UK-listed Contango reaches deal with Chinese investor for 51% of new Zimbabwe coal project

British resources company Contango has agreed to sell a 51% interest in the Muchesu coal project to Wencai Huo, a Zimbabwe-based Chinese investor with vast interests in mining.

Contango, listed in London, started building the Muchesu plant in Binga in 2022. In May last year, the company produced its first coking coal, used to make steel, and began exports in August. The company announced in October that it had opened talks with potential buyers for the operation.

Under the agreement, Huo, who runs Lebenmon Investments, will invest US$20 million into the project, to match what Contango has spent at Muchesu so far. Huo will also take up a 20% stake in Contango, and grant Contango life-of-mine royalties of US$2 million. Contango expects to ultimately retain a 24% stake in the project.

“Our intention has always been to develop Muchesu into a significant source of thermal and coking coal, as well as the manufacture of coke at site,” says Carl Esprey, Contango CEO.

He said the US$20 million investment is what the company needs to ramp up output and secure larger supply contracts. Contango has been battling to secure firm orders for coal. Last year, the company signed a deal with TransOre, a UAE commodities trader that supplies coal to Europe and the Middle East. Ongoing offtake discussions represent demand of more than 50,000 tonnes per month, although not all of this will turn into firm orders. The company recently sent 250 tonnes of thermal coal to a potential buyer for “burn tests” to measure quality.

Huo’s Lebenmon Investments is involved in multiple mining projects in the country. Buying a coal producer ties in with his plans, in partnership with Hong Kong-listed West International, to build a cement plant in Zimbabwe. That project, the group announced earlier this year, would include a 100MW power plant.

Huo’s company has, however, had legal controversies over mining rights in some of its operations. In Mutoko, the company last year contested a Magistrate’s ruling barring it from mining in the area after resistance from locals. Lebenmon was also reported among as one of the companies stopped in 2022 from prospecting for chrome in a section of the Great Dyke that runs through the Mavhuradona wilderness areas.

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