JOHANNESBURG (miningweekly.com) – Owing to low commodity prices, as well as to reduce the effect of negative cash burn, Aim-listed Beacon Hill Resources would reduce production at its Minas Moatize coking coal project, in Mozambique, until Phases 2B and 2C of the wash plant upgrade had been completed, Beacon Hill CEO Rowan Karstel said on Wednesday.

Phase 2A of the wash plant upgrade had been completed in May, Beacon Hill said, adding that the ramp-up of this phase had performed in line with the company’s expectations, to date, and provided the necessary insights to remedy any inefficiencies in the Phase 2B implementation.

"During the third quarter of this year, record low coking prices reminded us of the need to build Phases 2B and 2C of the wash plant as soon as possible, following the successful completion of Phase 2A, so that we can move Minas Moatize into a tier 1 free-on-board cash cost producer,” Karstel said.

He added that the reserve statement confirmation that Minas Moatize had a mine life of up to 15 years, also supported the decision to reduce production for the time being.

Phases 2B and 2C were scheduled for implementation during the first half of 2014 and would enable the mine to deliver 2.8-million tons of run-of-mine (ROM) coal, enabling it to reduce unit production costs to that of a tier 1 global hard coking coal producer. 

This would enable Beacon Hill to remain competitive and cash generative at current coal prices.

Phase 2B would increase the capacity of the plant from 1.8-million tons a year to 2.8-million tons a year, through an additional crushing station and a second dense medium cyclone plant. The old technology Lamellas would also be replaced with a thickener to increase the water recovery efficiency.

Phase 2C would comprise the installation of a flotation plant with a filter press that would increase the coking coal yield from about 15% to 21%.

“Despite our investment in our mainline power supply, one of the challenges in Tete, Mozambique, is a reliable power supply and the Phase 2B and 2C plan involves installing additional generator sets and voltage drop protection systems. The construction period for upgrading the plant will be eight months from the date the order is placed,” Beacon Hill said.

The company added that a preferred supplier had been selected to implement the upgrade on a turnkey basis, and that it had mandated a leading financial institution to arrange a senior secured debt facility to complete its Phase 2B and 2C capital expenditure. 

As mining and processing operations were still in the commissioning and ramp-up phases during the third quarter of this year, 79 202 t of ROM coal was mined at Minas Moatize during the third quarter, providing 19 859 t of saleable coal.