Dollars, the currency of Australia.

For the purposes of this announcement the following exchange rates have been used: