TIDMCGO
RNS Number : 8354S
Contango Holdings PLC
18 November 2021
Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural
Resources
18 November 2021
Contango Holdings Plc
('Contango' or the 'Company')
Placing of GBP2.5M to bring the Lubu Coking Coal Project
("Lubu") into Production
Highlights
-- US$3M will be used to fast track Lubu into production by late Q1 2022
-- Installation of coke batteries at site in Q4 2021 to capture full value proposition
-- Funds also applied to further the Garalo-Ntiela Project in Mali
Contango Holdings Plc is pleased to announce that it has raised
GBP2,500,000 (before expenses) through a Placing of 41,666,666 New
Ordinary Shares of GBP0.01 each ("Placing Shares") at a price of 6
pence per Placing Share (the "Placing"). Investors in the Placing
will also receive one warrant per Placing Share to subscribe for
one new ordinary share at a cost of 12p per share. The Placing was
undertaken by its broker Brandon Hill Capital Limited.
Use of Funds and Work Programme
The Placing will provide the Company with sufficient funds to
bring Lubu into production towards the end of Q1 2022, marking the
Company's transition into cashflow and profitability from
operations.
This development route is now feasible following the recent
verification by Bureau Veritas' studies on the Lubu coking coals
which confirmed to both the Company and potential customers the
product's attractive characteristics. The studies indicated the
potential for 96Mt from Block 2 of high-quality coking coal with
low ash and sulphur and with high yields and swelling indices.
There is currently significant demand both regionally and globally
for coking coal with such characteristics.
Also, the Company has recently visited a number of potential
customers and off-takers and following such conversations with
these groups the directors of the Company have chosen to begin
operations with immediate effect and take advantage of strong
commodity prices and forecasts.
The Company intends to commence with an initial 300Ktpa
production operation with the possibility of increasing production
in due course. The local demand is likely to increase as regional
coke battery capacity in Hwange (approximately 200Km from Lubu) is
being increased from 570Ktpa to 1.92Mtpa, which would create
further demand for suitable coking coals used in the process of
coke manufacture.
Given the historical expenditure of over US$20M on Lubu, CAPEX
required to bring Lubu into production is expected to be US$3M,
comprising principally of the following:
-- Constructing a decline shaft and associated
infrastructure;
-- Installing a continuous miner with retractable conveyor;
-- Installing a surface wash plant; and
-- Mining equipment.
Coke Battery Installation
The Company intends to install an initial 150Ktpa coke battery
at site by the end of 2022 following the commencement of initial
production earlier in the year. This would enable Contango to have
a fully integrated operation and produce coke, which has seen
prices reach approximately US$700/t in China this year and which is
currently selling at circa US$600/t.
By manufacturing coke, Contango expects to receive the highest
value possible for its resource and produce a product that can be
sold internationally at market rates. The Company will look to
optimise the funding strategy of the initial coke battery during
2022, with the expectation that existing cash resources, cash flows
from coking coal sales, as well as offtake-linked finance and debt
will be available. Given the modular nature of the coke batteries,
further expansion in coke production will also be explored in due
course.
Garalo-Ntiela Gold Project
The balance of the proceeds from the Placing, along with
existing cash resources which have been further boosted by
GBP1.025M during 2021 through the exercise of warrants, are to be
used for general working capital and to advance the Garalo-Ntiela
Project in Mali, where a short drilling programme is expected to
commence imminently as the Company looks to further verify the 2Moz
potential outlined in a NI 43-101 Independent Technical Report
earlier this year, ahead of finalising the development
strategy.
A further update is expected to be provided on Garalo-Ntiela
before year end.
Director Participation & Resignation
Existing major shareholder RAB Capital, has agreed to invest
GBP200,000 in the Placing. As Philip Richards is currently a
director of the Company and controlling shareholder of RAB Capital,
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.
Philip Richards has also advised the Board of his intention to
resign upon completion of this Placing as non-executive Director to
focus on his other business commitments. Philip Richards
commented:
"I am proud to have been one of the founders of Contango and
with what we have achieved so far as a company. When we set out,
our primary objective was to acquire a mining asset that could be
brought into production quickly and in a cost-effective manner,
with minimal dilution to shareholders. I believe Contango has
successfully navigated these uncertain times and is meeting these
objectives.
"With this Placing, construction already underway at Lubu and
the huge potential to be unlocked from our assets in Mali, I am
confident of the outlook for Contango. Following a subscription for
a further GBP200,000 in this Placing, RAB Capital will remain a
+10% shareholder of the Company. I will continue to remain a
supportive shareholder, offering any assistance I can to Contango
going forward."
Admission and Total Voting Rights
An application has been made for the Placing Shares to be
admitted to trading on the Official List and the London Stock
Exchange with effect from 8.00 a.m. on 24 November 2021
("Admission").
In accordance with the FCA's Disclosure Guidance and
Transparency Rules, the Company confirms that following Admission,
the Company's enlarged issued ordinary share capital will comprise
309,424,932 Ordinary Shares. The Company does not hold any Ordinary
Shares in Treasury. Therefore, following Admission, the above
figure may be used by shareholders in the Company as the
denominator for the calculations to determine if they are required
to notify their interest in, or a change to their interest in the
Company, under the FCA's Disclosure Guidance and Transparency
Rules.
Carl Esprey, Executive Director of Contango Holdings, said:
"I am delighted by the level of institutional support we have
seen in this at-market Placing, including subscriptions from a
number of new strategic investors. We now have funding in place to
bring our first asset into production towards the end of Q1 2022.
Work has already commenced at site and I look forward to keeping
the markets updated at this exciting time.
"The demand and outlook for coking coal remains very
encouraging. Its essential role within the steel and other
manufacturing industries means it will continue to play an
important role as advanced and emerging economies continue to
invest in their infrastructure. This is equally true in the
manufacture of coke and I believe our development strategy has
positioned Contango to be able to generate significant free
cashflow from operations going forward.
"Finally, I would like to thank Philip for his efforts in
helping Contango reach this pivotal moment in its history. The
Company is in advanced discussions to appoint a new Non-Executive
to the Board, who I believe will further strengthen the team as we
quickly move into development and production across the portfolio.
An update will be made on this in the near term."
**ENDS**
For further information, please visit
www.contango-holdings-plc.co.uk or contact:
Contango Holdings plc E: info@contango-holdings-plc.co.uk
Chief Executive Officer
Carl Esprey
Brandon Hill Capital Limited T: +44 (0)20 3463 5000
Financial Adviser & Broker
Jonathan Evans
St Brides Partners Ltd T: +44 (0)20 7236 1177
Financial PR & Investor Relations
Susie Geliher / Cosima Akerman
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END
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