BHR Investments Mauritius, a subsidiary of South African coal producer Beacon Hill Resources, has signed an agreement with Acácia Mineração to acquire up to a 70% stake in exploration licence 3788L of Pig Iron mineralization located in the Tete Province of Mozambique.

The 3788L prospecting and exploration licence was issued to Acácia in June 2011 for a period of five years and can be renewed.

As per the terms of the agreement, BHRIM is required to inject $200,000 or more over a period of 12 months for a 20% interest in the coal washing projects (SPV).

However, both the companies have agreed to the condition that the license 3788L will be transferred to a newly established entity.

For an aggregate stake of 51% in SPV, BHRIM will have to undertake and fund a maiden JORC-inferred resource within 36 months and for a 70% interest, a definitive feasibility study would need to be funded by BHRIM within 48 months.

Commenting on the agreement, Beacon Hill Resources CEO Rowan Karstel said that the company has demonstrated that Minas Moatize Coking coal project has the potential to be a tier 1 cash producer and that having commenced the wash plant development towards this target, Beacon is also focusing on maximising its margin potential through the development of its business model and portfolio through vertical integration opportunities.

"Following many months of due diligence, we are confident that Licence 3788L represents a significant potential pig iron opportunity, and that this transaction provides us with an ideal, low-cost opportunity to vertically integrate our portfolio and broaden our exposure to a broader group of steel related commodities.

"We will now proceed to complete our sampling work to understand the size of the deposit better and look forward to providing updates at the appropriate time," added Karstel.

BHRIM, meanwhile, is also liable to examine the mining potential of aggregates and magnetite for coal washing on the property.

The company is intending to secure approval of H.E. the Minister of Mineral Resources of the Republic of Mozambique for license transfer to a new SPV.