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Tapiwanashe Mangwiro Senior Business Reporter
London Alternative Investment (AIM) listed miner Zimbabwean coal miner, Contango Holdings, which owns the Lubu Coal Project in Hwange, is seeking to raise funds for mine expansion by issuing new shares.
The company said on Monday that it would be placing 125 000 000 new ordinary shares at 6 pence per share to raise gross proceeds of £7,5 million (US$8,087 million) from existing and new shareholders to develop its Zimbabwe coal asset.
Coal is an integral element of the Government’s target to grow mining into a US$12 billion industry by 2023, which would lay a strong foundation for Zimbabwe’s broad vision to transform Zimbabwe to an upper-middle-income country by 2030.
Contago said recently that it had received many international inquiries on the possibility of arrangements for the supply of high-quality thermal coal from Zimbabwe following the discovery of huge deposits at Lubu.
According to Contago, the placing shares represent 26,4 percent of the enlarged share capital of the company.
Contango chief executive, Carl Esprey said, ”I am delighted to report the strong demand for this capital raise, particularly in the context of difficult equity capital market conditions for junior mining companies and we welcome the support of a number of new shareholders to the register.
Contango said it will use the proceeds to finalise mine development, complete the installation of the wash plant, acquire further mining equipment and expand operations at the Lubu Coal Project.
The money will also enable the company to finalise the agreed relocation of additional households from the mine site, thereby providing a larger footprint for the mine and operations to meet heightened demand.
Further, Contago said the funds will enable them to settle all outstanding borrowings incurred by the company with respect to its capital expenditure on developing the mine since the second quarter of 2022.
The company hopes that the capital raise will also afford it the financial flexibility to pursue its growth plans with regard to coke products and thermal coal.
”I believe it is testament to the attractiveness of the Contango investment proposition that significant funds were available to ensure Contango is now fully capitalised to deliver on both the current offtake and our expansion plans,” Mr Esprey said.
The company said the current offtake agreement for the sale of 10 000 tonnes per month of washed coal, at the prevailing Minerals Mining Corporation of Zimbabwe (MMCZ) market price of US$120 per tonne, was expected to provide an estimated margin of circa US$80 per tonne.
”Most of the site preparation work has now been completed. We are now in full construction mode and opening up the pit further.
”Our focus remains on being in a position to deliver on first sales by year-end before rolling out our coking coal expansion, as well as our thermal coal and coke products,” Mr Esprey added.
The company said it can fund any future capital expenditure from internally generated cash flow from the sales anticipated to begin shortly.
Directors want to capitalise on the strong coal pricing and demand environment and given the material coal resource of 2,6 billion tonnes at Lubu, with a significant weighting of coking coal, there is clearly scalability in both production capacity and sales.
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