Production has started at London-listed natural resource development company Contango Holdings' Lubu coking coal project, in Zimbabwe.
Production is under way on Block 2, which was selected given the high-quality coking coal found at that location and its proximity to surface. The company expects to achieve an initial stabilised mining rate of 5 000 t a month at Lubu.
Studies have defined an estimated 96-million tonnes of coking coal within Block 2, which forms part of the broader Lubu complex, where an estimated 1.25-billion-tonne indicated and inferred resource has been identified to National Instrument 43-101 levels.
"Bringing our first asset into production is a milestone event for Contango. I would like to thank our in-country team for their efforts in helping us accomplish this important achievement. The resource at Lubu is significant and we are now finally in a position to start to receive the economic benefits.
"Coking coal and coke have suffered from significant under-investment and mine closures in recent years and this, coupled with global infrastructure projects and transition towards green energy, has led to a significant uptick in the commodity prices of both coking coal and coke. Accordingly, Lubu has come into production at a time of substantial demand for our products and limited supply," comments Contango CEO Carl Esprey.
Contango will stockpile production during the second quarter of this year, pending the installation of the wash plant at Lubu, thereby providing sufficient feedstock to ensure continuity of supply.
Work continues to prepare the site for the installation of the crushing unit, wash plant and associated infrastructure.
Following the installation of the wash plant, Contango expects to sell washed coking coal to regional buyers, as well as export to South Africa.
"I have spent much of the second half of this month in South Africa and Zimbabwe and been able to meet potential offtakers. The demand is clear and with production start-up risk now drastically reduced I would anticipate being in a position to enter offtake contracts in the near term.
"As previously reported, we believe there is a good possibility any offtake contracts entered into for coking coal or coke would come with some form of funding, to be used in the roll-out of the Lubu development," says Esprey.