London Stock Exchange-Listed firm, Contango Holdings Plc, is set to conclude an off-take deal with Afrochine, for coking coal produced at its Zimbabwe unit, Lubu Project in Matabeleland North Province, Business Times can report.
Top officials from Contango and Afrochine last week visited Lubu and the two parties are on the verge of signing a deal.
Afrochine is a Zimbabwean subsidiary of a Chinese steel giant, Tsingshan Group. Afrochine, which has a sizable footprint in Zimbabwe, plans to construct a US$1bn carbon steel plant in the country and is currently in the process of constructing several coke batteries in the Hwange.
“Contango is pleased to advise a productive site visit that recently took place at Lubu with senior members of the potential off take partner in attendance. Discussions with the potential off-take partner continues to progress, and I am pleased we have now reached a clear path to enable formal off-take agreements to be entered into.
“Our potential partner is one of the largest companies in Zimbabwe and its parent company is one of the largest steel producers in the world. The synergies between us are evident and I have every belief that upon completion of this brief and low-cost test work we will be able to enter a mutual and highly beneficial arrangement,” Contango Holdings chief executive Carl Esprey said.
Contango will now focus on extracting bulk samples of the high value coking and metallurgical coals found in the 1A Lower and MSU seams.
The operation will enable the company to focus specifically on the high value product of particular interest to Afrochine for its newly built coke batteries, expected to be commissioned later this month.
Given the increasing likelihood of a positive outcome with the potential off-take partner, Contango is expected to shortly approve the appointment of a mining engineer, who will be charged with identifying the best areas for underground mining, specifically looking at fresh coal characteristics and strength importance, needed to determine mine depth cut-off.
In addition, liaising with Contango’s technical team, the engineer will also help select the best excavation position for a 4m x 4m shaft, from which the bulk sample will be taken.