The London-listed natural resource development company, Contango Holdings Plc that is developing the Lubu Coking Coal Project in Zimbabwe, has commenced mining production at the Lubu Site, where the firm is aiming an initial stabilized mining rate of 5,000 tonnes per month.
Contango owns a 70% stake in the Lubu Coking Coal Project and production is proceeding on Block 2, which was sampled by Bureau Veritas of South Africa on October 21, 2021, which assessed a variety of metrics and properties derived from 49 samples extracted from the 1A Lower and MSU metallurgical seams, including ash, sulphur, and phosphorous content, as well as yield and calorific values. The block was selected given the high-quality coking coal found at that location and its proximity to the 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 CEO of Contango, Carl Esprey, commented that bringing its first asset into production is a milestone event.
“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,” he said.
Contango will supply production during Q2 2022 pending the installation of the wash plant in the same period, thereby providing sufficient feedstock to ensure continuity of supply as the work continues to prepare the site for the installation of the crushing unit, wash plant, and associated infrastructure.
The company has raised £3.5m to advance Lubu into high-quality production, and once the wash plant is installed, the company expects to sell washed coking coal to regional buyers as well as export it to South Africa, where it has held recent discussions with interested parties.
Later this year, the company expects to be able to capture the full value of its product by subsequently manufacturing coke on 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’s end.
Whilst sales prices are subject to offtake and future global pricing, Contango is confident that margins in excess of US $300/tonne should be achievable based on ongoing discussions with potential off-takers.