Contango Secures $20M for Muchesu Coal Project
London Stock Exchange-listed mining and exploration company Contango Holdings has made significant strides in developing its 2.6-billion-tonne Muchesu coal project in Zimbabwe. It has secured a US$20 million Revolving Facility Agreement (RFA) from its new majority shareholder, a Chinese investor active in Zimbabwe.
By Patricia Rwafa
This financial support comes as substantial investments continue to flow into the Muchesu site, despite Contango’s current suspension from trading on the London Stock Exchange.
Key areas of the Muchesu project set to benefit from the investment include the construction of a 3,000-tonne-per-day Dense Media Separation (DMS) plant and the expansion of the open pit to increase mining and processing capacity. The DMS plant installation is nearing completion, with testing and commissioning expected in early November, ahead of the planned start of production and processing later in the month.
As previously reported, the DMS plant will be calibrated to process available coking coal. Under the Mineral Royalty Agreement (MRA), a royalty of US$8 per tonne is payable to Contango for washed coking coal, on a monthly basis, in arrears.
The investor has also confirmed that an inaugural royalty payment of US$1 million will be made before the end of 2024, with a second payment of US$1 million expected by the end of Q1 2025. Future royalty payments will depend on operational productivity at the Muchesu site.
Contango anticipates that royalty payments will increase as production scales up. Reflecting their strong partnership, the investor has signalled plans to deliver at least one additional DMS plant to the site under the RFA, along with further capital investments aimed at unlocking additional revenue streams from Muchesu coal.
Carl Esprey, CEO of Contango, provided an update on the project’s progress and the company’s positive outlook despite the temporary suspension:
“During October, we have continued to see material investment at the Muchesu site. Visually, the landscape is changing weekly, and the pace of progress is very exciting. Muchesu has always been a world-class deposit, and it is now benefiting from the level of investment needed to unlock its full potential.”
“While I understand shareholders’ frustrations over the temporary suspension, this is also expected to be lifted very soon, following the completion of the audit and publication of the 2024 accounts, which will coincide with the start of processing operations at the site.”
“With the expectation of a first royalty payment this year and the addition of the investor as the largest shareholder in the company following the issuance of the SFP, the outlook for the company is overwhelmingly positive.”
The Muchesu coal project is a strategically significant asset, containing over 2.6 billion tonnes of coking and thermal coal. It spans 19,236 hectares in the highly prospective Karroo mid-Zambezi coal basin, located in the well-established Hwange-Binga mining area in northwestern Zimbabwe. This deposit is expected to bring high-value benefits not only to local communities but also to Zimbabwe’s broader economy.
Matabeleland North, where the Muchesu project is located, is a hub for mining activity and has been central to the country’s industrial development. The province is essential to Zimbabwe’s Vision 2030 goal of becoming an upper-middle-income society.
As a focal point for coal-to-energy investments, the region is set to unlock up to US$1 billion as part of Zimbabwe’s focus on coal and hydrocarbon energy. The development of the Muchesu coal project will therefore play a crucial role in advancing both local and national economic growth while enhancing Zimbabwe’s position in the global energy market.