Contango has conditionally acquired the Lubu Coal Project (“Lubu”) in Zimbabwe, subject to regulatory and shareholder approval in February 2020. Upon completion of the transaction, Contango will hold a 70% interest in the Lubu, with the remaining 30% held by supportive local partners.
Previous owners have expended +$20M on Lubu, which has enabled a sizeable resource in excess of 1.3 billion tonnes to be identified under NI 43-101 standard. Contango will initially focus on producing metallurgical 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 47m, ensuring operating costs are kept at very attractive levels. Contango intends on utilising contract miners initially to minimise any CAPEX requirement, ahead of first production in H2 2020, with the aim of selling and exporting the metallurgical coal products to international industrial consumers in the Southern Africa region.
In the longer term, the Company may review fully developing the coal field to exploit the thermal coal opportunities subject to an improvement in the investment climate in the country.
The Lubu Coal Project covers 19,236 hectares of the highly prospective Karroo Mid Zambezi coal basin, located in the established Hwange mining district in north-western Zimbabwe. Historically, c.US$20M has been spent on advancing the Lubu Coal Project by previous and current owners including the following work:
Since entering into the Heads of Agreement with Contango in December 2017, Consolidated Growth Holdings with financial support of Contango has advanced the Project further by:
Forecast sales of coal product expected from a small proportion of the B2 block include: