JOHANNESBURG (miningweekly.com) – Aim-listed Mozambique coking coal miner Beacon Hill Resources announced on Thursday that it had entered into a sublease of its rolling stock to an undisclosed party.

This sublease agreement would support the company’s expansion strategy to advance its Minas Moatize coking coal project to Tier-1-cash-cost status, which Beacon explained would deliver an economically robust mining project even during periods of depressed coking coal prices.

The sublessee, which had agreed to a minimum lease term of 12 months with extension option, would use all Beacon Hill’s five locomotives and 90 rail wagons on the Sena railway line, which runs from Moatize to the Port of Beira.

The company noted that final regulatory and Minister of Finance approval had been received and that this represented the completion of a key milestone towards the completion of the senior debt facility.

Beacon Hill CEO Rowan Karstel said the company was “delighted to have secured a high caliber counterparty to lease its rolling stock on the Sena line, further proving the viability of the logistics solution while Beacon Hill’s Minas Moatize coking coal expansion project advanced. 

“This transaction is a win-win for ourselves and the sublessee while also increasing the use of the Sena line.  Our two train sets are the newest class of rolling stock and are a big boost for the entire Mozambique coal supply chain.  We have taken nine months to conclude this transaction and with considerable assistance from the government of Mozambique represented by the Ministry of Mines and Ministry of Finance.”

BACKGROUND OF TRANSACTION
During the first half of 2014, Beacon Hill announced the delivery of five new Grindrod locomotives and 90 Transnet Engineering rail wagons, worth $21-million, to Mozambique after 12 months of manufacture. The transaction was funded by Thelo Rolling Stock South Africa, with Beacon Hill’s subsidiary BHR Investments Mauritius as lessee.

Pending the upgrade of the Minas Moatize coking coal mine to a Tier-1-cash-cost producer, Beacon Hill announced its intention to sublease the rolling stock until it restarted export operations through the Port of Beira. The rolling stock translates to 500 000 t/y of new rolling stock capacity to the Sena railway rolling stock fleet with expected availability rates of 94% associated with the new fleet.