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

28 February 2024

Contango Holdings Plc

('Contango' or the 'Company')

Unaudited Interim Results for the six months to 30 November 2023

Contango Holdings Plc, the London listed natural resource development company, announces its results for the six-month period ended 30 November 2023.

Highlights

·    Finalised construction at Muchesu including infrastructure upgrades and washplant

·    Muchesu formally opened in August 2023

·    Company now in discussion with groups regarding sale of Muchesu coals

·    Raised £1.305m through non-secured and non-convertible loan from existing shareholders

·    Entered into further offtake discussions with other groups

Post Period Highlights

·    Received payment of US$116K for a 1,000-tonne bulk sample

·    Extracted Run Of Mine to generate 1,332 tonnes of washed coking coal

·    Raised additional £370K through non-secured and non-convertible loan from existing shareholders

·    Evaluation and marketing of industrial coal products at Muchesu

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

Chairman's Statement

This has been a particularly busy period where the Company finalised key phases of construction and installation of plant and machinery to commence the production of washed coking coal. In August, the mine was formally opened by his Excellency Dr Emmerson Mnangagwa, the President of Zimbabwe. We would like to thank the operational team at Muchesu and stakeholders, whom we look forward to continuing to work with, in partnership with the people of the Binga region, in order to ensure the responsible development of Muchesu. We are focused on unlocking the value of this asset for the benefit of the entire community for years to come.

Our current focus at Muchesu is the first phase development of Block 2 via an open pit, where extensive work has been undertaken to define the specific properties of the coal. Block 2 contains an estimated 96MT of coking coal, forming a small part of the broader 1.3 billion tonnes, identified under NI 43-101 standard, at Muchesu. During the period, site works and equipment installation were undertaken and completed. This included infrastructure upgrades, as well as installation of screens, washplant, settling ponds, laboratories, weighbridge and pads for coal stockpiles, amongst others. We also opened up the coking coal seam in our open pit following the clearing of the overburden. Despite some delays, which are typical when setting up a new mining operation and building a new mine in an emerging market, with export permits belatedly received in late Q3 2023 the Company is now ready to mine, wash and sell coal to end users.

During the period, the Company also successfully completed the construction of housing and relocation of the villagers in the immediate vicinity of the Muchesu mine. This has been welcomed with resounding positive responses, most importantly from those relocated individuals and the wider community.

Since formally opening Muchesu, the Company received a non-binding proposal for the potential acquisition of its assets which may result in the sale of its assets at the subsidiary level.  Discussions and due diligence remain open and further updates will be made to shareholders as appropriate.

In the immediate term, the focus of the Company is to reach a stable state of revenue generation from the sale of Muchesu coal products. The mine development and sales strategy has taken longer than expected but we have built an operation that is now capable of transforming the Company into a sizeable coal producer.  

Financial Review

During the 6-month period to 31 November 2023, the Company spent £912,354 on the exploration and fixed assets, which relate to the development of the site and operations at Muchesu.

The Company raised £1,305,000 during the period from existing stakeholders through unsecured and non-convertible bridging loans. The funds raised supported capital expenditure and working capital due to the delay of sales under existing offtake arrangements.

Revenue

During the 6-month period to 31 November 2023, the Company reported revenue of £2,730 from a bulk sample. The Company is now engaging with a number of groups regarding offtake contracts and will update the market in due course.

Administrative Costs

Administrative costs incurred by the Company as it developed the Muchesu Mine during the period are broken down in Note 3.

Finance Costs

Finance costs relate to the loans advanced to the Company during the period.

Liquidity, cash and cash equivalents

As of 30 November 2023, the Company held £90,150 (2022: £3,314,359). Post period the Company has raised a further £370,000 through non-convertible and non-secured stakeholder loans.

Outlook

Our primary focus remains on securing suitable long-term offtake partners for our coking coal and, potentially, industrial coal.  Whilst we await a final decision from the Multi-National Company referred to in previous RNS announcements we continue to market our product to additional potential customers, having mined and washed significant quantities of additional coking coal for future samples and testing.

The longer-term aim of the Company is for Muchesu to become an integrated coke operation and capitalise on the additional margins from the sale of coke product in comparison to washed coking coal. Also, the sale of coke products would access the global markets.

I would like to take this opportunity to thank our shareholders for their support in 2023 whilst we navigate the transition to becoming a coal producer. The team at Muchesu have worked hard to deliver the mine and we look forward to seeing the sales strategy being delivered.

Roy Pitchford

28 February 2024

CEO REPORT

Contango's primary objective during the period was to begin producing washed coking coal at Muchesu and deliver the business plan of selling coking coal.   

The Muchesu Coal Mine in Zimbabwe

Contango has a 70% interest in Muchesu, with the remaining 30% held by local partners.

Since acquisition in 2020, the Contango team have implemented a rapid development plan with the objective of delivering first coking coal in as short a timeframe as practicable.  Initial trial mining operations commenced at in 2022 and coal was stockpiled in anticipation of the arrival and assembly of the wash plant.  Washed coking coal was produced around the start of the period in May 2023, and the Company's key objectives during the period focused on the further assessment of washed coal production to ensure optimisation, together with the advancement of long-term off-take negotiations and achieving first coal sales.

Following the formal opening of the Muchesu Mine on 1 August 2023, the weighbridge was installed and commissioned, which enabled trucks to collect coal from Muchesu and meet the necessary standards for the sale and transportation of bulk commodities in Zimbabwe and beyond, as well as confirming the tonnages and subsequent sales totals.

In late August 2023, Contango was issued with the final approvals relating to the export of coal from Muchesu from the Minerals Marketing Corporation of Zimbabwe allowing the Company to complete its inaugural sale to TransOre International FZE ("TransOre"), pursuant to the offtake arrangement announced in June 2023, which was subsequently exported to TransOre's international clients from the ports of Maputo and Beira.

The Contango team is fully focused on the successful ramp up of production alongside the development of additional offtake negotiations.  As referred to above, in June 2023 the Company entered into an agreement with TransOre whereby TransOre agreed to acquire up to 20,000 tonnes of washed coal per month from Muchesu. As previously reported, unfortunately the Company did not receive regular orders from TransOre under the offtake arrangement as envisaged. Accordingly, towards the end of the period and beyond the Company has looked to expand its network and deliver additional long-term offtakes.

In October 2023, the Company announced that, following a 12-month period of detailed due diligence, a global multi-national company ("MNC") had entered into an agreement to acquire 1,000 tonnes of washed coking coal for a formal industrial trial.  The MNC commenced collection of this coal in December 2023, collecting from mine gate ahead of delivery to its facilities in South Africa for final tests in its own coke batteries. The Company is expecting to receive a final decision in the near term. Whilst undertaking the bulk sample for the MNC, the Company also extracted and washed additional tonnes above the 1,000-tonne bulk sample. Some of these tonnes have already been supplied to additional potential customers following requests for product for their own due diligence purposes, as part of the Company's broader marketing. There remains a stockpile at site which can now be used in further offtake discussions. Lack of deliverable washed product to supply for testing had previously hindered the Company's efforts to broaden its customer base.

Offtake discussions are also underway for industrial coal. Industrial coal seams sit both above and below the coking coal seam and accordingly whilst the sales price is likely to be lower than the coking coal price, the extraction cost would be considerably lower given Muchesu's existing coking coal operations. Depending on the usage of the industrial coal, which would also be collected at mine gate, there is the potential that washing would not be required, thereby increasing production capacity and decreasing operating costs, without requiring additional capital investment.

Carl Esprey

28 February 2024