Mozambique plans lift Beacon Hill Resources
Losses widened at AIM-listed coking coal producer.Beacon Hill Resources (BHR), but its shares rose despite the news as the company outlined its operational milestones in the six months to the end of June.
Although revenue at the company was more than five times higher - climbing to £292,039, compared with £58,022 in the same period last year - losses spiralled to £1.8 million, up £0.63 million on last time.
Net assets as at 30 June stood at £40.3 million and the firm had cash in bank of £9.03 million.
"During the period, we significantly increased the value of our assets and we firmly believe there remains considerable potential for a further step-up in valuation as we rapidly progress our asset base through the development cycle," said chairman Justin Lewis.
He added: "Our confidence in, and commitment to, our projects lay behind the board's decision to reject an approach for the group pitched at 16.25p last month."
Lewis said the company is making good progress at both its Minas Moatize Coal Mine in Mozambique and its Arthur River Magnesite Project in Tasmania, and the firm was advancing its strategy of building and developing resource assets in commodities associated with the steel industry.
"We have met key development milestones at Minas Moatize having commenced production of export grade coal and commissioned our first wash plant," Lewis confirmed.
He said that initial production of coking coal has been accelerated with mining on course to commence in early 2012 which, following results attained from the recent coke test analysis, will now target Hard Coke which trades at a premium to thermal coal.
"We remain on track for our first export shipment in the fourth quarter of 2011 and are already stockpiling at our warehousing facilities in Beira," he added.
The company said that continued progress is also being made at the Arthur River Magnesite project where the first phase of drilling has been completed and we are in the final stages of completing the Scoping Study.
Analyst view
John Prior at Collins Stewart said it is time to revisit the investment case for the firm. “While the market is in sell mode on global growth fears, which we agree could impact on the coking coal price, we reiterate the scarcity in coking coal assets which has been highlighted by recent M&A activity and talk in the sector.”
Andrew McGeary at Northland commented “We will reduce our production forecasts to reflect lower capacity expectation and risk akin to securing Sena rail access, though this is mitigated in revenue and margin terms by the refocusing on more immediate coking coal production. We are minded of the considerable execution risk presented particularly in the key risk of gaining capacity on the Sena rail line.”
“While our price target is under review pending new forecasts our initial review suggests it is likely to present significant upside from current depressed >10p levels and we will hold our rating at ‘buy’, though our numbers will be dependent on a successful Sena outcome.
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