Contango Holdings commenced production at its 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 the surface. Studies have defined an estimated 96 million metric tons (mt) of coking coal within Block 2, which forms part of a much larger Lubu resource, estimated at 1.25 billion mt.
Contango is targeting a steady initial mining rate of 5,000 mt per month (mt/m). As previously reported, Contango will stockpile production during the second quarter, pending the installation of the wash plant in the same period, 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, the company said it expects to sell washed coking coal to regional buyers as well as exporting to South Africa.
“Bringing our first asset into production is a milestone event for Contango,” Contango CEO Carl Esprey said. “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 toward green energy, have 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.”
Later in 2022, Contango expects to be able to capture the full value for its product by subsequently manufacturing coke at site for use in the steel and ferro-alloy industries. An initial smaller scale coke battery of 36,000 mt/y has been sourced and a larger coke battery of 150,000 mt/y is expected to be installed toward year end. While sales prices are subject to offtake and future global pricing, the Contango believes margins in excess of $300/mt should be achievable based on ongoing discussions with potential offtakers.