London-Listed Contango Raises £1.85M, Welcomes New...

London-Listed Contango Raises £1.85M, Welcomes New 20% Shareholder

Nyashadzashe Ndoro- Chief Reporter

Contango Holdings Plc, a London-listed natural resource development company, has announced its unaudited interim results for the six months ending November 30, 2024.

The report highlights a significant strategic shift toward a cash-generating royalty model centered on its Muchesu coal mine in Zimbabwe.

The company has secured a pivotal partnership with Huo Investments Ltd, the investment vehicle of a prominent Zimbabwe-based Chinese national. This partnership has resulted in substantial capital injection and operational expansion at Muchesu.

The investor committed an initial US$1,000,000 in July 2024 and a further US$1,000,000 in January 2025, culminating in a 20% equity stake in Contango, making them the company's largest shareholder. This investment has facilitated the installation and commissioning of a Dense Media Separation plant, with a second plant ordered, and the expansion of the open pit at Muchesu to increase coking coal production.

This strategic partnership has enabled Contango to transition from a direct mining operator to a royalty-focused company. The company has received its initial royalty payments under the Mineral Royalty Agreement, with US$500 000 already paid and another US$500,000 forthcoming. The MRA guarantees a minimum of US$2,000,000 per annum, with expectations of significantly higher royalties as Muchesu's production capacity increases.

The DMS plant, now operational, is designed to process 3,000 tonnes of washed coal per day, and the second plant is expected to further boost output. The company anticipates a significant improvement in its financial performance in 2025, driven by these royalty payments.

Contango has also completed a £1,850,000 equity placement, with the investor subscribing for 142,000,000 shares. Following this and subsequent on-market acquisitions, the investor now holds 154,750,000 shares, representing approximately 20.42% of the company.

According to the company, the funds raised, along with royalty payments, will primarily be used to repay outstanding investor loans, which stood at £4,418,062 as of November 30, 2024. The Board has agreed with loan holders to prioritize debt repayment and working capital before implementing a dividend policy.

Looking ahead, Contango is optimistic about its financial prospects, driven by the increased operational capacity at Muchesu and the consistent flow of royalty payments. The company expects to see accelerated operational momentum and increased sales, translating into higher royalty receipts.

"Looking forward, I remain highly optimistic about the outlook for the remainder of 2025 and beyond. We are well positioned to transition from being a mining operation to a profitable royalty business, with the infrastructure now in place to support continued growth," Contango Holdings chairman Roy Pitchford stated.

"As we ramp up production at Muchesu and begin to see the full impact of the DMS plants, we expect operational momentum to accelerate, translating into increased sales and rising royalty receipts.

"I am confident that the steps we have taken, alongside the continued support from our investor, will enable us to deliver on our strategy and create lasting value for all stakeholders. I would like to express my sincere gratitude to our shareholders for their continued trust and support."