The Chronicle
7 – 9 minutes
Prosper Ndlovu and Nqobile Bhebhe, Business Reporters
LONDON-listed natural resource development company, Contango Holdings, is set to commence commercial coking coal production at Muchesu area in Binga next month, adding impetus to the ongoing transformation of the previously perceived marginalised district.
By exploiting its huge untapped coal deposits, Binga, which shares the borders with Hwange, Lupane, and Gokwe districts is primed to leapfrog past development hurdles and increase its contribution to the mainstream economy through enhanced economic activities covering mainly tourism, mining, fishing, and agriculture.
Now renamed Muchesu Coal, the new Lubu Coal Project, is expected to trigger a string of economic spin-offs for the community including job creation while boosting the country’s energy sector as well as exports.
The investment comes at a time when the Government under the Second Republic is taking deliberate steps to mainstream speedy development of Binga in line with the devolution agenda, which aims to ensure inclusive development across the country.
Contango Holdings has already taken delivery of critical mining equipment and key accessories on site, and focus is now on speeding up plant assembly processes in readiness for the targeted commencement of production.
On Monday the investor successfully delivered a surface miner Wirtgen 2200 machine, which has a cutting width of 2200mm, ideal for selective mining, and can mine up to 500 tonnes per hour.
Another key mining machine, a wash plant expected to produce 20 000 tonnes of washed coking coal per month is already on site.
The company has indicated that the wash plant assembly process is expected to take approximately three to four weeks from the time of delivery.
“The Wirtgen 2200 Surface Miner has arrived at site. It can mine up to 500 tonnes per hour in harder materials and will initially be used to expand the #CGO open pit/clear the overburden, before commencing mining of the coking coal seam at a rate of up to 1,000t per hour from #March23,” said Contango in latest official update through its Twitter handle.
In a detailed report earlier, the investment firm said focus will be directed on mining from Block B2, where extensive work has also been undertaken to define the specific properties of the coal resource.
It said the coal seams within Block B2 are from surface, down to a maximum depth of 47 metres, thus ensuring operating costs are kept competitive.
Added to that, the Lubu deposit contains significant quantities of both coking and thermal coal and at Block 2, it is expected that approximately 60 percent of coal extracted will be thermal coal, while 40 percent will be coking coal.
The firm is of the view that the development of thermal coal sales would only require modest capital costs, funded from internal cash flow, to increase the scale of operations and infrastructure while the cost of mining is negligible as the thermal coal is effectively a by-product of the coking coal mined.
“The company anticipates that it will be able to deliver 10,000t of coking coal and 10,000t of thermal coal per month based on current capacity by the end of H1 2023, subject to finalising transport and international export routes,” said Contango.
Commenting on the investment, Minister of State for Matabeleland North Provincial Affairs and Devolution, Cde Richard Moyo, described the project as “massive” saying its fruition was a demonstration that Zimbabwe is indeed open for business.
“We are aware of this massive project in Lusulu and greatly thank President Mnangagwa and the Second Republic for facilitating such big investments in our province and the country as a whole,” he said.
“No doubt this coal mining project will transform the entire Binga District in a big way through the creation of jobs for locals, associated infrastructure development, corporate social responsibility projects, and upgrading of Cross-Dete-Binga Road, among other benefits.”
Minister Moyo said the investment by the United Kingdom company in Binga buttresses Government’s determined efforts to transform the whole of Matabeleland North into a leading economic province in the country.
“As you recall our province is one of the tops in terms of contribution to the national economy as we are a major source of power generation at Hwange, coal production, gold mining, farming, and tourism,” said Minister Moyo.
“We now have the Gwayi-Shangani project coming on board and it will attract more investments.
“As a province, we are open for business and invite more investors to come as we continue to grow our contribution to the Gross Domestic Product.”
As part of its broader strategic plans, Contango Holdings has also cast its eyes on producing coke by installing coke batteries that process coking coal into coke for the industrial and ferro-alloy industries.
So confident of its plans that Contango says it has received heightened interest from a number of potential partners and off-takers with respect to the manufacture of coke at Lubu.
In April last year, chief executive officer of Contango, Mr Carl Esprey, noted that there is sufficient demand for coal and was in a position to enter offtake contracts in the near term.
Said Mr Esprey: “I have spent much of the second half of this month in South Africa and Zimbabwe and been able to meet potential off-takers.
“The demand is clear and with production start-up risk now drastically reduced I would anticipate being in a position to enter offtake contracts in the near term.”
The coal mining project is another example of growing investor confidence in the country under the Second Republic led by President Mnangagwa.
Coal is an integral element of the Government’s target to grow mining into a US$12 billion industry by 2023, which will lay a strong foundation for Zimbabwe’s broad vision to transform into an upper-middle-income country by 2030.
In November last year, the London Alternative Investment (AIM) listed miner went into the market to raise funds for mine expansion by issuing new shares.
A total of 125 000 000 new ordinary shares at six pence per share were expected to be put on the market to raise gross proceeds of £7,5 million (US$8,087 million) from existing and new shareholders to develop its Zimbabwe coal asset.
According to Contago, the placing shares represented 26,4 percent of the enlarged share capital of the company.
Contango said it will use the proceeds to finalise mine development, complete the installation of the wash plant, acquire further mining equipment and expand operations at the Lubu Coal Project.
Part of the money will also enable the company to finalise the agreed relocation of additional households from the mine site, thereby providing a larger footprint for the mine and operations to meet heightened demand.
According to official records from the company’s website, Contango holds about 70 percent interest in the Lubu Coal Project with the remaining 30 percent being held by supportive local partners.
The project covers 19,236 hectares of the highly prospective Karroo Mid Zambezi coal basin, located in established north-western Zimbabwe.
Previous owners have expended more than US$20 million on Lubu, which has enabled an estimated sizable resource in excess of 1,3 billion tonnes. – The Chronicle
