Contango Holdings PLC (LON:CGO) has agreed an off-take deal for its Lubu coalfield project in Zimbabwe.
A letter of intent has been signed with local coke producer South Mining, which has agreed in principle to purchase an anticipated minimum of 30,000 metric tonnes of raw coal per month.
The company, which floated as a cash shell back in 2017, completed the reverse takeover of Lubu in June.
Pricing remains subject to contract, negotiation and prevailing market conditions, though Contango said present assumptions led it to anticipate a sale price of US$45-55 per metric tonne of raw coal and US$70-80 per metric tonne of washed coal.
Contango, which is planning to hire a contract miner to extract the coal from Lubu, said it envisages the offtake with South Mining would provide it with “significant cashflow”.
Executive director Carl Esprey said he was confident of finalising the deal and beginning mine construction as travel and work restrictions ease across Zimbabwe.
He added, “the company continues to receive additional interest in its suite of coal products and we remain optimistic of further offtakes in due course to further boost profitability”.