London Stock Exchange-listed resources firm, Contango Holdings, is set to start production at its Lubu coal mining project in Matabeleland North Province after receiving impressive set of results from exploration.
Bureau Veritas of South Africa conducted the geological assessment.
The analyses assessed a variety of metrics and properties derived from 49 samples extracted from the 1A Lower and MSU metallurgical seams at the Lubu Coal Project including ash, sulphur and phosphorus contents, as well as yield and calorific values.
Contango Holdings chief executive officer, Carl Esprey, said the results from the study demonstrated the commercial viability of the project.
“We are delighted with the results from this study, which have demonstrated the commercial characteristics of the metallurgical coal at Lubu, as well as its viability in the manufacture of coke. This positive news has come at a time when demand for all forms of coal has risen significantly and has led to an increase in the metallurgical coal price from US$161/tonne to US$451/tonne over the last year,” Esprey said.
“Moreover, the price of coke, the product achieved through the ‘cooking’ of metallurgical coals through coke batteries, has also seen dramatic price rises, with a 70% increase over the same period to current levels of circa US$670/tonne. With current shortages, the price of coke is likely to increase even further.”
He believes Lubu is ideally positioned to benefit from this pricing outlook over both the near and medium term.
Contango Holdings has a 70% interest in the Lubu Coal Project with the remaining 30% held by supportive local partners.
Contango Holdings has also started undertaking detailed coking testing as it seeks to assess the feasibility of building coke batteries on site at its Lubu project.
The junior coal miner last year signed a Letter of Intent with South Mining relating to an off-take agreement for coal products produced at the Lubu Coalfield Project.
South Mining is a coke producer in Zimbabwe and is committed to producing 420,000 tonnes of coke from its new battery oven located in the Hwange district.
At over 2.6bn tonnes — Lubu is one of the largest coal resources in Southern Africa and the large size of the Lubu Resource will enable Contango to look at additional markets and develop expansion scenarios for its production.
In the longer term, the company may expand operations to fully develop the coal field to exploit thermal coal opportunities.
The Contango Holdings board is also currently evaluating a number of gold opportunities which are in line with these key investment principles and which have the potential to provide material value to shareholders in the near term. BusinessTimes