LONDON, UK: Contango Holdings Plc, the London listed natural resource development company developing the Lubu Coking Coal Project in Zimbabwe and the Garalo-Ntiela Gold Project in Mali, confirmed that production commenced at the Lubu site on 29 March 2022.
Production is underway on Block 2, which was selected given the high-quality coking coal found at that location and its proximity to surface. Studies have defined an estimated 96Mt of coking coal within Block 2, which forms part of the broader Lubu complex, where an estimated 1.25 billion tonne Indicated and Inferred resource has been identified to NI 43-101 levels.
The company is targeting an initial stabilised mining rate of 5,000 tonnes per month. As previously reported, Contango will stockpile production during Q2 2022 pending the installation of the wash plant in the same period, thereby providing sufficient feedstock to ensure continuity of supply.
Work continues to prepare the site for the installation of the crushing unit, wash plant and associated infrastructure. Following the installation of the wash plant the Company expects to sell washed coking coal to regional buyers as well as exporting to South Africa, where the Company has held recent discussions with interested parties.
Later in 2022 Contango expects to be able to capture the full value for its product by subsequently manufacturing coke at site for use in the steel and ferro-alloy industries. An initial smaller scale coke battery of 36,000 tonnes per annum has been sourced and a larger coke battery of 150,000 tonnes per annum is expected to be installed towards year end. Whilst sales prices are subject to offtake and future global pricing, the Company is confident that margins in excess of US$300/tonne should be achievable based on ongoing discussions with potential off-takers.
Carl Esprey, CEO of Contango, commented: “Bringing our first asset into production is a milestone event for Contango. I would like to thank our in-country team for their efforts in helping us accomplish this important achievement. The resource at Lubu is significant and we are now finally in a position to start to receive the economic benefits. Coking coal and coke have suffered from significant under-investment and mine closures in recent years and this, coupled with global infrastructure projects and transition towards green energy, have led to a significant uptick in the commodity prices of both coking call and coke. Accordingly, Lubu has come into production at a time of substantial demand for our products and limited supply.
“I have spent much of the second half of this month in South Africa and Zimbabwe and been able to meet potential off-takers. The demand is clear and with production start-up risk now drastically reduced I would anticipate being in a position to enter offtake contracts in the near term. As previously reported, we believe there is a good possibility any offtake contracts entered into for coking coal or coke would come with some form of funding, to be utilised in the roll out of the Lubu development.”
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