London Stock Exchange-listed Contango Holdings has started developing markets for its semi-soft coking coal being mined by its Zimbabwean mining unit due to a huge demand by users in the Southern Africa region.
Contango has a 70% interest in the Lubu Coal Project based in Matebeleland North in Zimbabwe with the remaining 30% held by local partners.
Under this initiative, the group may develop a relatively material operation without recourse to full-scale mining given that the terms of the Special Grant area does not stipulate a maximum threshold of production under the trial mining licence and bulk licence.
“The board has focussed on developing markets for its semi soft coking coal and 28MJ/kg CV coal which is known to be in demand by industrial users in the Southern Africa region.
“The group may develop a relatively material operation without recourse to full-scale mining given that the terms of the Special Grant area does not stipulate a maximum threshold of production under the trial mining licence and bulk licence,” Contango Holdings chief executive Roy Pitchford (pictured) said.
The coal seams within Block B2 are from surface down to a maximum depth of 47m, ensuring operating costs are kept at very attractive levels.
Contango is initially focused on the production of coking coal, with sales expected to local and international consumers.
Pitchford noted that a key development during the period was the advancement of long-term off-take discussions for coking coal produced at Lubu with a Zimbabwean subsidiary of a major Chinese industrial company and one of the world’s largest stainless-steel producers.
He said the potential offtake partner has a sizable footprint in Zimbabwe, with plans to construct a US$1bn carbon steel plant in the country and is currently in the process of constructing several coke batteries in the Hwange region of Zimbabwe.
The Contango team undertook a productive site visit in the second half of 2021 with senior members from the major Chinese industrial company in attendance.
Since the site visit discussions have continued to make good progress, Pitchford said.
Contango is now looking to optimise the development of Lubu with a fully integrated operation enabling the manufacture of coke However, following further positive results from studies during the second half of 2021.
Pitchford said Contango will focus on extracting bulk samples of the high value coking and metallurgical coals found in the 1A Lower and MSU seams.
Although close to surface, this will be treated as an underground operation, like those previously mined around Hwange Colliery, enabling the group to focus specifically on the high value product of particular interest to the major Chinese industrial company for its newly built coke batteries and for the expected Contango-owned coke battery.
He said company is fully funded to bring Lubu into production at the end of the first quarter of 2022 following a capital raise.