Strategic Update

3 December 2012

Beacon Hill Resources Plc / AIM: BHR / ASX: BHU / Sector: Mining

Beacon Hill Resources Plc ("Beacon Hill" or "the Company")

Strategic Update

The Board of Beacon Hill Resources Plc ('Beacon Hill' or 'the Company') is pleased to provide shareholders with a strategic update on the Company and its Minas Moatize Coal Project.

Following the appointment of Rowan Karstel as Managing Director on 2 November 2012, the Board has focussed on identifying and building a new management team based in Southern Africa, to lead the Company forward into commercial production at Minas Moatize.

Rowan's first initiative as Managing Director was to complete an immediate review of the Company's operations, with a primary focus on Beacon Hill's primary asset, Minas Moatize. Rowan's key findings and recommendations were presented and subsequently approved by the Board. These findings and strategic decisions are highlighted below:

Highlights

·; Minas Moatize Expansion Strategy: Targeting a phased development strategy which delivers a significant reduction in proposed capital expenditure going forward to achieve plant capacity of 1.8Mpta ROM in January 2013 and 2.8Mpta ROM by December 2013.

·; Coking Coal Strategy: Mining activities will initially be focused on high value coking coal shipments following the completion of the wash plant upgrade, with first production from February 2013. The ramp up of export production from Minas Moatize will be phased to match Beacon Hill's rail capacity.

·; Wash Plant Upgrade: The design of the wash plant upgrade has been modified to remove potential bottlenecks in order to meet the rated capacity. Approximately US$1.1m will be directed to implementing those issues.

·; Phase 3 Expansion: Given the materially lower capital expenditure associated with the Phase 2B & 2C wash plant upgrade, the Board has made the decision to not proceed with the Phase 3 expansion as envisaged in the Definitive Feasibility Study ('DFS'), at this stage.

·; Logistics: The Board has prioritised the use of rail in 2013 for bulk transporting coal to the Port of Beira and remains confident of securing a rail allocation by the end of January 2013.

·; Rolling Stock: Minas Moatize Limitada ('MML') has entered into a preliminary heads of agreement to lease locomotives and rail wagons conditional on an allocation on the Sena Rail Line.

·; Cost Reduction Programme: The Board has approved a cost cutting plan that will materially reduce labour costs in 2013. A continuous improvement exercise has also commenced along the operational value chain to further reduce costs and improve efficiencies.

Justin Farr-Jones, Chairman of Beacon Hill, commented, "We have appointed Rowan Karstel to provide Beacon Hill with extensive coal mining experience and expertise as we enter commercial production and seek to optimise our capital spend going forward. Rowan has identified a strategy to deliver a significant reduction in proposed capital expenditure going forward to achieve plant capacity of 1.8Mpta ROM in January 2013 and 2.8Mpta ROM by December 2013. I am very pleased to report his impact has been both immediate and positive for all shareholders.

In addition, the Board has taken a close look at our cost structure and concluded that Beacon Hill can achieve significant costs savings that will contribute immediately to the bottom line in 2013. At the same time, we continue to move Beacon Hill forward with a revised production ramp up strategy and through identifying leasing options for rail rolling stock. We are entering a critical phase for Beacon Hill and as a Board we look forward to reporting positive developments to shareholders over the final quarter of this year and the first quarter of next year. Achieving our near term objectives of obtaining a rail allocation and the commencement of production will help restore some credibility after a disappointing 2012. The Board believes the current share price does not accurately reflect the current or inherent value in the Company or its prospects. Ultimately, the Board bears responsibility for ensuring that Beacon Hill and its management deliver the performance that will fundamentally re-rate the valuation of the Company."

Minas Moatize Operations

Following Rowan Karstel's appointment as Managing Director on 2 November 2012, the Board focused on identifying and building a new management team based in Southern Africa, to lead the Company forward into commercial production at Minas Moatize. Rowan was mandated by the Board to complete an immediate review of the Company's operations. The key findings and recommendations were presented and subsequently approved by to the Board.

Production

The ramp up of export production from Minas Moatize will be phased in a way to match Beacon Hill's rail capacity, which is expected to be initially 500,000tpa, and to rise in line with capacity increases on the Sena Rail Line.

Coking Coal

The Board has made the decision to focus its mining activities initially on high value coking coal production and shipments following the completion of the wash plant upgrade. Coking coal will be transported using the Sena Rail Line (following the receipt of a rail allocation), in order to maximise revenue and returns.

Mine Planning

Opportunities to improve on the historic short and medium term mine planning have been identified, and the Company has commenced rectifying this in conjunction with its mining contractor using holistic mine planning software. The current open pit will be mined deeper to access the lower Chipanga seam with good quality coking coal yield sooner than the previous plan. Minas Moatize benefits from an average strip ratio of 1.9 which means the mining cash cost is at the lower quartile of cost curve.

Wash Plant Upgrade

Potential bottlenecks and limitations in the design of the wash plant upgrade were identified as part of the review process and as result an additional circa US$1.1m was required to complete the wash plant upgrade. The US$1.1m will be used to improve the tip capacity with a new feeder breaker, additional screen capacity in the plant and a new crusher section that should enable the plant to operate effectively and efficiently in the generation of coking coal. The US$1.1m has been committed from existing and available funds and the wash plant upgrade is now scheduled to be completed in January 2013.

Minas Moatize Expansion

The Company has revised its ramp up strategy in accordance with the review undertaken by new management to optimise the project's net present value by timing expansions with export capacity received on the Sena Rail Line. The staged development further breaks down the prior Phase 2 expansions into three parts, by adding Phase 2B and 2C as summarised in the table below:

Given the materially lower capital cost provided in the Phase 2B &2C upgrade, which takes the ROM wash plant capacity to 2.8Mtpa for approximately US$16m relative to the previously planned Phase 3 plant expansion to 4Mtpa for $150m, the Board has made the decision to not proceed with the Phase 3 expansion as originally envisaged in the DFS, published in February 2012. At current coal prices, the Phase 3 expansion to 4Mtpa ROM (and specifically the capital cost requirement) remains an option only if Beacon Hill is successful in partnering with an adjacent property to mine adjacent reserves to extend the mine life.

The revised Phase 2B & 2C plant upgrade will have the potential to achieve 70% of the targeted ROM output of the Phase 3 expansion (2.8Mtpa v 4.0Mtpa ROM Coal) for a fraction of the capital cost. If the Board decides to proceed with the Phase 2B &2C upgrade, the total cost of the wash plant upgrade will be circa US$16m as opposed to circa US$100m as discussed in the DFS.

Logistics

Rail

The Board has prioritised the use of rail in 2013 for bulk transporting coal to the Port of Beira. The Board remains confident of securing a rail allocation of initially 500,000tpa on the Sena Rail Line before the end of January.

Rolling Stock

MML has entered into a preliminary heads of agreement to lease locomotives and rail wagons to move coal along the Sena Rail Line. The rolling stock is expected to be received in Mozambique during Q2 2013 at the earliest, and remains subject to satisfactory leasing finance, supplier contracts and definitive master lease documentation as well as final rail allocation confirmation from Portos e Caminhos de Ferro de Moçambique ('CFM').

Shipment

The Company's second test shipment of thermal coal, which is currently stockpiled at the Port of Beira, will incur a loss for the Company due to both lower than expected volumes, current realised prices and deficiencies in the Company's historic management of coal marketing that have been identified and that is being currently being rectified by new management. A vessel has been nominated and the cargo will be sold via the marketing agreement with Vitol Coal S.A.

Corporate

Operational Management Team:

Further strengthening of Beacon Hill's operational management team in Southern Africa will be required once the Company attains a definitive rail allocation on the Sena Rail Line. As a first step, the Board will look to hire a Chief Operating Officer ('COO') to replace Peter Wilson, who will be leaving the Company shortly. The new COO will be based between Johannesburg and Tete and will assist Rowan Karstel with the operations of the Minas Moatize Project.

Cost Reduction

The Board has approved a cost cutting plan which is currently being implemented across the Company. The cost cutting plan is intended to place Beacon Hill amongst the lowest quartile in production costs for all coal mines. The cost cutting plan will initially result in the Company closing its Australian Office in Melbourne and rationalising of the management and finance function into Johannesburg and Tete by March 2013. The acceleration of the transfer of management and operations from Australia to Southern Africa will reduce operating costs significantly through reductions in staff and travel costs. Further staff costs savings are anticipated through the elimination of duplicated managerial positions and further cost cutting initiatives have been identified and will be implemented.

A continuous improvement exercise has also stated along the operational value chain to further reduce costs and improve efficiencies. Various cost saving initiatives have already been identified with the new mine plan and along the logistic operations.

Funding Position

The Group has raised approximately US$8.75m in the past two months through the issue of equity and convertible loan notes. As previously announced, on 18 October 2012, the Company issued US$4m in Ordinary Shares to contractors to provide additional working capital funding. In addition, on 7 November 2012, the Group issued approximately US$4.75m in unsecured convertible loan notes to assist with funding the additional costs associated to the wash plant upgrade and for general working capital purposes.

The Board believes that funds raised as part of the recent issue of convertible loan notes will provide the Company with sufficient funds to allow the company sufficient time to achieve a rail allocation and to commence coking coal production, both of which should positively impact shareholder value.

Furthermore, the Board expects to implement a debt funding facility in Q1 2013 and has mandated a leading bank to arrange a US$25m facility that will be used to provide the Company with ongoing working capital funding and to refinance the Company's existing senior debt facility held with Vitol Coal S.A. The Board believes that demonstration of the effectiveness of the wash plant upgrade and the receipt of rail allocation will be important milestones required to close the debt facility. As key development milestones are achieved, the Board also anticipates that it may raise further funds in Q1 2013 for Phase 2B of the wash plant upgrade, working capital purposes and to improve the logistics chain.

Speculation around Key Shareholder

The Board notes the recent transaction in which a change of control occurred in the Group largest shareholder Renaissance Capital. Renaissance Capital and Onexim, the new majority shareholder have confirmed to the Board of Beacon Hill that (i) Renaissance Capital continues to believe in Beacon Hill's potential and; (ii) Renaissance Capital is not a seller at the current market price, which does not reflect anywhere close to Beacon Hill's true valuation and; (iii) Renaissance Capital intends to continue to work with Beacon Hill management, the Board and other shareholders to support Beacon Hill in reaching its full potential.

Note: Renaissance Capital at the latest disclosure date held 352,581,405 Ordinary Shares (31.74%) in Beacon Hill, of which 122,254,896 (11.01%) are held by Renaissance Capital on behalf of a Renaissance Capital co-investor.

**ENDS**