4 Jul 2012 07:00
4 July 2012
Beacon Hill Resources Plc / ASX: BHU / AIM: BHR/ Sector: Mining
Beacon Hill Resources Plc ('Beacon Hill' or 'the Company')
Minas Moatize Expansion Project Update
HIGHLIGHTS
·; Optimisation work continues on the Minas Moatize Expansion Project aimed at a phased expansion of the existing operation to in excess of 2Mtpa of saleable coal.
·; Optimisation builds on the Definitive Feasibility Study ('DFS') published in February 2012, which projected a pre-tax NPV of US$662 million for the Project
·; The Expansion Project, is being undertaken in two further phases:
o Phase I - 0.6Mtpa ROM - currently operating
o Phase II - 1.2Mtpa ROM - expansion of existing 'Phase I CHPP' in 2013
o Phase III - 4.0Mtpa ROM - commissioning of new 'Phase III CHPP' in mid 2014
·; Discussions regarding financing of Phase III of the Expansion Project are progressing well focusing on raising debt finance, including options of key infrastructure financing on a Build, Own and Operate ('BOO') basis.
·; A drilling programme recommended in the DFS has now been completed - this will provide further test data for:
o Washability, liberation and flotation testing to optimise the design of the life of mine wash plant ('Phase III CHPP');
o Upgrading the Minas Moatize JORC Coal Resource and Reserve;
o Geotechnical investigations to optimise the pit design and the foundation design for the Phase III CHPP.
Justin Lewis Chairman of Beacon Hill commented, "Beacon Hill is focused on the expansion of the Minas Moatize Mine, as set out in the DFS published earlier this year. Having completed a further drilling programme, we have now commenced further test work, to facilitate and progress the optimisation of the design of the Phase III wash plant and the overall pit design. A successful outcome of the tests will result in a further improvement of the overall economics of the project through higher coking coal yields.
The next step for the Minas Moatize mine is the expansion of the current wash plant doubling its processing capacity to 1.2Mtpa ROM coal.
Minas Moatize Expansion PROJECT
The expansion of the Minas Moatize Coal Mine ('Minas Moatize Expansion' or the 'Project') is based upon increasing production to 4Mtpa ROM, producing on average 2.2Mtpa of saleable coking and thermal coal during its mine life. In February 2012, Beacon Hill published the DFS for the Minas Moatize Expansion, completed by consultants TWP Australia Pty Ltd, which demonstrated strong economics for the project. Financial modelling, using a 13% discount rate, demonstrates a pre-tax NPV13 of US$662 million and a post-tax NPV13 of US$428 million.
The Minas Moatize Expansion is being undertaken in two further phases over the next 30 months as detailed below:
Phase | Timing | Description | Transport | ROM (Mtpa) | Estimated Capex |
Phase I | Current | Current operations (Phase I CHPP)
| Road | 0.6 | $N/A |
Phase II | H1 2013 | Expansion of Current Washplant (Phase II CHPP)
| Road or Rail* | 1.2 | $5m |
Phase III | H2 2014 | New Life of Mine Washplant (Phase III CHPP) | Rail / Road | 4.0 | $150m (owner operator) $18m (BOO and contract mining) |
*Rail will be used when available. Existing trucking operation will be sufficient to transport Phase II production
The commencement of Phase III is subject to certain key milestones, including:
·; Rail allocation - the Group is involved in ongoing discussions with the operator of the Sena railway, CFM, and anticipates being able to enter into a formal agreement for an allocation before the end of the year when the current upgrade works (to achieve an estimated 6.5 Mtpa capacity) are completed;
·; Finalisation of the design of the Phase III CHPP - this is an ongoing process following the finalisation of the initial design as part of the DFS. The current testwork referred to below, together with operational experience gained from the existing washplant will be incorporated into this process. The Group anticipates being in a position towards the end of the current year to finalise contracts for the construction of the plant.
·; Financing - the Group is in ongoing discussions with a numbers of banks and project financiers to fund the capital requirement associated with Phase III. Two principle avenues currently being pursued, are via a debt facility and a Build, Own and Operate contract. It is not the Board's current intention to use the equity markets to fund Phase III of the Expansion.
DRILLING PROGRAMME
The DFS identified a number of areas where additional investigation could lead to further optimisation of the Project and further test work, when combined with experience of the coal handling behaviour within the existing wash plant, would lead to optimisation of the design and construction of the Phase III CHPP.
The Group has recently completed a drilling programme, which comprised 19 holes (10 HQ Resource Holes, 3 Large Diameter ('LD') Holes and 6 Geotechnical Holes). The core samples from this drilling programme have been forwarded to laboratories in South Africa and the United States for further testing and evaluation.
Washability, liberation and flotation testing for the Phase III CHPP design is underway based on the drill programme undertaken (a total of 448m of large LD drilling). The drill programme has also provided further test data for:
- Resource Definition - total of 759m of HQ drilling was undertaken for the purposes of improving resource definition and confidence;
- Geotechnical Investigation - total of 305m of HQ drilling was undertaken for geotechnical purposes in order to optimise the pit design, waste rock dump design and for the foundation design of the CHPP.
Washability and Liberation Testing Optimisation
Since Mozambican sourced coal is a relatively new product, optimum bulk processing methods are still being refined. Minas Moatize has the key advantage that it is currently operating a small scale wash plant (Phase I CHPP) which enables it to test various processing methods. Two drivers to improve processing results are:
- Liberation of high quality (coking) coal from ROM coal; and
- Treatment of the coal fines.
Higher quality (coking) coal is liberated by the crushing of the ROM coal at the beginning of the process, but since smaller size coal (fines) is harder to process, it is preferable to keep crushing to a minimum. The aim is to determine the optimum balance between minimising the crushing of the coal whilst maximising the liberation of the higher quality coal.
Mozambican coal is characterised by being a brittle coal, which when combined with the crushing process creates high volumes of 'fines'. A significant proportion of high grade coking coal is contained within these coal fines and the DFS confirmed that an improved understanding and treatment of the fines content in the coal has potential to increase the coking coal yield. Experience with the existing Phase I CHPP has also highlighted this as an opportunity for yield improvement.
The optimisation of the final design of the Phase III CHPP is focused upon identifying the optimum liberation size and design of the fines circuit. The liberation, flotation and filtration tests on the LD cores will investigate these properties, with the aim of upgrading the overall quality of the coking coal and coking coal yield that will been achieved from the Phase III CHPP. A successful outcome of the tests will result in a further improvement of the overall economics of the project through higher coking coal yields.
Resource Definition
As part of the DFS the Company reported a maiden JORC compliant Coal Reserve for Minas Moatize, which totalled a Mineable Reserve of 42.66Mt with the potential upside of a further 7.9Mt. The potential upside in the Reserve related to areas in the coal seams that had insufficient data to meet the JORC Measured (drill holes < 350m apart) or Indicated (drill holes > 350m but
Analysis of the drilling programme will enable reclassification of areas of the Upper Chipanga, Middle Chipanga and Bananeiras coal seams to upgrade the overall JORC Coal Resource and Reserve of Minas Moatize, which will be announced in due course.
Geotechnical Investigation
Six geotechnical investigation holes have been drilled to determine ground conditions, which will be used to enable detailed foundation design at key load points of the Phase III CHPP.
The results from the geotechnical holes will also assist in optimising the pit design. The preliminary pit design reported in the DFS, whilst supported by geotechnical pit design criteria, did not have the benefit of test information from core logs The results from the geotechnical holes will support the optimisation of detailed pit design work and the additional data will assist in deriving pit wall slope design, stand up times and bench and batter configurations.
**ENDS**
For further information, please contact: | |
Beacon Hill Resources Plc | |
Justin Lewis, Chairman Peter Wilson, Chief Operating Officer | +61 3 9627 9910 |
info@bhrplc.com | |
Canaccord Genuity Limited (Nominated Advisor & Broker) | |
John Prior / Sebastian Jones | +44 20 7523 8350 |
Halcyon Corporate (Australian Corporate Advisor) | |
Ryan Whitelegg / Jonathan Tooth | +61 3 9627 9941 |
St Brides Media & Finance (UK Media Enquiries) | |
Susie Geliher (susie@sbmf.co.uk) / Elisabeth Cowell (elisabeth@sbmf.co.uk) | +44 20 7236 1177 |
Glossary | |
BOO | Build, Own & Operate |
CFM | Mozambique Ports & Railways |
CHPP / Washplant | Coal Handling and Preparation Plant ('CHHP') or Washplant is used to wash / process coal into a higher value product that is saleable into global export markets |
Coking Coal | Also known as Metallurgical Coal is a high quality coal used in the steel production industry |
DFS | Definitive Feasibility Study |
Fines | Coal that is less than 2mm |
Flotation | A method to separate coal in the coal processing process |
FOB | Free on Board: The seller is responsible for transporting the coal to the port and loading the coal onto the vessel |
JORC | Joint Ore Reserves Committee: The JORC Code is the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves |
Liberation | The amount of physical breakage or crushing required to separate materials of different material densities (i.e. to separate the clean coal from the rock) |
Phase I CHPP | Current wash plant that has a capacity to process 0.6Mtpa of ROM Coal |
Phase II CHPP | Upgraded and optimised Phase 1 CHPP that will have the capacity to process approximately 1.2Mpta of ROM coal |
Phase III CHPP | New life of mine wash plant that will have capacity to produce up to 3 products simultaneously and process approximately 4Mtpa ROM Coal |
ROM | Run of mine coal as received from the mine |
Thermal Coal | Steaming coal intended for use in the steam and power generation industry |
Notes
Beacon Hill Resources
Beacon Hill Resources Plc is focused on building a portfolio of near-term production projects in commodities relating to the steel production industry. Beacon Hill is dual listed on London's AIM Market (Code: BHR) and the Australian Securities Exchange (Code: BHU).
Beacon Hill has 3 projects:
1. Minas Moatize Project, Mozambique
2. Changara Coal Project, Mozambique
3. Arthur River Magnesite Project, Australia
Minas Moatize Project
Beacon Hill, through its subsidiary Minas Moatize Limitada, owns and operates the Minas Moatize Coal Mine, which is one of three operating coal mines producing and selling coal in the Tete Province of Mozambique.
In February 2012, Beacon Hill published the DFS for the Minas Moatize Expansion, which demonstrated strong economics for the project. Financial modelling, based on a 4Mtpa ROM operation producing on average 2.2Mtpa of saleable coking and thermal coal using a 13% discount rate, demonstrates a pre-tax NPV13 of US$662 million and a post-tax NPV13 of US$428 million.
The Minas Moatize Expansion is being undertaken in three phases:
Phase | Timing | Description | Transport | ROM (Mtpa) |
Phase I | Current | Current operations(Phase I CHPP) | Road | 0.6 |
Phase II | H1 2013 | Expansion of Current Washplant(Phase II CHPP) | Road or Rail* | 1.2 |
Phase III | H2 2014 | New Life of Mine Washplant (Phase III CHPP) | Rail / Road | 4 |
*Rail will be used when available. Existing trucking operation will be sufficient to transport Phase II production
Changara Coal Project
Beacon Hill acquired majority ownership in a joint venture to explore and develop the Changara Coal Project in the Tete Province of Mozambique in December 2011. The Changara Coal Project covers a licence area of 184km2, which is 70 times the size of Minas Moatize. The project is located in the heart of the highly prospective coking coal basin of the Songo Area of the Tete Province.
The joint venture is a further step in Beacon Hill's wider expansion strategy in the globally significant coking coal region of Tete and will provide the Group with an opportunity to invest in a longer term development project that has the potential to considerably enhance its resource base.
Arthur River Magnesite Project
Beacon Hill has recently completed the Preliminary Scoping Study for the Arthur River Magnesite Project in Tasmania, Australia. The Study has indicated that the Project has robust financial potential and provides a strong platform to move forward towards a full Feasibility Study and securing a joint venture ('JV') and / or off-take partner to fund the development of the Project.
Financial modelling, using a discount rate of 10% (real), demonstrates a pre-tax NPV of A$42 million based on a mine life of 17 years and a 292,000dtpa ROM operation producing on average 100,000tpa of calcined magnesia.
More details on Beacon Hill can be found at www.bhrplc.com.
Competent Persons Statement
The Competent Person for reporting of coal resources, Peet Meyer of PC Meyer Consulting Pty Limited, who is a member of the Geological Society of South Africa (GSSA) and the Fossil Fuel Foundation. Peet Meyer has more than 21 years' experience in the southern African coal industry of which he has spent more than 5 years in the Mozambique Coalfields. He has the appropriate relevant qualifications and experience to be considered as a Competent Person as defined in the Standards on Mineral Resources and Reserves - Definitions and Guidelines (2004).
The Competent Person for reporting of coal reserves, Mr. Simon Griffiths, who is a Member of The Australian Institute of Mining and Metallurgy (AusIMM) and Society for Mining, Metallurgy, and Exploration, Inc. (SME) has sufficient experience which is relevant to the style and mineralisation and type of deposit under consideration and the activity to which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the 'Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'.
The Coal Resources and Reserves are reported in compliance with the guidance as defined in Appendix 5A of the ASX Listing Rules being the Australasian Code for Reporting Exploration Results, Mineral Resources and Ore Reserves (the JORC Code), 2004 Edition.
Mr Meyer and Mr Griffiths have consented to being named as the authors of the Resource and Reserve Statements respectively in this announcement.
Forward Looking Statement
Certain statements made during or in connection with the communication, including, without limitation, those concerning the economic outlook for the coal mining industry, expectations regarding coal prices, production, cash costs and other operating results, growth prospects and the outlook of Beacon Hill operations, its liquidity and the capital resources and expenditure, contain or comprise certain forward-looking statements regarding Company's development and exploration operations, economic performance and financial condition.
Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes is the regulatory environment and other government actions, fluctuations in coal prices and exchange rates and business and operational risk management. For a discussion of such factors, refer to the Company's most recent annual report and half year report. The Company undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events.