A United Kingdom based investment company, Contango Holdings, is eying gold opportunities in Zimbabwe, which the company said could be monetised in order to provide material value to shareholders in the short term.
The resource firm, which is listed on the London Stock Exchange, already has business interests in Zimbabwe after acquiring a 70% shareholding interest in Lubu coal project in Hwange district recently.
Local partners hold the balance of 30% in the project.
Contango Holdings expects to start production before year-end.
Lubu is one of the biggest deposits in southern Africa, with an estimated total resource of 2bn tonnes of coal.
The company said as part of its growth strategy, its focus remains on targeting assets with near term cash flow, low capital commitments and short payback periods.
“Contango has benefited from both its regional expertise in Zimbabwe and the profile of its UK listing, such that a number of opportunities have emerged that appear complementary to the company’s growth strategy.
“In particular Contango has identified a number of gold opportunities which could be monetised in the near-term through a toll treatment model in conjunction with exploration/development upside,” the company said in a statement.
This, the company said would enable a staged development and expansion, along with potential asset level or off-take funding, which would minimise any dilution and offer significant value to shareholders, particularly given the current gold price environment.
Recently, Contango signed two take-off agreements with South Mining and CoalZim Marketing Limited for coal products produced at the company’s Lubu coalfields.
The company expects to seal additional off-take agreements before year-end. Commissioning of Lubu and appointment of contract miners is also expected before the end of this year.
“We have made pleasing progress with Lubu over the last few months – progress which is all the more notable due to the exceptional operating environment that we have found ourselves in due to the Covid-19 pandemic.
“I am confident that as southern Africa increasingly returns to normality over the coming weeks and months, the letter of intent that we have secured thus far will translate into formal lucrative coal off-take agreements.
These are expected to be joined with other agreements in due course,” Contango Holdings executive director Carl Esprey said.
He added: “Our progress with Lubu has laid the foundations for what we believe will be a very profitable cash generative operation.
As such our attention is now turning to our wider complementary growth strategy, which includes the acquisition of businesses or assets with clear paths to cash flow and which have already been de-risked through previous exploration.”
The Contango board is 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.