BHR.L Regulatory News (BHR)

27 April 2012

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

Quarterly Activities Report for the period ended 31 March 2012

Highlights

Minas Moatize Mine, Mozambique

·; Definitive Feasibility Study ('DFS') demonstrated highly compelling economics for mine expansion - pre-tax NPV of US$662 million

·; Maiden JORC compliant Mineable Reserve of 42.65 million tonnes ('Mt') - Marketable Reserve is 23.45Mt, of which at least 8.72Mt is coking coal

·; Mining of coal commenced from Upper Chipanga Pit allowing for the production of a high margin Hard Coking Coal product

·; First coking coal shipment planned for mid-2012

·; Coal transported via truck is being stockpiled at the Port of Beira

·; Continued progress with respect to attaining an allocation on the Sena Rail Line to enable cost reductions and ramp up of production to 4Mtpa Run of Mine ('ROM') coal

Changara Coal Project, Mozambique

·; Mobilisation of drill rigs to commence initial exploration programme

Tasmania Magnesite

·; Positive Scoping Study completed and is being reviewed by management ahead of publication allowing project to proceed to next stage

Corporate & Financial

·; Strategic partnership finalised with Vitol Group, including marketing agreement and provision of $20m debt facility to Group

·; Revenue forecasted to increase following maiden export shipment of coking coal in mid-2012

·; Listing completed on the Australian Securities Exchange ('ASX')

Justin Lewis, Chairman of Beacon Hill, commented, "The past quarter has seen Beacon Hill grow into a significant Mozambican coal producer and developer in one of the world's most exciting developing coking coal regions. Recent developments have seen the Group commence production of coking coal, execute a highly valuable marketing agreement with Vitol Group, the world's largest private energy trading company, and publish a Definitive Feasibility Study, which demonstrates compelling economics for the Minas Moatize project, which more than underpins the Group's valuation. Importantly, we remain well funded with access to a $20 million debt facility from Vitol Group, and revenues from the sale of both coking and thermal coal are anticipated to increase as we ramp up production to 4Mtpa ROM coal.

"The recent share price performance does not reflect the true value the Group. The Board knows of no reason for this decline over recent weeks, as we continue to make strong progress with the expansion and ramp up of production at Minas Moatize. In addition, the Group is poised to commence exploration activities at the Changara Coal Project, which at 70 times the size of Minas Moatize provides the potential for significant upside within the Tete Province of Mozambique. We have an active period ahead of us, one which will see our maiden export of high margin coking coal in addition to continued negotiations to secure an allocation on the Sena rail line in advance of the expansion of the mine later this year. I am confident that these advancements will continue to enhance the value of the Group and I look forward to updating the market in due course."

Minas Moatize Mine

Operations during the March quarter were focused on pre-stripping the Upper Chipanga Pit in advance of the production of coking coal towards end of the quarter.

Minas Moatize experienced significant rainfall at the peak of the wet season which extended well into the first quarter. Whilst this impeded the continuous mining and stripping operation and production for Q1 2012, the Group does not anticipate any long term impacts to operations and current production levels are back in line with forecasts.

Continuous operation of the wash plant was affected by difficulties with a regular supply of power from the grid throughout Q1 2012, however this issue was addressed through the acquisition and installation of an independent power generator. In the three months to 31 March 2012 production was as follows:

Pre-stripping of a second open pit, the Upper Chipanga Pit ('UCP'), commenced during the quarter where the Group will focus its activities on mining coking coal. To 31 March 2012, 267,964 bank cubic metres ('bcm') was pre-stripped using excavators and mining commenced towards the end of Q1 2012. The Group remains on track to produce and export approximately 100,000 tonnes of coking coal in 2012.

Coal is currently being trucked from the mine to Beira and volumes are anticipated to increase as production increases. Coal is being stockpiled at the Group's laydown area within the Port of Beira. This initial production has allowed the Group to secure facilities along its logistics chain that will not be available to other producers. Whilst trucking is more expensive than rail, it is proving to be an effective transport solution.

Minas Moatize Expansion Project

Definitive Feasibility Study ('DFS')

In February 2012, Beacon Hill published the DFS for the Minas Moatize Coal Project. The DFS, completed by consultants TWP Australia Pty Ltd, demonstrates strong economics for the project. Financial modelling, based on a 4Mtpa ROM operation producing on average 2.2Mtpa of saleable coking and thermal coal during its mine life using a 13% discount rate, demonstrates a pre-tax NPV13 of US$662 million and a post-tax NPV13 of US$428 million.

Coal Reserves

In February 2012, the Group reported its maiden JORC compliant Coal Reserve for Minas Moatize. A total Mineable Reserve of 42.65Mt was reported with the potential upside of a further 7.9Mt. The Mineable Reserve represents the in situ portion of the Geological Resource that is economically mineable. 

Production from the main life of mine pit is targeted to commence towards the end of 2012 following the completion of mining from the Upper Chipanga Pit. The operation is targeted to build to a rate of up to 4Mtpa ROM coal producing on average 2.2Mtpa of saleable hard coking and thermal coal for the life of mine, although this ramp up will be subject to access to logistics and the capacity of the wash plants.

Marketing Partnership and US$20 Million Debt Facility

In March 2012, Beacon Hill entered into a strategic marketing partnership with the Vitol Group, one of the world's largest energy trading groups. As part of the partnership the parties entered into a Coal Marketing Agreement whereby Vitol Group will act as agent to market export coal produced by the Minas Moatize Mine.

Vitol Group has also made available to Beacon Hill a secured debt facility of up to US$20 million in two tranches of US$10 million, of which the Group has drawn the first tranche of $10 million. The facility may be utilised for capital expenditure, general corporate and working capital purposes.

Logistics

Having completed its first shipment in December 2011, Beacon Hill has restarted its trucking operation to the Port of Beira. The trucking solution allows the transport of up to 0.5Mtpa to the Port of Beira for future shipments, which is more than sufficient for its planned production over the next 18 months.  The Group intends to continue using this trucking solution pending the commencement of the transportation of coal via the Sena Rail Line, which remains the Group's longer term preferred transportation solution. 

The refurbishment of the Sena Rail Line to an initial capacity of 6.5Mtpa is ongoing with works anticipated to complete in mid-2012. Following completion of these works, the Group remains confident of attaining an allocation to the line in 2012, which will allow it to further ramp up coal production.

Changara Coal Project

In December 2011, Beacon Hill acquired majority ownership in a joint venture to explore and develop the Changara Coal Project in the Tete Province of Mozambique. The Changara Coal Project covers a licence area of 184km2, which is 70 times the size of Minas Moatize. It is located in the heart of the highly prospective coking coal basin of the Songo Area of the Tete Province, an area with proven coal reserves located within close proximity to Jindal Steel & Power Chingodzi Coal Project, which is estimated to contain a resource in excess of 700Mt of coking and thermal coal.

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. 

The first phase of the exploration programme at Changara has recently commenced. Drill rigs have been mobilised and the Group will undertake an initial drilling programme whereby 5 x 300m deep percussion drill holes will be drilled to provide confirmation of the coal seams and confirmation of the thickness of these seams. 

Tasmania Magnesite

A Preliminary Scoping Study for the Tasmania Magnesite Project, has been completed by consultants and is with the Company for review ahead of completion. The Scoping Study is positive and will form the basis for moving towards securing a joint venture partner to fund the development of the project. 

Corporate

Acquisition of Baetica

Beacon Hill, via its wholly owned subsidiary Minas Moatize Lda, acquired Baetica Lda ('Baetica') on 1 April 2012 for a nominal consideration. The acquisition of Baetica, a specialist Maputo based mining consultancy firm, will see Beacon Hill acquire a dedicated team of administration staff with significant experience of the Mozambican mining industry, whom will assist in the management of our existing projects as well as in the identification of future opportunities.

ASX Listing

Following its application in December 2011 to dual list on the official the Australian Securities Exchange, on Thursday 5 April 2012 official quotation of the Group's securities commenced. The rationale behind the dual listing was to provide Beacon Hill with access to a broader capital market base of Australian and Asian investors with a strong understanding of resources and the Board anticipates trading volumes on the ASX to increase over time.

Following admission to the official list of the ASX, CHESS Depository Interests ('CDIs') trade on the ASX under the code 'BHU'. Each CDI will represent two fully paid ordinary shares in the capital of the Group. Ordinary shares continue to be traded on AIM.

Share Capital

Beacon Hill currently has 1,051,442,137 ordinary shares, 19,770,000 warrants and 59,337,084 options outstanding.

**END**

For further information on the Company, visit www.bhrplc.com or contact:

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 owns and operates one of only two operating coal mines producing, selling and exporting coal in the Moatize Coal Basin of Mozambique. In addition, the Group has entered into a JV to develop a further coal tenement in Mozambique and holds licences over a significant magnesite deposit in Australia.

More details on Beacon Hill can be found at www.bhrplc.com.

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.