BHR.L Regulatory News (BHR)

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

11 November 2010

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

Update on Operations at Minas Moatize Coal Mine, Mozambique

Beacon Hill Resources Plc (AIM: BHR), the AIM listed resource company, is pleased to announce an update on progress at the Minas Moatize coal mine in the Tete Province of Mozambique. 

Overview

·; Exploration programme progressing well - drilling has been completed and testing of coal has commenced. Initial results from the exploration programme indicate an increase in the size of the overall resource and higher yields of coal than originally anticipated in addition to lower stripping ratios than originally expected

·; Production has increased to 8,000 tonnes per month, a 220% increase in production from levels seen at the time of acquisition

·; Stripping of initial open pit complete with production to commence in conjunction with the commissioning of temporary wash plant by the end of 2010 

·; Highly experienced management team assembled to oversee mine development -led by Peter Wilson, Chief Operating Officer and Max Botta, who recently joined as General Manager

·; Transport agreements in negotiation - written confirmation of capacity from both the operators of the Sena Rail line and Nacala rail line and first export shipment planned

·; Discussions advancing with contractors to operate coal handling and preparation plant ('CHPP') and mine on a BOOT (build, operate, own and transfer) basis

Beacon Hill Executive Chairman Justin Lewis said, "We continue to make excellent progress at the Minas Moatize mine. The initial results from our exploration programme are particularly encouraging, demonstrating the potential for BHR Mining to significantly increase the current 33 million tonnes resource and increase yields, in particular of coking coal and export thermal coal.

"In conjunction with the exploration programme, the Group remain focussed on establishing a large open pit mine capable of producing 4Mtpa. In line with this, we have significantly increased current production, and this trend is set to continue with the extension of the current trial open pit, generating significant revenues for the Group ahead of the commencement of the main open cut mine. We are also making solid progress with negotiations regarding logistics, utilising our unique position as the only current coal producer in the region in order to secure transport corridors for our export quality coal product."

Exploration Programme

BHR Mining Limited, the Group's majority controlled operating subsidiary ('BHR Mining') commenced a drilling programme in May 2010 after acquiring the Minas Moatize coal mine in the Tete region of Mozambique. The objective of this drilling programme was to expand and further define the current 33 million tonne resource, in addition to enabling mine design and the finalisation of the CHPP design.

Over 35 holes have been drilled across the entire licence area which has allowed the Group to define both additional seams and also a larger area of coal, leading to a larger volume of coal to be defined. The delineation of this increased volume of coal will potentially increase the project's reserves and increase the mine life.

Following the completion of the drilling programme, the Group has initiated a testing programme of the core samples at ALS Limited in South Africa. Based on a preliminary review by the Group's consultants, initial results from these tests demonstrate that potential likely yields of coal are higher than previously anticipated and are summarised below:

Notes:

1 As a percentage of Run of Mine (ROM)

2 Assuming annual ROM of 4mtpa

Current Production and development

Production is currently from the underground mine, which since acquisition has been substantially refurbished, and is currently producing 8,000 tonnes per month, over three times the level when acquired. In parallel with this, stripping of the initial open pit has been taking place and is now complete. This will allow the production of a further 10,000 tonnes per month over the next 12 months, commencing towards the end of 2010. In addition, following a further exploration campaign, the Group has recently decided to expand this initial pit to include a further 80,000 tonnes, further increasing production over the next 12 months prior to commencement of the main open cut mine.

In August 2010 the Group ordered a temporary washplant with a capacity of 80 tonnes per hour to be used over the next 14 months. This has now been built in South Africa, is being transported to site and is anticipated to be commissioned towards the end of November 2010. Once in production, the mine will be able to produce small quantities of both coking and thermal coal for export, as well as domestic coal for sale at the mine gate.

Minas Moatize continues to work towards the commencement of production from the main open pit mine from January 2012, ramping production up to ROM 4Mtpa by the early 2013. Prior to commencing production the Group needs to build a permanent CHPP and complete the mine design. It is the intention of the Group to appoint contractors to build, own and operate the CHPP, whilst BHR Mining will pay a per tonne fee to have its coal washed. The Group has commenced discussions with several parties who have expressed interest in bidding for the contract, and the Group hopes to be able to award a final contract early in the New Year. In addition, the Group has commenced discussions with a number of firms which have expressed interest in bidding for the mining contract. It is anticipated they will also undertake the design of the mine and this contract will also be awarded in the New Year.

Logistics

Since the acquisition of Minas Moatize in May, the Group has sought to use what the Board sees as two key advantages; firstly the existing infrastructure having enough capacity to support the proposed production of the mine and secondly, being able to use the Group's first mover advantage, by being the only producing coal mine in the region, to secure long term capacity on transport corridors.

With assistance from both the government and other stakeholders, the Group has been exploring different options to get its coal to port. To this end it has received written confirmation of capacity with effect from the end of the November 2010 from the operator of the Sena Line, CCFB. In addition, the Group has also has a written offer of capacity on the Nacala rail line and port from its operator. These are important steps in securing the future transport corridors for the Group's product and something the Group is unique in being able to secure as the only producing asset in the region. The Group continues to explore its options at the Port of Biera and is in active discussions with the operator of the port. In addition, the Group has recently been invited by the Government of Mozambique to apply for capacity in the new proposed coal handling terminal to be built at the Port of Biera.

It remains the target of the Group to make an export shipment of coal in the next few months.

**ENDS**

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.

The coal quality information in this announcement has been reviewed by Mr Peter Gunn, who is a Member of the Australasian Institute of Mining and Metallurgy and Managing Director of Coal Marketing International Pty Ltd, a specialist coal consultant. Peter Gunn has more than 30 years experience in coal projects globally.