REG - Contango HoldingsPLC - New Offtake Arrangement and Operational Update

Contango HoldingsAnnouncement

10/07/2023 07:00

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RNS Number : 4763F  Contango Holdings PLC  10 July 2023

Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural Resources

10 July 2023

Contango Holdings PLC

("Contango" or the "Company")

 

New Offtake Arrangement and Operational Update

 

Contango Holdings Plc, the London listed natural resource development company,
is pleased to announce it has entered into a new offtake arrangement with
TransOre International FZE ("TransOre") for the sale of up to 20,000 tonnes
per month of washed coking coal (the "TransOre Contract") from its flagship
Lubu Project in Zimbabwe, known as the Muchesu Project ("Muchesu") in country
and will be referenced as such going forward.

 

The TransOre Contract has been calculated with reference to the existing
washing capacity at Muchesu, 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 previously reported
by Contango on 14 June 2022, and is intended to complement the expected
offtake arrangements being finalised with the global multi-national company
("MNC"), which is expected to complete its due diligence shortly. The TransOre
Contract is priced at the prevailing Minerals Marketing Corporation of
Zimbabwe ("MMCZ") coking coal price, currently at US$120/tonne.

 

TransOre will take the coal currently being produced from the upper seams at
Muchesu at mine gate at the MMCZ price and handle all logistics and transport
costs, through its affiliate African Rail International FZE ("African Rail
Company"), which has rail access, locomotives and port access for export
already in place. TransOre currently holds an allocation for exporting coal
through the Dry Bulk Terminal at the Maputo Port, Mozambique. TransOre 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.

 

Once steady state production is achieved in Q3 2023 the Company expects its
operating costs to be approximately US$45 per tonne of washed coal, although
the Company continues to explore additional options to reduce these operating
costs further, whilst larger volumes are also expected to bring economies of
scale.

 

Operational and Financial Update

 

As previously announced, production of washed coking coal commenced at Muchesu
on Tuesday 23 May 2023 and a significant stockpile of coking coal has now been
mined by the Wirtgen Surface Miner and is awaiting processing. In June issues
were encountered with the mobile screen, which was unable to achieve the
efficiencies expected. Accordingly, in conjunction with the expectation of
entering into a larger offtake arrangement with TransOre, the Company elected
to replace it with a larger static screen. Installation is now completed, and
the washing of coal will recommence imminently. The Board expects to report
first sales under its offtake arrangement with TransOre in August 2023.

 

Given the additional capital requirements, which will enable a larger
operation, as well as first sales now expected to be made in August 2023, the
Company has raised £1.5M from a number of existing stakeholders through an
unsecured and non-convertible bridging loan.

 

Carl Esprey, CEO of Contango, commented: "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.

 

"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."

 

Alexander Schamber, Chief Commercial Officer of TransOre, commented: "I am
pleased our discussions with Contango have reached a positive conclusion and
we have entered into an offtake arrangement for up to 20,000 tonnes per month
of washed coking and high grade metallurgical coal. 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. We
are also excited to playing a central role in a project that promises to bring
such great benefit to the country of Zimbabwe and its people."

 

About TransOre

 

TransOre is a UAE registered entity managing a portfolio of global commodity
supply chains. TransOre facilitates the marketing, processing, financing and
transportation of essential raw materials. TransOre aims to source bulk
commodities from low-cost regions in Sub-Saharan Africa and supply high demand
markets in Europe, the Middle East, Asia and beyond. It utilises the
infrastructure of its affiliates, such as the African Rail Company
(https://www.africanrailco.com/ (https://www.africanrailco.com/) ), to ensure
it minimises transport costs, thereby enabling it to be highly competitive
with respect to pricing.

 

 

**ENDS**

 

 Contango Holdings plc                   E: contango@stbridespartners.co.uk

 Chief Executive Officer

 Carl Esprey

 Tavira Financial Limited                T: +44 (0)20 7100 5100

 Financial Adviser & Broker

 Jonathan Evans

 St Brides Partners Ltd                  T: +44 (0)20 7236 1177

 Financial PR & Investor Relations

 Susie Geliher

 

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