Contango, the London listed natural resource development company, says it is currently in discussions regarding a potential long-term offtake for coking coal produced at Contango’s Lubu Coking Coal Project with the Zimbabwean subsidiary of a major Chinese industrial company and one the world’s largest stainless steel producers – Afrochine.
Afrochine has a sizeable footprint in Zimbabwe and is planning to construct a US$1bn carbon steel plant in the country, with capacity of 2 million tonnes of steel per annum. In addition, the mining group is currently in the process of constructing a number of coke batteries in the Hwange region of Zimbabwe with the aim of being ready for production by the end of April 2021.
Given the Lubu Coking Coal Project’s proximity to Hwange, the company and Afrochine have entered into discussions with the view to Contango supplying the coking coal for the coke batteries on a long-term offtake.
Given the positive progress made and the potential significance of an agreement with Afrochine, the company has elected to cease mining operations at Lubu until these discussions have progressed, which is expected to be in April 2021, thereby ensuring any potential development is optimised and the company’s resources are deployed appropriately.
Both parties are looking to advance discussions further and additional meetings and a site visit have been scheduled for mid-April 2021. The company intends to open a trial pit and a bulk sample will be sent to Afrochine so that it can conduct a burn test.
Carl Esprey, Chief Executive Officer of Contango Holdings, said: “The potential offtake partner, together with its global conglomerate parent company, are investing heavily in Zimbabwe as they look to establish an industrial steel and coke hub in-country, capitalising on the significant demand for construction materials both in the region and overseas. We believe that the partner will be a key architect in the expansion of Zimbabwe’s industrial growth and we are delighted to be in discussions with this prominent and progressive business in relation to our Lubu Coking Coal Project.
“As shareholders will be aware, coking coal is a critical component of steel manufacturing and the synergies between Contango and the potential offtake partner are evident. We look forward to advancing these discussions next month and will update the market accordingly.”