Contango Holdings PLC Metallurgical Coal Product Offtake -- LOI Signed (8925W)
August 24 2020 - 2:00AM
UK Regulatory
TIDMCGO
RNS Number : 8925W
Contango Holdings PLC
24 August 2020
Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural
Resources
24 August 2020
Contango Holdings Plc
('Contango' or the 'Company')
Metallurgical Coal Product Offtake - Letter of Intent Signed
Contango Holdings Plc, the London listed natural resource
development company, is pleased to announce that it has signed a
Letter of Intent ('LOI') with CoalZim Marketing (Pvt) Limited
('CoalZim') relating to an offtake agreement for coal products
produced at the Company's Lubu Coalfield Project in Zimbabwe
('Lubu').
Overview
-- Second coal offtake LOI secured by Contango in August,
demonstrating the strong demand for the high-quality coal products
produced at Lubu
-- The LOI establishes the framework for formal offtake
documentation to be advanced between Monaf Investments (Private)
Limited ('Monaf'), Contango's subsidiary company, and CoalZim, a
coal sales and trading company based in Harare
-- Subject to contract and appropriate standard and quality coal
testing, CoalZim has in principle agreed to purchase an anticipated
2,000 metric tonnes of 28CV metallurgical coal per month from
Monaf
-- Pricing of the offtake remains subject to contract,
negotiation and prevailing market conditions, however, this is a
higher value product and it assumed a sales price (delivered to
Harare) of between US$100 and US$120 per metric tonne of coal is
achievable based on discussions
-- Contango has previously cited expected combined contract
mining and processing costs of US$15 per tonne for Lubu coal
-- Transport costs to Harare are expected to be circa US$15 per tonne
-- The Company intnds to enter into formal offtake agreements
with these two parties under LOI, along with additional customers
currently under negotiation, ahead of the anticipated commissioning
of Lubu in Q4 2020
Carl Esprey, Executive Director of Contango Holdings, said: "The
delivery of another LOI, within 10 days of securing our first
agreement with South Mining, further highlights the strong demand
dynamics for our coal products within Zimbabwe. Furthermore, the
anticipated pricing of this agreement, being between $100 and $120
per metric tonne of coal delivered to Harare against the forecast
extraction and washing and transport cost of circa $30 per metric
tonne, provides further support for the potential value of this
contract.
"As previously reported, I am confident that commercial
negotiations can be finalised with CoalZim and South Mining, as
well as the additional coal offtake partners we are currently in
discussions with, and this process is likely to move quickly once
the COVID-19 related travel restrictions ease further in
Zimbawe.
"These formalised agreements will allow us to move forward with
development at Lubu and, employing contract miners, we expect to be
in a position to deliver first production and revenues within six
months. Clearly this is set to be a highly active period in our
transition to a cash generative mining company, and I look forward
to providing further updates in due course."
For further information, please visit
www.contango-holdings-plc.co.uk or contact:
Contango Holdings plc E: info@contango-holdings-plc.co.uk
Chief Executive Officer
Carl Esprey
Brandon Hill Capital Limited T: +44 (0)20 3463 5000
Financial Adviser & Broker
Jonathan Evans
St Brides Partners Ltd T: +44 (0)20 7236 1177
Financial PR & Investor Relations
Susie Geliher / Cosima Akerman
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END
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