Muchesu coal project receives acquisition offer
A coking coal project that started production in Zimbabwe this year could be sold to a larger investor, reflecting strong demand for the coal used by steel manufacturers.
Contango, listed in London, says it has opened talks for a potential acquisition of the Muchesu project, which began production in May and exported its first coking coal in August. Contango has, separately, entered into a deal with “a leading steel producer” to supply 1,000 tonnes of washed coking coal for a formal industrial trial in November.
“Muchesu is fully commissioned and ready to expand operations and we are primed to deliver washed coking coal to the market,” Contango CEO Carl Esprey says.
“In addition, we have now received a credible approach with respect to our assets. Whilst there is no guarantee a firm offer will be made, we expect this process to move fast and will update shareholders on the details of the proposals as appropriate.
The potential coking coal buyer plans to buy an initial 80,000 tonnes per annum of washed coking coal from Muchesu, which would be 6,700 tonnes per month. This would give Contango revenue of over US$100 000, paid in advance.
While Contango does not name the potential coal offtaker, a likely buyer is ArcelorMittal, which already buys the bulk of Zimbabwe’s coking coal – including from Hwange Colliery. Its executives, who visited Zimbabwe a year ago, said the company plans to increase its purchases from Zimbabwe.
Contango recently sent the first consignment of 20,000 tonnes of coal being sold to UAE commodity company TransOre. Contango is waiting for fresh orders.
Zimbabwe last year exported US$166.4 million worth of coking coal, up from US$39 million in 2020, according to government figures. Government hopes the likes of Contango can deliver more.