London (Platts)--22Feb2012/800 am EST/1300 GMT

London AIM-listed resource company Beacon Hill Resources said Wednesday that the definitive feasibility study for the expansion of its Minas Moatize coking coal project in Mozambique's Tete province has been completed, confirming a mine life of 11.5 years.

The study, carried out by independent consultants TWP Australia, found a total JORC mineable reserve of 42.65 million mt, with a marketable reserve of 23.45 million mt of coal, of which over a third, 8.72 million mt, is coking coal.

It added in a statement that, based on a 4 million mt/year run of mine (operation producing an average of 2.2 million mt/year of salable coking and thermal coal, the pre-tax net profit value of the project is $662 million, with an internal rate of return of 79.5%. It estimates the total project capital to be $166 million.

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Beacon Hill said that the average life of mine operating cost is about $58.50/mt FOB Beira and an independent marketing study indicates that coking coal from Minas Moatize will attract a long-term price around standard hard coking coal benchmarks.

It forecast the average long-term prices for its primary export coking coal product with maximum 9.5% ash at $207/mt, its secondary export thermal coal product of minimum 5,970 kcal/kg NAR at $94/mt and its tertiary domestic thermal coal product with maximum 40-45% ash at $55/mt.

Beacon Hill will initially transport coking coal by road to the port of Beira at a cost of $55/mt, before using the Sena rail line costing $20/mt as production ramps up, with port costs of about $10/mt.

According to the DFS, at full production, 4.3 million mt/year of ROM coal will be processed at a rate of 750 mt/hour through a new main coal handling and preparation plant, which has been designed to produce all three products simultaneously.

"The economics of the project are not only highly positive, but are also subject to improvement across a range of areas and with a NPV of $662 million, a marketable reserve of 23.45 million mt of coal, of which over one third is coking coal, near term coking coal production and a proven end-to-end export solution, the commercial value of the Minas Moatize project is clearly apparent," said Beacon Hill chairman Justin Lewis in the statement.

The company started mining at the project at the end of the first half of 2011, producing 82,920 mt of ROM coal and 24,900 mt of salable thermal coal in 2011.

--Jacqueline Holman, jacqueline_holman@platts.com

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