Online Reporter
Nqobile Bhebhe, Zimpapers Business Hub
CONTANGO Holdings Plc is poised for a significant transformation as it transitions from an operating company to a royalty-based business model, with its Muchesu coal project in Binga at the heart of the new strategy.
Contango Holdings is a UK-based natural resource development company focused on mining and exploration projects, primarily the Muchesu Coal Project in Zimbabwe and the Garalo gold project in Mali.
In its annual report for the year ended May 31, 2025, the company announced that its future focus would be on deriving sustainable value from royalties, while supporting the development of the Muchesu Mine by its new operating partner, Huo Investments (Pvt) Ltd.
“Looking to 2026, Contango is transitioning from an operating company to a royalty-based business model. The board will continue to support Huo Investments as it completes the development programme at Muchesu, with first commercial production targeted for early 2026,” said Contango chairman, Mr Gordon Thompson.
The shift follows the signing of definitive agreements on July 3, 2024, which saw Contango transfer operational control of Monaf Investments (Pvt) Ltd to Huo Investments. Contango retained a 24.75 percent stake in Monaf Investments, which holds proprietary rights over the Muchesu project, after selling 51 percent to Huo Investments.
“Contango will continue to hold a 24 percent interest in Monaf and will continue to support Huo Investments in advancing the Muchesu Mine into a sustainable mining operation, focused on producing high-quality coking coal for industrial use across southern Africa,” Mr Thompson said.
He added that while the original strategy was to secure offtake agreements to underpin development, the company was presented with an alternative path that unlocked greater potential for Muchesu. “Remembering that our initial strategy for Muchesu was to progress offtake negotiations with the objective of securing a contract to underpin development and generate free cash flow for reinvestment. While those discussions were ongoing, the board was presented with an alternative, which unlocked the project’s potential through a partial sale of our stake in the project to Huo Investments,” he said.
In June 2024, following due diligence, Contango agreed to sell its controlling interest in Monaf to Huo Investments. This deal also saw Huo take up a 20 percent stake in Contango Holdings Plc. “This agreement provided Contango with a life-of-mine royalty, including a guaranteed minimum of US$2 million per annum, a committed investment of at least US$20 million by Huo Investments into Muchesu — equivalent to Contango’s historic investment — and the refund of Contango’s historic US$20 million investment through future revenue streams,” said Mr Thompson.
Following the deal, Huo Investments became Contango’s largest shareholder through its participation in the January 2025 placing. They have since delivered on their capital commitment, commissioning a Dense Media Separation (DMS) plant with a capacity of 3 000 tonnes per day of washed coal, while also expanding the open pit and commencing construction of coke batteries.
During the year under review, Contango received US$700 000 of the first US$1 million due under the Mineral Royalty Agreement, with the remaining US$300 000 settled in June 2025. The company expects the second US$1 million royalty payment by the end of the fourth quarter of 2025.
Once the DMS plant is fully commissioned and operating at design capacity, royalty payments are anticipated to exceed the guaranteed minimum of US$2 million per annum, as per the definitive agreements.
Meanwhile, Contango raised gross proceeds of £1.85 million in January 2025 through a placing of 191 255 217 new ordinary shares at 1.11p each, with £272 933 applied to reduce creditor balances.
For the period, the Group recorded revenue of £nil (2024: £64 218 coal sales) from its Monaf investment following the partial disposal in July 2024. However, a royalty income of £567 551 (US$700,000) was received from Huo Investments, reflecting the company’s shift in focus towards cash generation through royalties.
Mr Thompson said the new model leaves Contango better positioned to strengthen its balance sheet and ensure long-term returns for shareholders, while Huo spearheads Muchesu’s operational future.
