30 January 2013

Mozambique: Beacon Hill Discovers More Coking Coal

Maputo — The London-based mining company Beacon Hill Resources has announced that it has increased by almost a third the estimated reserves of coking coal at its Minas de Moatize mine in the western Mozambican province of Tete.

According to the company, test drilling last year resulted in the estimated reserves rising to 86.8 million tonnes, which is up from the previous estimate of 66.4 million tonnes.

The managing director of Beacon Hill, Rowan Karstel, said that he believes that more coal could be found at the site, with an official statement with further details due to be published at the end of the first quarter of this year.

The company is planning to increase production to 2.8 million tonnes per annum by the end of this year, and will focus on mining the high value coking coal that is used in steel production.

To carry out this strategy, Beacon Hill is in the process of upgrading the wash plant where the coking coal is cleaned.

Beacon Hill is gearing up to begin commercial exports. On Christmas Eve its second trial shipment of 18,576 tonnes of thermal coal left Beira Port.

However, in a statement to the London Stock Exchange on Tuesday, the company accepted that not everything has been positive. The Beacon Hill chairperson, Justin Farr-Jones, pointed out that “in recognition of poor operating performance, no bonuses were paid to the Executive Committee Management in 2012 and the restructured Board also waived their 2012 option incentives”.

To bring the coal to market, the company has entered into a preliminary agreement with the Sena Rail Line to allow it to transport 0.5 million tonnes per annum to the port of Beira.

Like all the coal companies in the Moatize Basin, the expansion at Beacon Hill is dependent upon a phenomenal increase in the capacity to transport the coal. The Sena Rail Line is close to full capacity and even upgrading the line will not bring it close to meeting the demand.

The Brazilian mining giant Vale is planning to invest heavily in building a new line from its mine in Tete to the port of Nacala, through Malawi.

Meanwhile, the London-based mining company Rio Tinto has had to admit to shareholders that it vastly overvalued its coal mine in the Moatize Basin, by around three billion US dollars, because the company has found less coking coal than expected and has no way of getting the coal to market in sufficient quantities after the Mozambican government refused, on environmental grounds, to let the company take the coal on barges down the Zambezi River, to be transshipped onto larger vessels near the river’s mouth.

Independent experts believe that over the next decade coal exports from the Zambezi coal basin by several companies could reach 100 million tonnes per year, making Mozambique one of the world’s largest coal exporters.

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