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New agreement will see prime Zimbabwe coal shipped cheaply to Europe, Asia and Middle East

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More and more coal mining operations are setting up shop in the Hwange coal fields and shipping their coal to markets in Europe and Asia. A number of environmental groups have raised concerns about the conduct of several smaller companies that have been active in and around the town of Hwange and close to the Hwange National Park. Image credit: Leon Louw for WhyAfrica

New agreement will see prime Zimbabwe coal shipped cheaply to Europe, Asia and Middle East  

About 20,000 tonnes per month of washed coking coal from a new, London listed coal mining company operating in the Karoo Mid Zambezi Coal Basin in Zimbabwe, will be shipped to high demand markets in Europe, the Middle East and Asia. 

London listed Contango Holdings has entered into an offtake agreement for the sale of 20,000 tonnes of washed coking coal per month from its Lubu coal project, located in the established Hwange coal mining district of Zimbabwe. More and more coal mining companies, including a large number of Chinese operations, have set up shop in the Hwange region recently amid calls from several groups about adverse environmental impacts and a lack of adherence to environmental compliance. The coal fields is located close to Hwange National Park, one of Zimbabwe’s flagship wildlife areas.

Contango, the most recent name on a growing list of coal mining companies in the prospective Karoo Mid Zambezi Coal Basin, close to the historic mining town of Hwange in Zimbabwe, announced earlier this week that they have entered into an off-take agreement with a company called TransOre International.

TransOre is registered in the United Arab Emirates (UAE) and manages a portfolio of global commodity supply chains. According to its website TransOre facilitates the marketing, processing, financing and transportation of essential raw materials.

TransOre’s states on its website that the company 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/ ), to ensure it minimises transport costs, thereby enabling it to be highly competitive with respect to pricing.

London listed Contango has a 70% interest in the Lubu Coal Project in Zimbabwe, with the remaining 30% held by supportive local partners.

The Lubu Coal Project covers 19,236 hectares of the prospective Karroo Mid Zambezi Coal Basin

From pit to port (New agreement will see prime Zimbabwe coal shipped cheaply to Europe, Asia and Middle East)

According to a statement by Contango, 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 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,” Contango says in the statement.

The TransOre Contract is priced at the prevailing Minerals Marketing Corporation of Zimbabwe (MMCZ) coking coal price, currently at USD120/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, 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.”

Carl Esprey, CEO of Contango says that once steady state production is achieved in Q3 2023 the company expects its operating costs to be approximately USD45 per tonne of washed coal, although Contango continues to explore additional options to reduce these operating costs further, whilst larger volumes are also expected to bring economies of scale.

Operational issues under control (New Agreement will see prime Zimbabwe coal shipped cheaply to Europe, Asia and Middle East)

The company states that production of washed coking coal commenced at Muchesu on 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.

According to Esprey, TransOre brings a sizeable logistics operation, which Esprey believes is more aligned with Contango’s objectives of further developing its “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. 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.”

According to Alexander Schamber, Chief Commercial Officer of TransOre, the company and its affiliate companies are very active throughout southern Africa.

“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,” says Schamber.

New agreement will see prime Zimbabwe coal shipped cheaply to Europe, Asia and Middle East       

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New agreement will see prime Zimbabwe coal shipped cheaply to Europe, Asia and Middle East       

 

 

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