Beacon Hill to run out of cash in days

[miningmx.com] – THE future of UK-listed coal producer Beacon Hill Resources is hanging in the balance after shareholders last year narrowly voted down a proposal to restructure a portion of debt and inject £1.5m into the business.

Rowan Karstel, CEO of Beacon Hill, said in an interview this week that he intended to make an announcement in about 10 days so “shareholders have line of sight”. The firm, which mines coal in Mozambique, has enough cash until mid-January.

The resolutions voted down in Beacon Hill’s general meeting on December 17 included restructuring of about $13m in convertible loan notes as well as a £1.5m fund raising and share capital re-organisation.

Beacon Hill received 69% support for the resolutions against the requisite 75%, an outcome its chairman, Justin Farr-Jones, who had invested $400,000 of his own capital in the company, described as “regrettable’.

Said Karstel of the outcome at the general meeting: “It was a small, activist group who managed to get a no-vote. I think they were historical shareholders who invested in the company four or five years ago’.

Beacon Hill turned down a 16.25 pence/share offer, valuing the company at a then price of $231m, in August 2011. The company was valued at $1.76m before the share was suspended on December 17. This was after several rounds of re-financing which diluted shareholders.

An agreement with Vitol Coal S.A that it amend the $4.1m in debt, due this year as part of a total $10m senior debt facility, was also subject to the passing of the resolutions relating to the refinancing. In terms of its finance agreement with Vitol, the trader has the right to buy the company’s mine out of administration for $1.

“I must say in all of this Vitol has been very supportive,’ said Karstel. “But I’m very angry. We managed to meet a lot of our KPI [key performance indicators] over the last two years to take Beacon Hill forward, but it was this debt that I inherited,’ he said.

Beacon Hill put its 1.8mtpa hard coking coal mine – also known as Minas Moatize – on care and maintenance in June ahead of securing $20M in project finance.

If the finance could be agreed, the company planned to expand the mine to 3.2mtpa run-of-mine and achieve Tier 1 costs of $110/t against a coking coal price in June of about $120/t.