Beacon Hill Resources plc
Chairman, seconded by Renaissance Capital · Mining (coking coal), Mozambique
The mandate
Beacon Hill Resources plc was an AIM-listed coking-coal company in Mozambique and a portfolio company of Renaissance Capital. Renaissance Capital seconded me to the company as Chairman with a mandate to take its greenfield coal licence, approximately 600km inland, into production for the global seaborne coking-coal market. I stayed on beyond the original secondment at the board’s request.
What we did
- Raised more than £20 million to fund the move into production.
- Negotiated the logistics chain a mine 600km from the coast depends on: access to the Sena rail line to the port of Beira, and an operating lease for five locomotives and 90 wagons.
- Took the company from a pre-production, early-stage business to a producing asset.
The return
The mission succeeded: the mine reached production. Renaissance made three times its money on its convertible investment, exiting before the commodity cycle turned.
What happened next
After that exit, the seaborne coking-coal price fell below the economic cost of production, a gap no operator could close, and the company entered administration in 2015.
What I took from it
Logistics is strategy for an inland resource company: the rail and port contracts were worth as much as the resource. Commodity businesses need a funding plan for the bottom of the cycle, not the middle. And a board’s job in a turnaround is to make the irreversible decisions early, while there are still options.
Contemporary coverage
- Rolling stock operating lease signed for the Sena line (company announcement)
- Results of general meeting, September 2014 (company announcement)
- Beacon Hill aims to reduce restructuring impact on shareholders (Engineering News, December 2014)
- Commodity price slump main reason for Beacon Hill’s fall, says chairman (The Market Reporter)
- Beacon Hill goes into administration (Mining Weekly, January 2015)