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Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural Resources

31 October 2022

Contango Holdings Plc

("Contango" or the "Company")

Oversubscribed Placing of £7,500,000 to fund production and growth strategy

Highlights

-     Oversubscribed Placing of £7,500,000 at 6p with new and existing shareholders

-     Capital raise to fund final capital expenditure ("capex") and enable further expansion

-     Company now fully funded to first revenue from sale of coking coal under existing offtake

-     Company targeting additional offtakes for coking coal, thermal coal and coke product

Contango Holdings Plc, the London listed natural resource company developing the Lubu Coal Project in Zimbabwe ("Lubu Project") is pleased to announce a placing of 125,000,000 new ordinary shares ("Placing Shares") at 6 pence per share to raise Gross Proceeds of £7,500,000 ("Placing") from existing and new shareholders. The Placing Shares represent 26.4% of the Enlarged Share Capital of the Company.  The placees will receive 1 warrant per 2 Placing Shares, exercisable at 9p for 3 years from admission ("Investor Warrants"). The Placing was undertaken by Tavira Financial Limited ("Tavira"), the broker to the Company.

Use of Proceeds

The funds will be used to finalise mine development, complete the installation of the wash plant, acquire further mining equipment and expand operations at the Lubu Project. The Placing will also enable the Company to finalise the agreed relocation of additional households from the mine site, thereby providing a larger footprint for the mine and operations to meet heightened demand. Finally, the Placing will enable the Company to settle all outstanding borrowings incurred by the Company with respect to its capital expenditure on developing the mine since Q2 2022.

The capital raise also provides the Company with financial flexibility to pursue its growth plans with regard to coke product and thermal coal.

Coking Coal

Contango is now fully funded to achieve positive cash flows from the sale of coking coal in the near term under its current offtake arrangement and to fund future growth.

The current offtake agreement for the sale of 10,000 tonnes per month of washed coal, at the prevailing MMCZ market price of US$120 per tonne, is expected to provide an estimated margin of circa US$80 per tonne. The wash plant being installed this quarter at the Lubu Project has the capacity to wash 20,000 tonnes per month of coal (double the existing contracted coal production under offtake of 10,000 tonnes per month). Therefore, in the current quarter, the Company expects to enter additional offtake arrangements for washed coking coal to utilise this spare capacity.

Any further offtake agreements for coking coal above the 20,000 tonne per month capacity of the wash plant would require the installation of further similar wash plants on site which cost US$1.5-2m each. The Company can fund any future capex from internally generated cash flow from the sales anticipated to begin shortly.

The Directors want to capitalise on the strong coal pricing and demand environment and given the material coal resource of 2.6 billion tonnes at Lubu, with a significant weighting of coking coal, there is clearly scalability in both production capacity and sales.

Coking Product

As previously reported the Company intends to produce coke by installing coke batteries that process coking coal into coke for the industrial and ferro alloy industries. The capex related to the installation of the coke batteries is circa US$5m. The Company has received heightened interest from a number of potential partners and off takers with respect to the manufacture of coke at Lubu.

The Company is looking to actively accelerate this plan, especially given current market prices and ongoing discussions have outlined the margins on the manufacture of coke are as much as four times those achieved on coking coal production at Lubu.

For the avoidance of doubt, the Company does not intend to raise any additional equity to fund the capex on the installation of coke batteries. This capital will be sourced from a combination of pre-payment of coke product via offtake, project level debt and the Company's own cash resources.

Thermal Coal

The Company recently announced a potential thermal coal strategy given the favourable thermal coal pricing and demand dynamics, which has seen thermal coal prices rise more than threefold to all-time highs of circa US$450 per tonne this year,.

The Company has received a number of requests for the regular delivery of thermal coal from a variety of international markets and is currently looking to finalise logistics to enable an export solution. The Company expects that thermal coal could generate margins of over US$100 per tonne. This could be further improved in the event the Company is successful in its current efforts to secure a rail transport solution rather than trucking to port.

Prospectus

The Placing is conditional on, inter alia, the publication of a prospectus, as approved by the Financial Conduct Authority, (the "Prospectus") which is expected to be issued on or around 4 November 2022. An updated corporate presentation will also be released at this time.

Director Participation in the Placing

Carl Esprey, the CEO, has participated in the Placing and acquired 694,437 Placing Shares at 6p for gross consideration of £41,666. This subscription is deemed a related party transaction as defined under DTR 7.3. The independent director, Roy Pitchford (Non-Executive Chairman), considers the terms of the Director participation in the Placing are fair and reasonable insofar as the Company's shareholders are concerned.

Issue of Performance Shares

The Company announced on 9 April 2021 the issue of 21,390,000 performance share options ("Performance Options") to its board, senior management and consultants in lieu of the modest salaries and fees received to maintain a tight cost structure. The Performance Options are exercisable for a nil exercise price.

Each holder to the Performance Options has agreed to the Company's request to exercise their options at this time to simplify the process and capital structure. Accordingly, the Company will now issue the 21,390,000 Shares (the "Performance Shares") as part of Admission. The Performance Shares will represent 4.5% of the Enlarged Share Capital of the Company.

The Performance Shares remain subject to a hard lock up and will be unable to be traded prior to 9 April 2023, as previously noted in the RNS on 9 April 2021.

Admission

The Company will apply for admission of the Placing Shares and Performance Shares to listing on the standard listing segment of the Official List of the FCA and to trading on the main market for listed securities of the London Stock Exchange ("Admission"). Subject to, inter alia, the publication of a Prospectus, as approved by the Financial Conduct Authority, and the Placing Agreement between the Company and Tavira not being terminated in accordance with its terms, it is expected that Admission of the Placing Shares and Performance Shares will occur at 8:00 am on or around Monday 7 November 2022.

In accordance with the provision of the Disclosure Guidance and Transparency Rules of the FCA ("DTRs"), the Company confirms that, following Admission, and assuming issue of the Placing and Performance Shares, its issued share capital will comprise 472,724,023 Ordinary Shares, each of which carries the right to vote, with no Ordinary Shares held in treasury. This figure may be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the DTRs.

Carl Esprey, CEO of Contango, commented:

"I am delighted to report the strong demand for this capital raise, particularly in the context of difficult equity capital market conditions for junior mining companies and we welcome the support of a number of new shareholders to the register.

"I believe it is testament to the attractiveness of the Contango investment proposition that significant funds were available to ensure Contango is now fully capitalised to deliver on both the current offtake and our expansion plans.

Whilst cost inflation and the strengthening US dollar pushed higher our required capex to first sales and positive cashflow, the Company will now benefit given our dollar denominated sales going forward.

"Demand for our coking coal, thermal coal and coke products is as strong as we have ever seen. We have an existing coking coal offtake in place, utilising only half of our wash plant capacity and I do not foresee any issues in entering another offtake and doubling our earnings potential from our existing production capacity.

"Most of the site preparation work has now been completed. We are now in full construction mode and opening up the pit further. Our focus remains on being in a position to deliver on first sales by year end before rolling out our coking coal expansion, as well as our thermal coal and coke products.

"I look forward to updating shareholders on our progress on what is a truly exciting time for the Company."

**ENDS**

For further information, please visit www.contango-holdings-plc.co.uk or contact: