Contango to export coal to Europe in 2023

London-listed Contango Holdings plans to start exporting thermal coal early next year from its Zimbabwe mine following requests from customers in Europe and Asia, the company said Wednesday.

“Fuelled by the dramatic rise in thermal coal prices over the past 12 months, the board are now considering a coking and thermal operation, delivering 10,000 tonnes of coking coal and 10,000 tonnes of thermal coal per month based on current capacity in H1 2023,” Contango said in a statement.

The company said it had received “unsolicited approaches” for thermal coal from buyers, ranging from trading houses to industrial consumers, in Africa, Europe and Asia.

Contango, which plans to increase its annual output to 300,000 tonnes by the end of 2023, said it had recently raised 7.5 million pounds through a private placement to fund its operations.

Europe is facing crippling energy shortages after it banned coal imports from Russia as part of sanctions for its invasion of Ukraine.

Contango owns 70% of the Lubu project in Hwange district. Production started in March this year at Block 2, which was selected given the high-quality coking coal found at that location and its proximity to surface. The company set an initial stabilised mining rate of 5 000 t a month.

"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 towards green energy, has 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," said Contango CEO Carl Esprey when production started.

Studies have defined an estimated 96-million tonnes of coking coal within Block 2, which forms part of the broader Lubu complex, where an estimated 1.25-billion-tonne indicated and inferred resource has been identified to National Instrument 43-101 levels.

The company’s main focus is supplying its low-sulphur coking coal to the southern African ferro alloy and industrial markets, but it has found current prices of thermal coal – used in electricity generation – attractive.