malvernmugadzikwa
Nqobile Bhebhe
CONTANGO Holdings, a natural resource development company operating coal projects in Binga, Matabeleland North Province, has indicated that the success of development and production activities at Muchesu cannot be guaranteed.
The company identified several risk factors, including financial, fluctuating commodity prices, local facility availability, adverse seasonal weather and issues related to licenses and permits.
According to the firm’s Annual Report and Financial Statements For the year ended 31 May 2024 released last week, chief executive officer, Carl Esprey, said operational success is at risk.
“There can be no assurance that the development and production activities at Muchesu will be successful,” said Esprey in his strategic report.
“The group will be subject to a variety of risks associated with current and any potential future joint ventures, which could result in a material adverse effect on its future growth, results of operations and financial position.
“Potential legal proceedings or disputes may have a material adverse effect on the group’s financial performance, cash flow and results of operations. Financial risks, including but not limited to foreign exchange effects and valuation of intangible assets.
The group may not be able to close the previously referenced Definitive Agreements entered with the Investor.”
Recently, the London – listed natural resource development firm, announced that it had entered into an agreement to sell 51 percent of its shareholding in the Muchesu colliery project to a Zimbabwe-based Chinese national, Wencai Huo.
Contango will retain a 24 percent stake in the project.
The process of formally transferring the shares to Huo Investments and gaining the requisite approvals from Government agencies is under way and should be completed by the end of the year.
Esprey added that the Group will be subject to taxation in several different jurisdictions and adverse changes to the taxation laws of such jurisdictions could have a material adverse effect on its profitability
“The Group’s insurance may not cover all potential losses, liabilities and damage related to its business and certain risks are uninsured and uninsurable.”
On commodity prices, he said the price of coal may affect the economic viability of ultimate production at Mooches.
The revenues and financial performance are dependent on the price of coal and coke Operational risks, including but not limited to availability of local facilities and adverse seasonal weather.
The report further adds that the Group’s operational performance will depend on key management and qualified operating personnel which the Group may not be able to attract and retain in the future.
However, he noted that there are mitigating actions set against the cited risk categories.
Pertaining to exploration and development risks, the firm said: “There can be no assurance that the development and production activities at Muchesu will be successful, however, significant exploratory work has been conducted at the project which supports the Board’s confidence that profitable mining and processing operations can be developed.
“Additionally, the phased development route which has been employed at Muchesu seeks to mitigate risks along the development life cycle of the project. Applications for the renewal or extension of any permit may not result in the renewal or extension taking effect prior to the expiry of the previous permit. There can be no assurance as to the nature of the terms of any award, renewal or extension of any permit. The Group regularly monitors the good standing of its permits.”
He said as commercial mining ramps up at Muchesu, the Group will increasingly review changes in commodity prices so as to ensure projects remain both technically and economically attractive.
Bongani Ndlovu