Contango secures US$20 million boost for Muchesu
CONTANGO Holdings has detailed a financial outlay usage of a US$20 million Revolving Facility Agreement (RFA) provided by its new majority shareholder, a Chinese investor operating in Zimbabwe, coming in as significant investment continues to pour in at the Muchesu site in Binga, Matabeleland North.
The new investor has further confirmed that an inaugural royalty payment of US$1 million is to be made before the end of 2024, with a second US$1 million expected around the end of the first quarter in 2025.
Coal washing plant in Binga
Thereafter, the additional royalty payments to the company will be in line with operational productivity at Muchesu.
In an operational and financial update, the firm indicated the primary areas of the mine to receive investment from the US$20 million will be the construction of a 3 000 tonne per day Dense Media Separation (DMS) Plant and the significant expansion of the open pit to enable higher mining and processing capacity.
The investor has indicated intentions to deliver at least one further DMS plant to the site under the RFA along with further capital investment to unlock additional revenue streams from Muchesu coal.
Mr Carl Esprey
“The DMS installation is nearing completion, with testing and commissioning expected in the first half of November, ahead of the start of production and processing in the second half of November,” the firm said.
The DMS plant will be calibrated to process readily available coking coal. Under the Mineral Royalty Agreement (MRA) entered into with the investor, a royalty of US$8 per tonne is payable to Contango for washed coking coal monthly in arrears.
A minimum of US$2 million per annum is payable in terms of royalties to Contango. However, the company expects to benefit from materially higher royalty payments, it said.
The company’s chief executive officer, Mr Carl Esprey, said material investment continued to be made in October.
“Visually,the landscape is changing weekly and the speed of that change is very exciting. Muchesu has always been a world-class deposit and it is now benefitting from the level of investment required to unlock its full potential,” he said.
“With the expectation of a first royalty payment this year and welcoming the investor as the largest shareholder in the company following the issue of the SFP, the outlook for the company is looking overwhelmingly positive. We look forward to providing further updates as appropriate.”
Meanwhile, Moore Kingston Smith LLP (MKS) was appointed auditor for the company in July and is finalising the 2024 annual report.
Once published, the company will arrange to lift the temporary suspension from trading on the London Stock Exchange for the shares to start trading again.
“While I understand shareholders’ frustrations over the temporary suspension, this too is expected to be lifted in the very near term following the completion of the audit and publication of the 2024 accounts, which will coincide with the commencement of processing operations in earnest at the site,” said Mr Esprey.
Muchesu is a strategic coal asset with over 2,6 billion tonnes of coking and thermal coal.
It covers 19 236 hectares of the highly prospective Karroo mid-Zambezi coal basin, located in the established Hwange-Binga mining area, in north-western Zimbabwe.
Muchesu coal mine 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 attainment of Vision 2030 for an upper-middle-income society.
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 focus.-chronicle
