Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural Resources
18 November 2021
Contango Holdings Plc
('Contango' or the 'Company')
· Installation of coke batteries at site in Q4 2021 to capture full value proposition
· Funds also applied to further the Garalo-Ntiela Project in
Contango Holdings Plc is pleased to announce that it has raised
Use of Funds and Work Programme
The Placing will provide the Company with sufficient funds to bring Lubu into production towards the end of Q1 2022, marking the Company's transition into cashflow and profitability from operations.
This development route is now feasible following the recent verification by Bureau Veritas' studies on the Lubu coking coals which confirmed to both the Company and potential customers the product's attractive characteristics. The studies indicated the potential for 96Mt from Block 2 of high-quality coking coal with low ash and sulphur and with high yields and swelling indices. There is currently significant demand both regionally and globally for coking coal with such characteristics.
Also, the Company has recently visited a number of potential customers and off-takers and following such conversations with these groups the directors of the Company have chosen to begin operations with immediate effect and take advantage of strong commodity prices and forecasts.
The Company intends to commence with an initial 300Ktpa production operation with the possibility of increasing production in due course. The local demand is likely to increase as regional coke battery capacity in Hwange (approximately 200Km from Lubu) is being increased from 570Ktpa to 1.92Mtpa, which would create further demand for suitable coking coals used in the process of coke manufacture.
Given the historical expenditure of over
• Constructing a decline shaft and associated infrastructure;
• Installing a continuous miner with retractable conveyor;
• Installing a surface wash plant; and
• Mining equipment.
Coke Battery Installation
The Company intends to install an initial 150Ktpa coke battery at site by the end of 2022 following the commencement of initial production earlier in the year. This would enable Contango to have a fully integrated operation and produce coke, which has seen prices reach approximately
By manufacturing coke, Contango expects to receive the highest value possible for its resource and produce a product that can be sold internationally at market rates. The Company will look to optimise the funding strategy of the initial coke battery during 2022, with the expectation that existing cash resources, cash flows from coking coal sales, as well as offtake-linked finance and debt will be available. Given the modular nature of the coke batteries, further expansion in coke production will also be explored in due course.
Garalo-Ntiela Gold Project
The balance of the proceeds from the Placing, along with existing cash resources which have been further boosted by
A further update is expected to be provided on Garalo-Ntiela before year end.
Director Participation & Resignation
Existing major shareholder RAB Capital, has agreed to invest
Philip Richards has also advised the Board of his intention to resign upon completion of this Placing as non-executive Director to focus on his other business commitments. Philip Richards commented:
"I am proud to have been one of the founders of Contango and with what we have achieved so far as a company. When we set out, our primary objective was to acquire a mining asset that could be brought into production quickly and in a cost-effective manner, with minimal dilution to shareholders. I believe Contango has successfully navigated these uncertain times and is meeting these objectives.
"With this Placing, construction already underway at Lubu and the huge potential to be unlocked from our assets in
Admission and Total Voting Rights
An application has been made for the Placing Shares to be admitted to trading on the Official List and the London Stock Exchange with effect from 8.00 a.m. on 24 November 2021 ("Admission").
In accordance with the FCA's Disclosure Guidance and Transparency Rules, the Company confirms that following Admission, the Company's enlarged issued ordinary share capital will comprise 309,424,932 Ordinary Shares. The Company does not hold any Ordinary Shares in Treasury. Therefore, following Admission, the above figure may be used by shareholders in the Company as the denominator for the calculations to determine if they are required to notify their interest in, or a change to their interest in the Company, under the FCA's Disclosure Guidance and Transparency Rules.
Carl Esprey, Executive Director of Contango Holdings, said:
"I am delighted by the level of institutional support we have seen in this at-market Placing, including subscriptions from a number of new strategic investors. We now have funding in place to bring our first asset into production towards the end of Q1 2022. Work has already commenced at site and I look forward to keeping the markets updated at this exciting time.
"The demand and outlook for coking coal remains very encouraging. Its essential role within the steel and other manufacturing industries means it will continue to play an important role as advanced and emerging economies continue to invest in their infrastructure. This is equally true in the manufacture of coke and I believe our development strategy has positioned Contango to be able to generate significant free cashflow from operations going forward.
"Finally, I would like to thank Philip for his efforts in helping Contango reach this pivotal moment in its history. The Company is in advanced discussions to appoint a new Non-Executive to the Board, who I believe will further strengthen the team as we quickly move into development and production across the portfolio. An update will be made on this in the near term."
For further information, please visit www.contango-holdings-plc.co.uk or contact:
Contango Holdings plc
Chief Executive Officer
Brandon Hill Capital Limited
Financial Adviser & Broker
T: +44 (0)20 3463 5000
St Brides Partners Ltd
Financial PR & Investor Relations
Susie Geliher / Cosima Akerman
T: +44 (0)20 7236 1177