BEACON HILL SUB-LEASES ROLLING STOCK

The London-based mining company Beacon Hill Resources has announced that it is sub-leasing all of its railway rolling stock, which will be used on the Sena rail line between the Moatize coal basin, in the western Mozambican province of Tete, and the port of Beira.The identity of the sub-lessee is currently undisclosed, but it must be another of the coal mining companies operating in Tete.According to the Beacon Hill release, the sub-lessee will use all of Beacon Hill’s five locomotives and 90 wagons. The lease will run for at least 12 months with an option for extension.Beacon Hill claims that the lease arrangement “will support the Company's expansion strategy to advance Beacon Hill's Minas Moatize Coking Coal Project to Tier One cash cost status which will deliver an economically robust mining project even during periods of depressed coking coal prices”.Minas Moatize is one of the smaller coal mines currently in operation in Tete. Beacon Hill planned to produce an average of 2.2 million tonnes a year of saleable coking and thermal coal for the lifetime of the mine. Leasing all its rolling stock is a clear indication that Beacon Hill does not believe it can export this coal at a profit given the current state of the world coal market.The locomotives and wagons were delivered earlier this year. They were expected to deliver 500,000 tonnes of coal a year to Beira port, assuming an availability rate of 94 per cent. Beacon Hill did not buy the rolling stock outright, but leased it from Thelo Rolling Stock of South Africa. Hence the current arrangement is a sub-lease.The rolling stock will remain farmed out until Beacon Hill decides to resume coal exports from Beira. Beacon Hill cited its Chief Executive Office, Rowan Karstek, as commenting 'We are delighted to have secured a high calibre counterparty to lease our rolling stock on the Sena Line further proving the viability of the logistics solution whilst Beacon Hill's Minas Moatize Coking Coal expansion project is advanced”.Karstel said 'This transaction is a win-win for ourselves and the Sub-lessee whilst also increasing the utilisation 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”.