UK firm seeks more external markets for Zim coal
LONDON-LISTED Contango Holdings, which holds a controlling stake in the Muchesu Coal Mine in Binga, is seeking to broaden its external markets after the firm recently delivered 1 000 tonnes of bulk samples of processed coking coal to various prospective customers.
Contango’s Muchesu coal mining project was commissioned by President Mnangagwa in July last year and sits in the country’s coal-rich region of Matabeleland North province.
In 2016, Zimbabwe was estimated to host proven reserves equivalent to 163,3 times its annual consumption. This meant it had about 163 years of Coal left at current consumption levels, excluding the unproven reserves.
Coal is one of the key minerals the Government designated a few years ago to drive the growth of the country’s mining economy to a US$12 billion industry.
Notably, mining in general is strategically important to Zimbabwe given the sector accounts for over 75 percent of the country’s export receipts and employs thousands across the country.
Contango received an export permit from the Minerals Marketing Corporation of Zimbabwe (MMCZ) in August last year to export coal from its Binga project.
Subsequently, the group made its first export sale to TransOre International FZE, a United Arab Emirates-registered entity managing a portfolio of global commodity supply chains.
TransOre has pledged to play a central role in the Binga colliery project for the benefit of Zimbabwe.
Under its offtake arrangement with Contango, the UAE-based company agreed to purchase 20 000 tonnes per month of washed coking coal.
Last December, Contango said it was eyeing a long-term offtake agreement with an unnamed Multinational Company (MNC) that has placed an order for 1 000 tonnes of washed coking coal bulk sample.
The unnamed multinational requires a minimum of 7 000 tonnes per month.
In a statement accompanying unaudited results for the six months to November 30, 2023, said the undisclosed multinational firm has started collection of its order to South Africa for final tests in its coke batteries.
“Contango is expecting to receive a final decision in the near term. Whilst undertaking the bulk sample for the MNC, the company (Contango) also extracted and washed additional tonnes above the 1 000-tonne bulk sample.
“Some of these tonnes have already been supplied to additional potential customers following requests for the product for their own due diligence purposes, as part of the company’s broader marketing,” the group said.
Contango said that the mining site holds a stockpile that can be used in further offtake discussions.
Previously, it said lack of deliverable washed products to supply for testing had hindered efforts to broaden its customer base.
“Offtake discussions are also underway for industrial coal. Industrial coal seams sit both above and below the coking coal seam and accordingly whilst the sales price is likely to be lower than the coking coal price, the extraction cost would be considerably lower given Muchesu’s existing coking coal operations.
“Depending on the usage of the industrial coal, which would also be collected at the mine gate, there is the potential that washing would not be required, thereby increasing production capacity and decreasing operating costs, without requiring additional capital investment,” said Contango.
Meanwhile, during the 6 months under review, the mining group spent £912,354 (equivalent to US$1,3 million) on the exploration and fixed assets, which relate to the development of the site and operations at Muchesu.
It also raised £1 305 000 (US$1,655 million) during the period from existing stakeholders through unsecured and non-convertible bridging loans.
“The funds raised supported capital expenditure and working capital due to the delay of sales under existing offtake arrangements.
During the period under review, Contango reported revenue of £2 730 (equivalent to US$3 462) from a bulk sample.
In the outlook, the mining group’s primary focus remains on securing suitable long-term offtake partners for its coking coal and, potentially, industrial coal.
“The longer-term aim of the company is for Muchesu to become an integrated coke operation and capitalise on the additional margins from the sale of coke products in comparison to washed coking coal.
“Also, the sale of coke products would access the global markets,” it said.
Muchesu is one of the signature investment projects under the Second Republic, which is expected to yield high-value benefits for locals and the economy at large.
The colliery project covers 19 236 hectares of the highly prospective Karroo Mid Zambezi coal basin located in the established Hwange mining district in north-western Zimbabwe.