Production at Lubu coal project in Hwange commences
Contango Holdings, a London listed natural resource development company, says it has commenced production at its Lubu Coking Coal Project in Hwange, Zimbabwe.
The company said that coal production had commenced within the timelines the company set, end of March 2022.
The miner said production was now underway at its Lubu Block 2 pit, which it selected given its high quality coking coal potential and proximity to the surface.
Studies done by the company at the site have indicated that an estimated 96 tonnes of coking coal could be present within Block 2.
The block forms part of the broader Lubu complex, where an estimated 1,25 billion tonnes of coal is said to be available.
Carl Esprey, chief executive officer of Contango said “Bringing our first asset into production is a milestone event for Contango.
I would like to thank our in-country team for their efforts in helping us accomplish this important achievement. The resource at Lubu is significant and we are now finally in a position to start to receive the economic benefits.”
The company is targeting an initial stabilised mining rate of 5 000 tonnes per month as it targets to stockpile production during the second quarter of 2022 pending the installation of a wash plant at the mine in the same period.
Stockpiling is being done in order to be able to provide sufficient feedstock for the wash plant and as well to ensure continuity of supply of coal and coking coal.
The company has been in a rush to enter into uptake agreements with potential buyers of its coking coal in the region and locally as well.
Mr Esprey said, “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.”
Contango believes that closure of some coal mines has led to better prices hence their optimism towards the company’s future.
“Coking coal and coke have suffered from significant under-investment and mine closures in recent years and this, coupled with global infrastructure projects and transition towards green energy, have led to a significant uptick in the commodity prices of both coking call and coke.
“Accordingly, Lubu has come into production at a time of substantial demand for our products and limited supply,” Mr Esprey said.
The company said it is confident that margins in excess of US$300/tonne should be achievable based on ongoing discussions with potential off-taker.