UK’s Contango plans first coking coal production in Q1 after sample tests beat expectations

Sample collection at Lubu coalfields

Contango, the UK listed resources company, says it plans to start coking production in Zimbabwe in the next quarter after better-than-expected results from a set of sample analyses conducted by Bureau Veritas in South Africa.

Contango will produce coking coal, a type of coal used in the production of steel.

Some 49 samples from Contango’s metallurgical seams at the Lubu coal project, in Hwange, including ash, sulphur and phosphorous contents, as well as yield and calorific values. The results exceeded the company’s expectations and “confirmed the viability” of Lubu’s metallurgical coal.

“With the studies now completed and both a regional and global market identified, I believe Lubu is ideally positioned to benefit from this pricing outlook over both the near and medium term,” Contango CEO Carl Esprey said Friday.

“I look forward to providing further updates on our progress in the current quarter, ahead of our transition into a producer early next quarter.”

Steel deal

Earlier this year, Contango opened talks with Afrochine for the supply of coking coal. Afrochine is a subsidiary of world number one stainless steel manufacturer Tsingshan. The company has begun developing a steel plant near Chivhu, and will need coke for production.

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Last year, Contango began supply talks with two companies, CoalZim Marketing and South Mining. Those agreements could see Lubu supplying a minimum of 32,000 tonnes of coal a month.

Espray says the latest test results add to good news around rising world coal prices.

“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,” he said.

The price of coke, which comes from the ‘cooking’ of metallurgical coal in coke batteries, has risen 70% to US$670/tonne in the past year.

Contango started trading on the London Stock Exchange in June after completing the acquisition of Consolidation Growth Holdings’ interest Lubu. Contango now has a 70% interest in the Lubu project, said to hold some of the largest coal reserves in the region.

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