BHR.L Regulatory News (BHR)

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

10 November 2010

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

Off-take Agreement and Strategic Investment at Mozambique Coal Mine

Beacon Hill Resources plc (AIM: BHR), the AIM listed resource group, announces an update with regard to its Mozambique coal mine, Minas Moatize, and its partnership with Global Coke Limited ('Global Coke').

Overview

·; Formal off-take agreement finalised with Global Coke for all coking coal produced from Minas Moatize coal mine, together with payment of US$5 million deposit

·; Global Coke to invest US$20m for an intial interest of 9.45% in BHR Mining Limited ('BHR Mining'), valuing BHR Mining at approximately US$210m, and acquire a further 16.55% of BHR Mining from Consolidated Minerals Pte Limited ('Consolidated Minerals')

·; Proposed amendment to the subscription arrangements to allow Beacon Hill to increase its interest in BHR Mining to 68% through a further investment of US$10m

·; Subscription targeted for completion by 30 November 2010

Beacon Hill Chairman Justin Lewis said, "The development of Beacon Hill is continuing apace as we seek to establish a portfolio of resource assets with near term production potential in commodities associated with the steel industry.

Following lengthy negotiations we have finalised the off-take agreement for the coking coal produced at the Minas Moatize coal mine in Mozambique for the life of the mine, for which we have today received a US$5 million pre-payment. Additionally, we are finalising discussions regarding the strategic investment by Global Coke which will see them make a significant investment whilst allowing Beacon Hill to increase its interest in the project as well. Following the completion of the amended subscription agreement, BHR Mining will be fully funded.

"We are now devoting our energies on implementing our development strategy and increasing production through the establishment of a large scale open cut operation. We remain excited by this asset's potential and believe that it will generate significant future returns."

Off-take Agreement

BHR Mining Mauritius Limited, a subsidiary of BHR Mining, has entered into a formal off-take agreement with Global Minerals & Metals Pte Limited ('GMM'), a subsidiary of Global Coke. Pursuant to the agreement, GMM has agreed to purchase all the coking coal produced by the Minas Moatize mine, for the life of the mine. The coal will be delivered for sale at either Port Biera or Port Nacala Free-on-Board ('FOB') at a price linked to the prevailing hard coking coal benchmark price, assuming similar quality and specific parameters, with a 4% discount. As part of the agreement, GMM has today paid a deposit of US$5 million against initial shipments of coal.

In tandem with Global Coke, the Group has also commenced reviewing the feasibility of establishing a metallurgical coke manufacturing facility in Mozambique. This is with a view to marketing the coke produced to African markets, where a considerable premium is currently paid. Once established, coking coal can be delivered at the mine gate, direct to the coking ovens, rather than on an FOB basis.

Strategic Investment

As part of the partnership announced in July 2010, GMM entered into a subscription agreement to take a 26% interest in BHR Mining, valuing the project at US$210 million following the investment. BHR Mining and GMM are in advanced discussions to amend the subscription agreement, conditional upon it being completed, whereby GMM will on or before 30 November 2010 invest US$20 million for new shares in BHR Mining giving GMM a 9.45% interest in BHR Mining. Beacon Hill will, conditional on completion of GMM's subscription and a proposed fundraising by the Company, invest a further US$10 million for new shares in BHR Mining to take its holding to 68%, following the partial exercise of the option it holds over existing shares in BHR Mining held by Consolidated Minerals. This investment will value BHR Mining at approximately US$210 million following the investment and will leave the project fully funded based on existing plans, allowing both for the settlement of the remaining payment to the vendors of the mine and future development costs.

Beacon Hill is in advanced discussions with its advisers and potential investors to fund Beacon Hill's additional US$10 million investment in BHR Mining. It is intended that the revised subscriptions by GMM and Beacon Hill will take place on or before 30 November 2010. 

Acquisition of Minas Moatize

BHR Mining remains in discussions with the vendors of Minas Moatize to allow the final payment in respect of the acquisition to be made in conjunction with the completion of the subscription in BHR Mining by GMM on 30 November 2010.

Contacts

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

Notes

Beacon Hill Resources Plc (AIM: BHR) is an AIM listed resource company focussed on the acquisition and development of assets in commodities relating to the steel production industry. The Group currently has two primary assets - the Minas Moatize Coal Mine in Tete, Mozambique and Tasmania Magnesite NL in Tasmania.

**ENDS**