Admission To Trading & First Day of Dealings

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

 

18 June 2020

Contango Holdings Plc

('Contango' or the 'Company')

 

Admission To Trading & First Day of Dealings

 

Further to the announcement of 17 June 2020, the board of Contango Holdings Plc ('Contango' or the 'Company') is pleased to announce the admission of its entire share capital, being 203,133,278 ordinary shares of £0.01 each ("Ordinary Shares") to the Official List (by way of a Standard Listing under Chapter 14 of the Listing Rules) and to trading on the London Stock Exchange's Main Market for listed securities (the "Admission").  The Company's Admission follows the completion of the acquisition by way of a reverse takeover of Consolidated Growth Holdings' interest in the Lubu Coalfield Project in Zimbabwe. 

 

Dealings will commence at 8.00 a.m. today under the TIDM "CGO" with ISIN number GB00BF0F5X78.

 

Overview

 

·    Admission to the Official List following the acquisition, by way of a reverse takeover, of a 70% interest in the Lubu Coalfield Project ("Lubu" or the "Project"):

o  Lubu is a derisked development with total historical spend in excess $20 million and over 100 holes and 12,000m of drilling completed and Total resource in excess of 1 billion tonnes of coal

o  Contango has acquired the asset for an implied value of £6.4M

o  In June 2019, Contango begun advancing funds to commence a new  work programme  including a 9 hole drill campaign designed to enable full washability test work, detmination of product range, SG and grade to determine product types for the purposes of offtake discussions. In total, over $750,000 spent on the project in the recent 12 months

o  Focus initially on small area of B2 Block in Lubu with deposit starting at surface down to a maximum depth of 47m

o  Targeting production and sale of semi-soft coking coal for export to Southern African countries and additional potential for sales of thermal coal to domestic power companies

o  Targeting an initial 1Mtpa of coal product sales - in discussions with a number of offtake groups

o  Site preparation and box cut for mining to commence immediately and first production and sales anticipated before end of 2020

·    Raised £1.4m with new and existing investors and now fully funded to first cash flow  

·    Appointment of Carl Esprey (Executive Director) and Roy Pitchford (Non-Executive Chairman) to the Board providing proven natural resources operational expertise and specialist natural resources financing experience

·    Board fully aligned with shareholders given its material equity holding and remuneration of less than £96,000 per annum for the entire board combined

·    Immediate focus on early cashflows from Lubu to underpin the Company's financial position and support a dividend policy

 

Carl Esprey, Executive Director of Contango Holdings, said: "I am delighted to have successfully brought this asset to market and I am confident that the work conducted on Lubu in recent years will translate to material value for shareholders in the near future. 

 

"The remaining months of 2020 are set to be punctuated with high impact news flow as we look to deliver first production and revenues from Lubu by the end of Q4.  Our strategy is centred on providing early cashflows from this, our first asset, and then expanding our production schedules to realise the full value of this +1 billion tonne coal project.  I believe this is a message which will resonate with investors as we look to underpin the Company's financial performance with the objective of supporting a dividend policy.

 

"I look forward to providing further updates in the coming weeks and months as we begin our initial activities readying the site for production, specifically the refurbishment and development of supporting facilities, ground clearance and removal of overburden of the 20-acre area that comprises the initial mining zone within Block B2 of Lubu."

 

Oliver Stansfield, Non-Executive Director of Contango Holdings, said: "On behalf of the shareholders of Contango I am delighted to welcome Carl and Roy to the Board.  The acquisition of Lubu has taken longer than expected  but I am confident that this transaction and our entry into Zimbabwe will prove worth the wait.  Accessing an asset of this size, quality and stage of development is highly advantageous and Lubu certainly meets all of the investment criteria that we set out with when originally identifying suitable targets. It is with considerable optimism that I look forward to the rest of 2020 and beyond.

 

"I would also like to thank Brian and Neal for their service to Contango during their tenure on the board and for helping to deliver this milestone transaction."

 

Further Information

 

Background to the Acquisition

 

On 22 December 2017, the Company announced that it had signed a memorandum of understanding to acquire Monaf Investments (Private) Limited's ("Monaf") interest in a mining asset in Zimbabwe (namely, the Lubu Coalfield), the "Acquisition".

 

The Acquisition constituted a Reverse Takeover under the Listing Rules and trading in the Existing Ordinary Shares was suspended with effect from 22 December 2017 pending the publication of a prospectus.

 

The consideration for the Acquisition was £6,834,829.05, to be satisfied by the Company issuing 128,849,961 Ordinary Shares in the capital of the Company to Consolidated Growth Holdings Limited ("CGH"), being the parent company of Monaf, at an equivalent price of 5 pence per share and an additional cash investment of £392,331 ($487,500) from existing cash resources that was advanced by the Company in instalments since June 2019 to fund the development of the Project.

 

Development Strategy for Lubu

 

Contango will undertake a phased development of the Lubu Coalfield by initially embarking in a period of small scale mining from the open pit of predominantly coking coal. This phased development seeks to expedite initial production, whilst also enabling the Company to look at further expansion scenarios given the scale of the resource. The Company, alongside CGH, commenced a comprehensive work programme in June 2019 designed to provide specific potential customers of their coking coals with further information on the coal specifications through coking and caking tests. It is envisaged that as a result of this work, Contango should be in a position to enter into its first offtake arrangement in the near term.

 

Site preparation for Open Pit Production

The Company will undertake a programme of work to make the site suitable for mining and re-establish a work camp at the Lubu Coalfield. This will require a refurbishment of the existing facilities.

 

Simultaneous with the refurbishment,  the Company will carry out ground clearance of vegetation and overburden of the 20-acre area that comprises the initial focus of the Company being a mining zone within Block B2 of Lubu. Based upon their collective experience, the Directors and Proposed Directors estimate that the ground clearance work will take 2 months from Readmission to complete at a total cost of £250,000 to be spent on excavation machinery, labour and fuel necessary to complete the ground clearance and prepare the box cut for open pit mining at Block B2.

 

Once the site preparation is complete and upon entering int an offtake contract, the Company will commence production and sales of predominantly coking coal from the open pit in the Southern Africa region to industrial customers. The Company may in the future sell thermal coal to the domestic power stations subject to burns tests to be performed by power generation companies when the Company can provide sufficient sized samples from the open pit.

 

Board & Management

 

Following Admission, the Board composition has changed with the appointment of Carl Esprey and Executive Director and Roy Pitchford and Non-Executive Chairman.  As previously announced, Brian McMaster and Neal Griffiths have retired.

 

Carl, who qualified as a Chartered Accountant and Chartered Financial Analyst, has built a career in the natural resource investment and development sector. After beginning his career at Deloitte in Johannesburg in 2001, Carl joined BHP Billiton in 2004 as an analyst focussed on mergers and acquisitions. After four years at BHP Billiton, Carl used his expertise in the resources industry to move into equity investment and joined GLG Partners in London in 2008, where he focussed on natural resources investments. In 2014 Carl joined the board of Atlas Development & Support Services Limited and guided the company through its dual listing on the Growth Enterprise Market Segment of the Nairobi Securities Exchange, whilst also managing operations across Kenya, Ethiopia and Tanzania. Carl has separately founded Elatio Tech Limited, a southern-African revenue generating gaming business and Waraba Gold Limited, a west-African gold exploration company.

 

Roy is a Zimbabwean national and qualified as a Chartered Accountant in Zimbabwe. He has a long history in the country's mining sector and was the President of the Chamber of Mines in Zimbabwe. He was the chief executive officer at Cluff Resources, where he led the redevelopment of Freda Rebecca mine, the largest gold mine in the country, as well as several smaller mines in the portfolio. Also, he was chief executive officer at Zimplats, where he oversaw the development of the Ngezi Opencast Platinum Mine into production, the re-commission of the Selous Metallurgical Complex in 2002 and created a company with a platinum-group metals resource base in excess of 300 million ounces. More recently, he was chief executive officer at Vast Resources until December 2017, a company that has mines in both Romania and Zimbabwe.

 

The directors provide Contango with a combination of proven natural resources operational and in country expertise and specialist natural resources financing experience. The Company will also continue to utilise its experience in the future in assessing additional and value accretive transactions.

 

The Company also has a highly experienced in-country management team to drive development at Lubu. Richard Rice (Technical Manager) is a geology graduate of the University of the Witwatersrand and has ~40 years of professional experience leading multi-disciplinary teams in finding orebodies and establishing mines in developing countries around the world, particularly in Zimbabwe and Africa.  Richard is registered with the SACNASP council as a professional geologist and first became involved in the Lubu Project in 2010 and is currently responsible for overseeing the ongoing exploration programme. Richard has headed up the technical departments for two AIM listed mining companies and was a Senior VP for Sun Mining, a private equity mining company with assets in Russia, Kazakhstan, Canada and South Africa. Richard has also managed successful exploration programmes all over the world, and specialises in the application of computer modelling in the evaluation of mining opportunities

 

Jacques Cormack (Country Manager) is based in Zimbabwe and is the Country Manager for the Lubu Coal Project. Having spent a significant amount of time in Zimbabwe, Jacques has been responsible for dealing with a wide variety of operational activities and logistics. He has also developed good relationships with the authorities, including at the Ministerial level, and is fluent in Shona.

 

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

 

Contango Holdings plc Chief Executive Officer Carl Esprey	E: [email protected]
Brandon Hill Capital Limited Financial Adviser & Broker Jonathan Evans	T: +44 (0)20 3463 5000
St Brides Partners Ltd Financial PR & Investor Relations Susie Geliher / Cosima Akerman	T: +44 (0)20 7236 1177