Contango Holdings, a London Alternative Investment Market (AIM) listed coal miner, has taken delivery of key equipment for its coal washer plant to be constructed at its Lubu Coal Project in Hwange, ahead of scheduled first coking coal production and sales expected to start by March this year.
The company reported that the wash plant arrived at site on February 3, 2022 and has been unloaded ahead of assembly.
In a statement the company said, “The wash plant site and foundations were prepared in anticipation of its delivery, and construction and assembly is expected to take approximately 3 – 4 weeks, with commissioning following thereafter.”
Once calibrated and certified to be operating efficiently the wash plant will have the capacity to produce 20 000 tonnes of washed coking coal per month.
In addition, the company also expects to take delivery at the site of its surface miner in the coming days. The surface miner has a cutting width of 2200mm, is ideal for selective mining, and can mine up to 500 tonnes per hour.
“The laboratory is also expected to arrive at site in the first half of February. Following its delivery, all significant capital items will be at site enabling the company to ramp up activity ahead of first production and sales at the end of March 2023,” the company added.
The company said it continued to make good progress at the site in expectation of delivery of the wash plant and surface miner, and that it was fully capitalised and well-funded. Given the demand for Contango’s products the company will now also set about expanding the planned footprint of the pit to enable increased production capacity. This positive development was funded out of existing cash resources following our 7,5 million-pound (US$9 million) capital raise earlier last quarter,” chief executive Carl Esprey said.
Mr Esprey said that looking at phase 2, they remain focused on being able to capture the full value of their product by manufacturing coke for use in the steel and ferro-alloy industries.
Coke is an upgraded product derived from coking coal and commands a significant price premium to coking coal.
The Contango management team is still engaged in discussions with a number of potential off-takers for the proposed coke, including existing coking coal off-take partner, AtoZ, in addition to other customers in Zimbabwe and international commodity trading houses.
“Guided by the conversations that we have had with potential offtake partners, we anticipate that any future offtake agreement for coke is likely to be accompanied by the requisite funding to finance the associated infrastructure, principally the installation of coke batteries.
The company also retains the option of funding the coke batteries through project-level debt, or self-funding from internal cash flow. The London listed miner also announced that it has entered into a non-binding Memorandum of Understanding (MOU) with a leading multi-national company (MNC).
The MOU outlines a framework for collaboration across not only coking coal, but also in the manufacture of coke and follows several site visits and a preliminary analysis of a 50 kilogramme sample of its Muchesu washed coking-coal.
Mr Esprey said, “The signing of this MOU is hugely material for Contango. The MNC is active in Zimbabwe and is a world leader in its field. I believe their interest in the Muchesu Coal Project is testament to its highly attractive characteristics, both in terms of scale and coal quality.”
The intention is to undertake a stage-gated due diligence exercise that will look at all aspects that would underpin either a coking-coal offtake agreement, or the possibility of establishing a coking plant adjacent to the Muchesu Mine.
“The due diligence process is underway, and one of the first steps has been to deliver a 1 tonne coking-coal sample to the MNC for further testing. The ongoing discussions are focussed on the viability of a long-term offtake and the potential of a joint venture partnership in establishing coke batteries and developing an underground mine,” Esprey added.
“Given that Muchesu has a 2 billion tonne plus resource there is plenty of scope for multiple offtakes across our whole suite of coal products – the MOU does not focus on thermal coal for instance.”
The Contago chief executive said he looks forward to updating the market on further progress. – The Herald
