LSE-listed Contango is in discussions with the Zimbabwean subsidiary of a major Chinese industrial company, one of the world’s largest stainless steel producers, regarding a potential long-term offtake for coking coal produced at its Lubu coking coal project.
The potential offtake partner has a sizeable footprint in Zimbabwe and is planning to build a $1-billion carbon steel plant in the country, with a capacity of two-million tonnes of steel a year.
In addition, the potential partner is building a number of coke batteries in the Hwange region of Zimbabwe with the aim of being ready for production by the end of April.
Given the Lubu coking coal project’s proximity to Hwange in the north-western part of Zimbabwe, Contango and the potential partner have entered into discussions with a view to Contango supplying the coking coal for the coke batteries on a long-term offtake.
Also, because of the “positive progress” made thus far and the potential significance of an agreement with the partner, Contango reports that it has elected to cease mining operations at Lubu until these discussions have progressed, which is expected to be in April.
This, Contango says, ensures any potential development is enhanced and its resources are deployed appropriately.
Both parties are looking to advance discussions further and additional meetings and a site visit have been scheduled for mid-April.
Going forward, Contango intends to open a trial pit, following which a bulk sample will be sent to the potential offtaker to facilitate a test burn.
Contango CEO Carl Esprey says the potential offtake partner, together with its global conglomerate parent company, are investing heavily in Zimbabwe as they look to establish an industrial steel and coke hub in-country, capitalising on the significant demand for construction materials both in the region and overseas.
“We believe that the potential offtake partner will be a key architect in the expansion of Zimbabwe’s industrial growth and we are delighted to be in discussions with this prominent and progressive business in relation to our Lubu coking coal project.”