UK-listed Contango, which is developing a new coal mine in Zimbabwe, says it is in talks with a “multinational company” for a possible coking coal mining deal.
Contango says it has signed an MoU for “collaboration” on coking coal and the manufacture of coke at its Muchesu coal project, in Hwange’s Lubu area. The site is said to contain a resource of two billion tonnes of coal. The talks are focussed on a long-term offtake and a joint venture to construct coke batteries and develop an underground mine.
Contango does not say which company it is talking to, with CEO Carl Espray only saying that the MoU is “hugely material for Contango” and that the multination concerned “is active in Zimbabwe and is a world leader in its field”. But it is most likely that the potential partner is Tsingshan, the arm of the world’s biggest stainless-steel company, which is building a steel plant near Mvuma and is hungry for coking coal, a key ingredient in steel production.
Last year, Contango said it was in preliminary talks with a potential partner with “a sizeable footprint in Zimbabwe and is planning to construct a US$1 billion carbon steel plant in the country”.
In its latest statement, Contango says the potential partner has already made several site visits and analysed a 50kg sample of the Muchesu washed coking coal, Contango said Monday. This may lead to the buyer taking up the coking coal that Contango will produce, or the building of a coking plant near the mine.
“Based on current timelines, the company would aim to conclude the first phase (concept/pre-feasibility) of the due diligence exercise in Q1 2023 after which a decision will be made if, and how best, to proceed to the subsequent phases,” the company said.
Said Espray: “I believe their interest in the Muchesu Coal Project is testament to its highly attractive characteristics, both in terms of scale and coal quality.”
As part of the due diligence, Contango is delivering a 1-tonne coking-coal sample to the multinational company for further testing.