LONDON Stock Exchange-listed Contango Holdings has expanded its portfolio through acquisition of two gold mining ventures while also developing its Matabeleland North-based Lubu coking coal project in Zimbabwe.
The diversified resources firm has since identified a number of opportunities in Zimbabwe which could be monetised in order to provide material value to shareholders in the short term.
“The year under review has been a highly active period that saw the group achieve various milestones in our wider investment and growth strategy.
“After identifying and reviewing a number of opportunities, Contango successfully acquired two high-value gold assets, while continuing to advance the Lubu coking coal project in Zimbabwe,” Contango Holdings chairman Roy Pitchford said.
The mining group has, to date, added the Garalo Gold project and the Ntiela Gold project located adjacent to each other in one of Africa’s largest gold-producing regions in Mali.
The investments have significantly strengthened the company’s portfolio as it looks to transition into a cash generative mining group this year.
According to the company, the progress made so far at the Lubu coking coal project has laid the foundation for a profitable cash generative operation with first revenues expected towards the end of first quarter of this year.
“As previously reported, we provided bulk samples to a number of potential future customers, which confirmed the strong demand for our high-quality coking coal product,” Pitchford said in a statement accompanying the company’s 2021 fourth quarter results.
During the period, negotiations with Afrochine, which is a subsidiary of a major Chinese steel manufacturer, progressed well.
Post period, the company undertook further studies on the composition of its coking coals, with results that highlighted the value of Lubu.
Contango is now planning to install coke batteries at site in 2022, thus enabling the generation of a higher-value product that can be transported internationally.
Contango has to date raised sufficient funds to bring Lubu into production, further strengthening its position in offtake discussions.
Pitchford noted that the coking coal and coke markets saw significant price increases during the period and this naturally improved the economics and outlook for Lubu further.
Contango has a 70% interest in Lubu, with the remaining 30% held by a local partner.
Previous owners had expended more than US$20 million on Lubu, which enabled a sizeable resource in excess of 1, 3 billion tonnes to be identified.
Contango says it will initially focus on producing coking coal from Block B2, where extensive work has also been undertaken to define the specific properties of the coal, which in turn has enabled offtake conversations to commence.
The coal seams within Block B2 are from surface down to a maximum depth of 47 metres, ensuring operating costs are kept at very attractive levels.