Beacon Hill will own 80% of the project upon issuing MidWest 60 million ordinary shares in Beacon Hill.
The license area covers 184sq.km and is located in the heart of the highly prospective coking coal basin of the Songo area of the Tete province.
The JV agreement is a major win for Beacon Hill, which already owns the Minas Moatize coal project in Tete.
Beacon Hill chairman Justin Lewis said the JV was another step in the group’s expansion strategy in the coking coal region of Tete.
“This licence allows Beacon Hill to significantly expand its resource base and in turn strengthen its foothold in Tete, one of the most exciting coking coal regions in the world,” Lewis said.
“In this context, today’s announcement is a major step forward for the group in achieving its goals, as the new licence covers a highly prospective area 70 times the size of Minas Moatize, and represents an opportunity for the group to invest in a longer term development project that will further enhance the group’s value accretion potential.”
The London AIM-listed company expects all future contributions to the JV to be funded by the group’s existing cash resources and future cash flows generated from Minas Moatize.
The licence was issued to Midwest Africa in July 2008 and is valid until 2013.
To date, it has undertaken remote sensing and GIS studies of the tenement area, which have indicated that approximately 100sq.km of the tenement is covered with coal-bearing Karoo sediments.
Lewis said this was encouraging because it was similar to the Karoo sediments found in the Moatize coal basin.
“Whilst minimal exploratory work has been undertaken within the licence area, exploratory drilling conducted by Jindal and ENRC within close proximity to the site have yielded positive results and the group is confident that the acquisition of this licence will enhance the group’s overall coal resource base,” Lewis said.
Beacon Hill’s Minas Moatize mine, which is already producing and exporting thermal coal, is on track to commence hard coking production early next year.
The company is also chasing a dual listing on the Australian Securities Exchange in 2012.
