Contango receives non-binding proposal for potential acquisition of assets

LONDON Alternative Investment (AIM)-listed miner — Contango Holdings has received a non-binding proposal for the potential acquisition of its assets which may result in the sale of its assets at the subsidiary level at a time when it has entered into another lucrative coal agreement.

Contango has a 70 percent interest in the Muchesu Coal Mine with the remaining 30 percent being held by supportive local partners.

The Lubu coalfield is estimated to hold 2,6 billion tonnes of coal, which makes it one of the largest coal ventures in the country.

According to the mining entity, the proposal is at an early stage with a number of commercial points under discussion.

Therefore, there is no guarantee that these discussions will lead to a formal offer, it noted.

The company is now in discussions with its advisers with regard to the proposal and the Board will seek to maximise value for all its stakeholders before pursuing the disposal of its principal assets.

It noted that for the avoidance of doubt, the firm which has made the proposal is different to the Multi-National undertaking the coking coal trial.

Contango Holdings chief executive officer, Mr Carl Esprey described the potential asset sale as a credible approach.

“In addition, we have now received a credible approach with respect to our assets. While there is no guarantee a firm offer will be made, we expect this process to move fast and will update shareholders on the details of the proposals as appropriate.”

The entity said it has entered into an agreement with a leading steel producer — Multi-National to supply 1 000 tonnes of washed coking coal for a formal industrial trial during November.

It noted that discussions with the Multi-National have been ongoing for the past twelve months during which time several site visits have taken place and a detailed due diligence process has been undertaken on Muchesu’s coal products.

The Multi-National has expressed a desire to enter into an off-take with the Company for an initial 80 000 tonnes per annum of washed coking coal from the Muchesu Project, equating to approximately 6 700 tonnes per month although there is clear potential to expand on this figure as Contango’s production capacity increases.

The Multi-National has agreed to purchase the washed coking coal for the industrial trial at mine gate, and revenue in excess of US$100 000 will be paid in advance.

The Multi-National will be responsible for transporting the washed coking coal in its own fleet of trucks to its facilities in South Africa where the trial will take place.”
Said Mr Esprey, “We have now entered into a trial supply with one of the largest steel producers globally following their extensive due diligence on the products.

“As a new coal producer, our coal products are subject to stringent tests and quality control before end users will commit to large volumes, and the Multi-National’s interest in our coal is both highly encouraging and reaffirms its quality.

Coal mining is expected to contribute significantly to the realisation of the US$12 billion mining industry by the end of this year.

The coming on stream of the mine feeds into the Vision 2030 agenda as hundreds of jobs will be created for locals directly while others will be employed by downstream industries.

Muchesu Coal Mine 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.

Matabeleland North has vast mining activities that have been critical to the growth of the province and the country’s development.

The province is the hub of coal-to-energy value chain investments, which will unlock up to US$1 billion under the coal and hydro-carbon sector.-chronicls