Coal miner receives key plant equipment

Contango Holdings, a London Alternative Investment Market (AIM) listed coal miner, has taken
delivery of key equipment for its coal washer plant to be constructed at its Lubu Coal Project in
Hwange, ahead of scheduled first coking coal production and sales expected to start by March this
year.

The company reported that the wash plant arrived at site on February 3, 2022 and has been
unloaded ahead of assembly.

In a statement the company said, “The wash plant site and foundations were prepared in
anticipation of its delivery, and construction and assembly is expected to take approximately 3 – 4
weeks, with commissioning following thereafter.”

Once calibrated and certified to be operating efficiently the wash plant will have the capacity to
produce 20 000 tonnes of washed coking coal per month.

In addition, the company also expects to take delivery at the site of its surface miner in the coming
days. The surface miner has a cutting width of 2200mm, is ideal for selective mining, and can mine
up to 500 tonnes per hour.

“The laboratory is also expected to arrive at site in the first half of February. Following its delivery,
all significant capital items will be at site enabling the company to ramp up activity ahead of first
production and sales at the end of March 2023,” the company added.

The company said it continued to make good progress at the site in expectation of delivery of the
wash plant and surface miner, and that it was fully capitalised and well-funded. 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 Esprey said that looking at phase 2, they remain 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 is still engaged in discussions with a number of potential offtakers for the proposed coke, including existing coking coal off-take partner, AtoZ, in addition to
other customers 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 also announced that it has 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 its 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
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 that 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 due diligence process is underway, and one of the first steps has been to deliver a 1 tonne
coking-coal sample to the MNC for further testing. The ongoing discussions are focussed on the
viability of a long-term offtake and the potential of a joint venture partnership in establishing coke
batteries and developing an underground mine,” Esprey added.

“Given that Muchesu has a 2 billion tonne plus resource there is plenty of scope for multiple
offtakes across our whole suite of coal products – the MOU does not focus on thermal coal for
instance.”

The Contago chief executive said he looks forward to updating the market on further progress.- The Herald