Contango secures US$2 million funding for Muchesu

Audrey Galawu

Assistant Editor

Contango Holdings has announced a strategic financial boost for its Muchesu coal project in Zimbabwe, securing US$2 million through a new share subscription agreement and an advance of $1 million from investor Huo Investments.

“As reported on 3 July 2024, the Investor has entered into a subscription agreement with the Company to subscribe for 142,000,000 new ordinary shares ("Subscription Shares") at a price of £0.0111 pence per share ("Subscription Price"). As a result, the Company will receive £1,576,200 (US$2,000,000) of new funding ("Subscription"). The Subscription is subject to the issuance and approval of a Short Form Prospectus ("SFP"). The Company is pleased to advise it has now submitted a SFP to the FCA for its review and approval,” announced Contango in a statement.

”Further, in keeping with the collaborative relationship between the Investor and the Company, the Company is pleased to report it has now received a payment of US$1,000,000, as an advance against the Subscription,” reads the statement.

Contango announced in June that Mr Wencai Huo, a Zimbabwe-based Chinese national with extensive mining and business investments in Zimbabwe and Southern Africa acquired a majority stake of the Muchesu project.

Contango CEO Carl Esprey expressed confidence in the significant operational enhancements and future growth prospects of the project:

"We are now seeing significant activity at Muchesu. A new wash plant is being delivered and constructed to materially increase production capacity, whilst other earth moving and processing equipment are expected to arrive on site in the forthcoming weeks. We are also integrating members of the existing operational team with the team assembled by the Investor. We believe the resultant outcome will leave Muchesu on a much firmer footing and poised for significant growth.

"Finally, planning is also underway to expand the size of the existing open pit as well as engineering designs for underground mining. These steps should lead to a significant increase in mining output, which the Company stands to benefit from through both its royalty arrangements and residual 24.75% interest in Muchesu. I look forward to keeping shareholders appraised of both operational developments and the formal closing of the Definitive Agreements."

The company announced that the Investor has already commenced delivery of some capital equipment and operational items.

“The first convoy carrying parts for a new wash plant has arrived at site with the remaining convoys expected to arrive during July. A team of engineers are already on site to oversee operations and the installation of the new wash plant. Upon completion, the wash plant is expected to have a washing capacity of 3,000 tonnes per day, significantly greater than the Company's existing washing capabilities, which will continue to remain operational.”

The company said it is bolstering its operations with the imminent arrival of new heavy-duty excavators, a wash plant with enhanced capacity, and other capital equipment.

Orders have been placed for a further five heavy-duty excavators, four of which are to be delivered from South Africa. Also, another front-end loader and accessories have been ordered. All these items are due at Muchesu before the end of July 2024.