TINASHE MAKICHI
London Stock Exchange-listed Contango Holdings has started undertaking detailed coking testing as it seeks to assess the feasibility of building coke batteries on site at its Matabeleland North’s Lubu project, Business Times can report.
The junior coal miner last year signed a Letter of Intent (LOI) with South Mining relating to an off-take agreement for coal products produced at the Lubu Coalfield Project. South Mining is a prominent coke producer in Zimbabwe and is committed to producing 420,000 tonnes of coke from its new battery oven located in the Hwange district.
At over 2.6bn tonnes, Lubu is one of the largest coal resources in Southern Africa and the large size of the Lubu Resource will enable Contango to look at additional markets and develop expansion scenarios for its production
“Detailed coking testing will take place over the next months to assess the feasibility of building coke batteries on site,” the coal miner said in its February 2021 corporate presentation.
It said LOIs have since been signed regarding coal off-takes, totalling a minimum of 32,000 tonnes a month while upon the expected conversion to formal off-takes this year, these two LOIs could result in excess of US$1m per month in earnings before interest and taxes depreciation and amortisation.
Subject to the success of the initial development of the project, the company will embark on a bankable feasibility study for full scale mining at Lubu, it said.
This phase will be reviewed following a period of 18-24 months of successful mining and sales in the initial phase.
Contango has a 70% interest in the Lubu Coal Project with the remaining 30% held by supportive local partners.
It is understood that Contango will initially focus on producing metallurgical coal from Block B2, where extensive work has also been undertaken to define the specific properties of the coal, which in turn has enabled off-take conversations to commence.
The coal seams within Block B2 are from surface down to a maximum depth of 47m, ensuring operating costs are kept at very attractive levels.
Contango is focused on achieving the production of metallurgical coal products and sales to international industrial consumers in the Southern Africa region.
In the longer term, the company may expand operation to fully develop the coal field to exploit thermal coal opportunities.
The Contango board is also currently evaluating a number of gold opportunities which are in line with these key investment principles and which have the potential to provide material value to shareholders in the near term.
