rowan karstel, beacon hill resources - operational logistic routes as a key to mining investment –...

Disclaimer

| BEACON HILL RESOURCES | Heavy Haul Rail Africa | JHB |Presentation| March 2014

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CONTENTS

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1. Introduction 2. Minas Moatize Coal Mine 3. Logistics

4.1 Alternative Solutions 4.2 Ncala Line 4.3 SENA Line 4.3 Ports

4. Infrastructure: Power supply 5. Legal and fiscal framework 6. Marketing 7. Cash Cost 8. The Future 9. Conclusion

Strategic Focus Areas for Africa

• Infrastructure • Logistics • Skilled People


STRATEGIC CORRIDORS

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Trans-Kalahari


Mozambique

• 23 million people • 2500km of coastline • On of the poorest countries in

the world • 8% GDP growth rate


Minas Moatize Coal Project Tete Province, Mozambique (located in the highest coking coal yield area)

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(Anglo American)


MINAS MOATIZE COAL MINE


Geology in Tete Province


Phase 2A 1.8Mtpa Process Plant and Lab

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Laboratory


Coking Coal Properties in Tete “Tier 2 Hard Coking Coal”

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Positive

• High CSN (8-9)

• Very High CSR (60-64)

• Low CRI (22 -24)

Negative

• High Sulphur ( >0.8%)

• High Phosphorous (> 0.055%)

• Lower Fluidity

• Mozambique coke cell at a slight discount to HCC (+- 8%)

• “Making Coke is a blending game and there are some natural advantages to coke manufacturers sourcing Chipanga Coking Coal. It is Ideal for making good quality coke” – Dr D Ojha from Global Coke, India

Notes: CSN – Coke Strength Reactivity CSR – Crucible Swelling Number CRI - Coke Reactivity Index


Production (steady state)

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Run of Mine 2.8 Mtpa

Saleable Products per annum

588 000 tons of Coking Coal

627 000 tons per annum of export Thermal (5400 Kcal)

On mine cash cost

US$ 22 / saleable ton Strip ratio 0.55 BCM: ton

FOB cash cost in Beira (all-in)

US$108 /saleable ton

Capital US$ 22.9 mil for 2014

Life of Mine 15.4 years


Sena Rolling Stock- Grindrod Loco’s New rolling stock to be delivered to the Company in Q1 2014

Five ‘new’ Grindrod RL30SCC-3

Power 2 461 kW gross (3 300 hp)

Power 2 240 kW traction (3000 hp)

Traction effort - continuous 300 kN @ 18km/h

Total mass 108 tonnes

Axle load 18 tonnes

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Specifications

On-board Computers


Sena Rolling Stock – TE Wagons New rolling stock to be delivered to the Company in Q1 2014

90 new Gondola-type coal wagons fitted with the patented Sheffield bogey system

Tare mass 20,4 tonnes

Payload 61,6 tonnes

Wagon length over couplers 13,2 m

Axle load 20 tonnes

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Specifications


Carbomoc Coal Loading Site CCLS a joint development between MML and JSPL

Land jointly owned by MML and Jindal

JPSL overseeing and carrying out construction of the works

Development to allow for storing, loading and transporting of coal

Three storage areas - JSPL Sites 1 & 2, MML Site

Rail lines to handle 42 wagons consists

Weighbridge to be provided

T e r m s a n d c o n d i t i o n s o f C o -Development agreed between parties

MML to pay $1,8 m (incl. tax) for 1/3 of throughput capacity – practical capacity of facility seen as ±2,7Mtpa.


Warehouse Nr. 4 Off-loading Site Layout Development on CFM land

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Rail line for 42 wagons with take-off from warehouse spur wagons that will not affect main line operations

Coal to be off-loaded from rail wagons, loaded onto road trucks and taken to a 40 000 tonne stockpile area on land be-longing to the port

From there the coal will be loaded onto skips and taken to the quay side for loading onto vessels

Construction of new port community road.

Costs ($) 8.5 million


Indicative MML Process Cost US$ 108 / ton FOB Beira (2.8 Mtpa)

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Laboratory

16%

7%

12%

30%

22%

13% Mining Cost

Process Cost

Transport

Rail

Port

Other

64%


ALTERNATIVE LOGISTIC SOLUTIONS


Barging down of the Zambezi

Dredging data:

• Approximately 180km (from the total 540km) will require dredging

• Capital dredging estimated volume : 19 million m3

• Maintenance dredging: 25% of capital dredging per year

• Dredging will effect 7.1 to 11.7 % of the active channel

• The Zambezi is a very dynamic river: main channel is known to shift over time and the flood episodes can quickly modify the position of the navigable channel

• After capital dredging you will need permanent maintenance dredging


Coal slurry Pipeline

Features of a proposed Coal Slurry Pipeline (ARUP)

• Use fresh water from Zambezi river or sea water from the ocean

• Closing loop system, minimise water loss • Particle size of at least 4 to 7 mm for fresh water transport

and up to 50mm for seawater (dense medium) transport • Pipeline slurry of 50 to 60% solid by weight • One main pump station and one booster pump station to

overcome friction • Dual pipeline principle can be followed large pipeline for coal slurry , small pipe line for water return • 70% of water recycled

• Capital Cost per km : US$ 9. 2 million • Operational cost: Assume 35 MW power Fixed Cost (pa) US$ 30 Million Variable Cost (per ton) US$ 0.5 • Expected Transportation tariff : US$ 20/ton


CFM Plan to increase the SENA capacity

5Mtpa 2013

20Mtpa 2017

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6.5 Mtpa

12 Mtpa ($100 mil funding)

Vale 4 Mtpa Rio Tinto 2 Mtpa Minas Moatize 0.5 Mtpa


Macuse Project

Mozambique reappraises rail costs

• Mozambique’s transport ministry lifted the estimated cost of a railway and port project to boost coal exports to $5bn, almost twice as much as its initial projection, Reuters reports.

• The Mozambique government chose Bangkok-based Italian-Thai Development as preferred developer to:

• construct the 525km rail line from Tete province to Macuse in Mozambique’s Zambezia province and

• a port able to handle 25mtpa of coal.

• The project was initially penciled in at $3bn but the figure has been revised.

• The total value of both contracts is estimated at $5bn, with the construction planned for 2016,” Ministry of Transport spokesman Verlopes


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Hauling the coal from Tete to Beira • Distance 570km

• Road in some areas in poor condition

• Not sustainable option in the long term

• Cost $58 / ton


NACALA LINE


NACALA CORRIDOR

Length : 912 Km

Capex: $ 4.4 Billion

$3.4 Billion Railway $1.0 Billion Port Terminal


Motaize-Nacala Railway Line:

• 230km Greenfield • 670km upgrade of existing

• 237 km through Malawi & 675 km in Moz

Moatize-Nacala Railway Line



Existing line: • Rehabilitation / strengthening of substructure • Replacement of superstructure


• 33 bridges rehabilitated and or strengthened • 65 new bridges



SENA LINE


SENA LINE 570km


THE WAY FORWARD ON THE SENA LINE

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Technical • Minimise the speed constraints on the line ( especially

section that flooded early 2013)

• Break up critical sections with by-pass loops

• Once a homogeneous system is in place increase the length of the by-pass loop.

• Introduce on-board computers with Telecom system

Funding • Creative funding options with private investors


Rail Allocation BHR receives 0.5 Mt Sena Rail Line Allocation in 2013 MML has entered into an Interim Rail Access

Agreement with Portos e Caminhos de Ferro de Moçambique (‘CFM’) on the Sena Rail Line for an allocation of 0.5 Mtpa commencing in April 2013 (7.7% of line capacity)

MML will pay CFM a monthly line access fee

The Interim Rail Access Agreement automatically renews itself each year until MML and CFM enter into a long term take or pay agreement for a minimum term of 10 years

It is the Company’s intention to use the Sena Line capacity to commence exports of coking coal

Increases to 1.5mtpa in 3 years


PORTS


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Berth with 20m draft Cape Size vessels Installed capacity 18 Mtpa (Opportunity to expand)

NACALA PORT

CIA


Port of Beira

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QUAY 11A &B 2014/15

Maximum 20 Mtpa capacity

Draft only 9m

Only Handymax Ships ( max 33 000t )


Port of Beira (Cornelder)

MINAS MOATIZE LAYDOWN AREA

QUAY 9 (2MTPA CAPACITY)

BHR IS USING QUAY 9

VALE / RIO FACILITY

QUAY 8 (6MTPA CAPACITY)

VALE / RIO ARE USING

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QUAY 11A &B 2014/15


BEIRA QUAY 13

TERMINAL 13

PORT OF BEIRA


QUAY 13 – PROPOSED LAYOUT


Transhipment solution


INFRATRUCTURE: POWER SUPPLY


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Power Supply Projects

EDM/SASOL 160 MW


LEGAL AND FISCAL FRAMEWORK


Gabriel Muthisse

Structure of Government Departments


MINING CONTRACT

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Government Participation: The initial phase of the Mining Contract allows the Government a 5% stake in MML which aligns Governments interests with that of the company.

The signing of this contract represents a milestone in the process of stabilising the BHR subsidiary by providing following advantages:

• Security of tenure through this 25 years contract and a predictable long term legal frame work of investment.

• Fiscal incentives and exemption from custom duties.

• Ability to employ sufficient skilled foreign professionals required to implement planned development and if required hire international contractors for the term of the contract. (Ex-pats : 30% project , 20% operations 5yrs , 10% steady state )

• Training and Employment Programme : Challenge is the Skills shortage

• Community development programme: MML needs to spend $1 mil in next 5 years and $4mil over life of mine

BEE (SA)

SOCIAL AND LABOUR PLAN / EMP / H & S Strategy

School next to Minas Moatize in Tete


MARKETING


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Mozambique Coking Coal – an opportunity

• Latest forecast 10Mt (coking exports) by 2020 • Major potential: Brazil and India (making up nearly 50% of the

global coking coal growth) • India’s steel output up 6% (April – Sept 2013) • Brazil steel output around 40 Mt in 2014

Source: Argus – Coal Trans Maputo


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Mozambique Thermal Coal

• India chronically short of power, 25% of populations has no access to power

• Indian domestic coal reserves in the North East and new power capacity being built in the South and West, will be better serviced by imported coal

• Indian domestic coal production has increased at CAGR 4% since 2008

• Indian coal imports have increased at CAGR 21% over the same period

• Ultra Mega Power Projects (UMPP) in the Government 11th five year plan (2007-2012) envisages the creation of an additional 62 000 MW generating capacity, not just coal. Each UMMP will have a capacity of

+- 10 Mt/a copal

Source: World bank, World Coal Institute, Coal Issues Portal, Salva Report on India’s Thermal Coal Imports and Hatch


CASH COSTS


MML Process Breakdown (FOB all-in $108/t)

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$20 /t 0r 18%

Quay 13 Transhipping


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Plant Phase 2B and

50.00

70.00

90.00

110.00

130.00

150.00

170.00

190.00

210.00

Cost / USd / to

n

Business Costs Corporate Costs

Long Run Marginal Cost Curve BHR will be a Tier 1 FOB cash cost producer after CAPEX

Source: report from CRU London

TIER 1

Effect of no rail


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Rail Capacity on SENA line- A factor of where the Commodity Cycle is

Assumptions: 1) Mine ROM Capacity 2) 21% coking coal practical yield 3) 24% thermal coal practical yield “Why build Macuze if SENA goes up to 20Mtpa”

Bearish Commodity Cycle

Bullish Commodity Cycle


THE FUTURE


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High Road for Mozambique Coal

Coking Coal in Tete Province (short to medium term)

• SENA line capacity to 20 Mtpa ( outsource operator, CFM control)

• Development of Quay 13 in Beira

• Professional dredging company in Beira

• Tax regime to follow commodity cycle

• Mining Contract

• Skills Development

“Mozambique has got the potential to become a role model for Mining in AFRICA”


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Rovuma Hydrocarbon Basin

“If the Government manages the process wisely, Mozambique can become a second Qatar in the future”

“Rovuma has got major potential for LNG , GTL and Power. Why do the Grand INGA project in the Congo if there is all the gas reserves in Mozambique”


Contacts

Rowan Karstel CEO [email protected]

Justin Farr-Jones Chairman [email protected]

www.bhrplc.com [email protected]


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