(BHR.L) Beacon Hill Resources

Asset

1) coal-producing mine in the Tete province of Mozambique.
(largest undeveloped coal region in the world, two mining monoliths, Vale of Brazil and Riversdale of Australia, are firmly positioned in the area.)

2) Tasmania Magnesite  two licences in NE, AUS  (Arthur River Project) ,
Magnesia is typically processed into calcinated or other forms of magnesia, increasing achieved prices (from $50 per tonne to up to $250/t for CCM or higher for other compounds) 

DEC - full funding for both its projects by the placing of £23m of new equity

COAL 
Already mining coal (current resource estimate of 33Mt mineable of coal reserve, with saleable estimate of 20Mt.)




2010-05 May -  producing 2,000 tons of coal a month.   2ktpm
2011-01                               8,000 tons a month
2011                                    20,000 tons a month this year
2012                                    200,000

For 2012 detail of coal sales and production type see link

30% of which is expected to be coking coal for the export market.

Already granted environmental approval for an opencast mine of some 200kt -400kt per month

The main transport Sena railway line has recently been expanded and on which the group has an offer of additional capacity from November 2012. Both Beira port and Nacala port are being expanded/refurbished to handle greater capacity/size of ships. 

COST 

moving from more underground mining to open-pit, which is easier, cheaper and offers a far safer and more agreeable environment for the miners.

Total investment is projected to be some $10m with contractors undertaking the mining.

Figures

Beacon Hill can obtain $100 a ton (£65) for its coal 
cost of digging it out of the ground is about $50 a ton. 

if prices stay static, the group should deliver turnover of $240 million in a couple of years and profits of $120 million. 


Arthur River  Project Magnesite

JORC compliant resource of 13.2m measured tonnes and £25.8m tonnes magnesia rated in inferred category.

initial progress towards preparing the statutory Development Proposal and Environmental Management Plan (‘DPEMP’). Several key components  are already completed including the flora, fauna and Aboriginal heritage surveys

Begin a drilling programme first quarter 2011 -  understanding of the deposit and its geology as well as expanding the current Measured and Inferred resource.

Production by 2012 would be impressive.

High grade at 43.4% with some 13.2m tonnes of measured resource with another 10m of inferred tonnes at a 41.5% grade while a further 15.8m tonnes of inferred resource register a very respectable 39.9%.


Figures


Valuation for the Magnesia opportunity of Aus$69.3m to Aus$83m (c.£36-44m) based on the measured and inferred resource – though that would increase substantially on the announcement of a JV to sell processed product. 



Director

Justin Lewis - appointed chairman last year, the company has moved on in leaps and bounds,  only in his 30s, probably why it seems he has a hunger for success,

shares at the option price which is 14p

Hub - BoD always seem to rush their option prices when they feel the train is about to leave the station.

Future Plan

COAL - executing a further drilling program, 28 holes completed to date (2010-12), and has identified the Chipanga seam as likely to lead to an increase in reserves estimates


The group will construct an 80t per hour mobile wash plant while simultaneously handling other minor items to put the group on track for full planned production by January 2012.

Infrastructure refurbished/expanded - The local railway line is to be extended to the mine.

Arthur River  Project -  additional exploration which could significantly increase the extent of this resource.  (to potentially over 100Mt tonnes based on earlier exploration).

funding sufficient to bring the mine into full production. 

Expect to explore JVs to achieve this next step as the mine approaches full production.



POSITIVE

positive cashflow

Implied Valued per share 23.3p
(does not include the upside from the potential to upgrade resource estimates by drilling activities, or the potential lift to the Manganese operation by the JV to create higher value compounds, or even the income from the exercise of the options/warrants)




Negative

Time? take years to complete the two projects  (Tasmania Magnesite and Mozambique Coal).


Share Dilution - to acquired the remaining 49% tete mine. 238m new shares.Half are expected to convert as soon as shareholders give approval with the other half converting one year later. The implied valuation for BHRM is some $200m. The convertibles carry a 15% interest rate.