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Tapiwanashe Mangwiro
Senior Business Reporter
Contango Holdings, a London-listed natural resource development firm, says installation of its coal wash plant is now 75 percent complete, putting it in good stead to meet the target of first coking coal production and sales by the end of next month.
Increased coal production and processing capacity will be critical going forward in light of impending operationalisation of Hwange units 7 and 8, which should start coming online at the end of next month with the first unit already undergoing system synchronisation.
The company has received a number of requests for the regular delivery of thermal coal from a variety of international markets and is currently looking to finalize export logistics.
The company last year raised £7,5 million in an oversubscribed placing to fund its coke product and thermal coal production and growth plans.
The proceeds from the placement were earmarked for mine development, installing the coal wash plant, acquiring additional mining equipment, and expanding operations at the Lubu Project in Hwange.
“Construction of our Contango wash plant is now 75 percent complete. Upon completion, crushing and screening will also be installed. Following commissioning and optimisation it is expected to be able to produce 20 000 tonnes of washed coking coal per month,” Contago said.
At 20,000 tonnes per month of coal, the coal wash plant is double the amount of Contago’s existing offtake contract, and company said last year it therefore expected to enter into further offtake deals in to utilize this spare capacity
Additionally, the company indicated that the construction of the Contango water storage tank had been completed. The storage has a 1 million litre capacity. Pipework to the wash plant has also been installed and the borehole pumps will be connected shortly.
“Given the demand for Contango’s products the company will now also set about expanding the planned footprint of the pit to enable increased production capacity. This positive development was funded out of existing cash resources following our 7,5 million-pound (US$9 million) capital raise earlier last quarter,” Chief Executive Carl Esprey said.
Mr Espresy said looking ahead to phase two, the company remained focused on being able to capture the full value of their product by manufacturing coke for use in the steel and ferro-alloy industries.
Coke is an upgraded product derived from coking coal and commands a significant price premium to coking coal.
The Contango management team are still engaging in active discussions with a number of potential off-takers for our proposed coke product, including the existing coking coal off-take partner, AtoZ, in addition to existing coke producers in Zimbabwe and international commodity trading houses.
“Guided by the conversations that we have had with potential offtake partners, we anticipate that any future offtake agreement for coke is likely to be accompanied by the requisite funding to finance the associated infrastructure, principally the installation of coke batteries.
The company also retains the option of funding the coke batteries through project-level debt, or self-funding from internal cash flow.
The London-listed miner earlier in the month announced that it had entered into a non-binding Memorandum of Understanding (MOU) with a leading Multi-National Company (MNC).
The MOU outlines a framework for collaboration across not only coking coal, but also in the manufacture of coke and follows several site visits and a preliminary analysis of a 50 kilogramme sample of Muchesu washed coking-coal.
Mr Esprey said, “The signing of this MOU is hugely material for Contango. The MNC is active in Zimbabwe and is a world leader in its field. I believe their interest in the Muchesu Coal Project is a testament to its highly attractive characteristics, both in terms of scale and coal quality.”
The intention is to undertake a stage-gated due diligence exercise which will look at all aspects that would underpin either a coking-coal offtake agreement, or the possibility of establishing a coking plant adjacent to the Muchesu Mine.
The chief executive said he looks forward to updating the market on further progress.
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