UK-listed firm starts coal production in Hwange Contango Holdings says bringing a mine into production is no small feat for a junior mining company

Tapiwanashe Mangwiro Senior Business Reporter

Contango Holdings, the London-listed natural resources development company, which owns the Lubu Coal Mine in Hwange, commenced washed coal production on Tuesday.

This historic development followed dry and wet runs of the wash plant over the last few days and the integration of the screen with the broader processing facilities.

Carl Esprey, the chief executive officer (CEO) of Contango Holdings, commented, “This is a landmark moment for Contango. It is no small feat to bring a mine into production and something most junior mining companies never achieve.” According to the miner, stockpiles of coking coal have already been established by the Wirtgen Surface Miner, which, as previously reported, can mine at a rate of up to 1 000 tonnes of coking coal per hour.

“The Surface Miner continues to extract coking coal and is increasing the wash plant stockpiles further,” the company said in a production update.

The miner had initially scheduled the end of the 2023 first quarter as the day of first production, but the chief executive officer acknowledged that the process took longer than anticipated.

“I appreciate this process has taken longer than expected, but we are now producing a high-quality coking coal product and very soon will be a revenue-generating company.

“We have achieved this during turbulent markets and without significant dilution, which is a testament to the team assembled in the country and the attractiveness of the Lubu Project,” Mr Esprey added.

Lubu Coal said it will continue to undertake studies on washed coal production to ensure optimisation and samples will also be sent to several parties who have indicated they would look to enter into long-term offtake contracts.

The focus for the company is now on how to best expand operations at the mine while leveraging off their producer status.

Mr Esprey added that, “We have advised previously that we intend on manufacturing coke at Lubu, which is expected to increase our margins from US$80 per tonne to over US$300 per tonne at current pricing. We have continued to pursue this avenue in discussions with potential strategic partners.

“The sheer scale of Lubu opens up significant potential across a variety of revenue streams and we intend to focus on unlocking the potential of Lubu from this very solid foundation.”

The company said this included the company’s potential Strategic Partner under a Memorandum of Understanding and complements Contango’s existing offtake for 10 000 tonnes a month of washed coal.

All coking coal produced according to the statement, including coal dispatched as samples, will be sold at factory gate, with the current Minerals Marketing Corporation of Zimbabwe (MMCZ) price still set at US$120 per tonne.

The company also advised that the construction of a small-scale coke battery has been completed at the Lubu Coal mine.

The pilot coke plant has been constructed to provide the on-site capability to manufacture coke from washed coking coal produced at Lubu for testing by future offtake partners and for the company’s internal studies and quality control.

The ultimate coke batteries to be installed at Lubu for future production and sales will be considerably larger and have different specifications.

“Whilst the expected margins on our coking coal production are very attractive, we have always maintained the highest margin business stems from the manufacture of coke at Lubu.

“The completion of the pilot coke plant will now enable us to generate larger coke production for testing, something required to enable us to conclude discussions under our MOU and, as required, provide additional samples to other parties who have expressed interest in coke produced from Lubu,” said Mr  Esprey.

Lubu Coal Mine expects to announce the first sales of washed coking coal in June 2023.

The Company’s projects include the Lubu Coal Project and the Garalo-Ntiela Project. The company has a 70 percent interest in the Lubu Coal Project (Lubu) in Zimbabwe, with the remaining 30 percent held by supportive local partners.

Its Lubu Coal Project covers approximately 19,236 hectares of the Karoo Mid Zambezi coal basin, located in the established Hwange mining district in north-western Zimbabwe.

The Garalo-Ntiela Project occupies 161.5 square kilometers (km2), in the Sikasso region of southern Mali, 200 kilometers south-east of the capital Bamako and close to the Guinea border.

The permit is surrounded by a number of multi-million-ounce gold deposits.

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