Contango clinches another lucrative offtake deal

LONDON Alternative Investment (AIM)-listed miner — Contango Holdings has clinched another lucrative new 20 000 tonnes per month of washed coking coal offtake arrangement with TransOre International FZE (TransOre) from its flagship Lubu Project in Binga.

TransOre is a United Arab Emirates (UAE) registered entity managing a portfolio of global commodity supply chains and has pledged to play a central role in the Binga coal project for the benefit of Zimbabwe.

It facilitates the marketing, processing, financing and transportation of essential raw materials.

The scope of the new washed coking coal arrangement is dependent on the existing washing capacity at the mine site. However, in the event Contango is able to increase washing capacity further, TransOre has indicated its willingness to expand the size of the contract.

The TransOre contract is expected to replace the non-exclusive contract with AtoZ Investments (Pty) Ltd and is intended to complement the expected offtake arrangements being finalised with the global multi-national company which is expected to complete its due diligence shortly.

The first offtake signed with AtoZ Investments (Pty) Ltd was to purchase 10 000 tonnes per month of washed coking coal.

Recently, Contango indicated that it was inundated with prospective buyers for coke and subsequent by-products.

The mining house started production recently and is one of the transformative development strides in Matabeleland North province given its impact on jobs, community development and downstream industries.

According to the investor, President Mnangagwa is expected to officially commission the massive project in Binga district on July 21.

The mining firm has been accelerating the assembling of machinery in recent months and this has been facilitated by the successful £7,5 million fundraising in October.

Giving an update on the new deal on Monday, CEO Mr Carl Esprey said after holding discussions with TransOre for a considerable period, they are impressed by their operations and network.

“We are delighted to enter into this offtake contract with TransOre, doubling our existing offtake and replacing our non-exclusive offtake with AtoZ.

“We have been in discussion with TransOre for some time and have been impressed by their operations and network.

“They bring a sizeable logistics operation, which we believe is more aligned with Contango’s objectives moving forward as we develop our world-class Muchesu project,” he said.

Coal washing plant in Binga

Added Mr Esprey, “This new contract is in addition to the ongoing discussions under the previously reported MoU with a global multi-national company (“MNC”).

“These discussions are centred around a larger coke operation at Muchesu. We expect to deliver further samples of our washed coal to the MNC later this month as part of the final stages of due diligence on the coke qualities of our product.”

According to the update, TransOre will take the coal currently being produced from the upper seams at Muchesu at the mine gate at the Minerals Marketing Corporation of Zimbabwe (MMCZ) price and handle all logistics and transport costs, through its affiliate African Rail International FZE which has rail access, locomotives and port access for export already in place.

TransOre holds an allocation for exporting coal through the Dry Bulk Terminal at the Maputo Port, Mozambique.

The firm has also expressed its interest in taking any additional coal that becomes available, either in the event of mine expansion or if the expected contract with the MNC does not materialise.

TransOre Chief Commercial Officer, Mr Alexander Schamber expressed delight that discussions with Contango have reached a positive conclusion.

He said they are excited to play a central role in a project that promises to bring such great benefit to Zimbabwe.

“TransOre and its affiliate companies are very active throughout southern Africa, and we will be able to leverage our existing infrastructure and logistics experience to ensure efficient delivery of coal from the Muchesu project to our customers.

“We very much view this as the start of a long-term and larger working relationship as we unlock the value of the Muchesu coal project in a collaborative fashion.”

The TransOre Contract is priced at the prevailing Minerals Marketing Corporation of Zimbabwe coking coal price, currently at US$120/tonne.

Once steady state production is achieved in the third quarter of the year, Contago expects its operating costs to be approximately US$45 per tonne of washed coal, although it continues to explore additional options to reduce these operating costs further, while larger volumes are also expected to bring economies of scale.

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.

By exploiting its huge untapped coal deposits, Binga, which shares the borders with Hwange, Lupane, and Gokwe districts, is primed to leapfrog development and increase its contribution to the mainstream economy through enhanced economic activities covering mainly tourism, mining, fishing and agriculture.

The investment comes at a time when the Government under the Second Republic is taking deliberate steps to develop Binga in line with the devolution agenda, which aims to ensure inclusive development across the country.

As part of its broader strategic plans, Contango Holdings has also cast its eyes on producing coke by installing coke batteries that process coking coal into coke for the industrial and ferro-alloy industries.-chronicle