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For anyone wondering about production - take a look at the Jan RNS. We were ready to go into production c.March. Awaiting approval expected in Feb
[“The site was recently inspected by the Environment Management Agency ("EMA") following the camp site rehabilitation and access upgrades that have now been completed. A meeting with the Binga District Council ('BDC') has now been scheduled in early February 2021 to outline the two pit locations at Lubu ahead of pit development…in line with the proposed start-up timetable…Contango expects to FINALISE ITS DISCUSSIONS WITH THE PROPOSED MINING CONTRACTOR IMMINENTLY AHEAD OF OPENING THE TWO PITS AT LUBU IN FEB 21…This will enable ongoing coking coal offtake discussions to be finalised…As previously reported, the manufacture of coke at site would provide a significant boost to the value of the product generated at Lubu, which is already considered to be highly valuable.
Carl Esprey, Executive Director of Contango Holdings, said: "Our Lubu Project is advancing well ahead of the unveiling of the first open pit next month…Our offtake negotiations continue to progress well and the opening of the pit in the next few weeks will allow these discussions to be finalised. Conversion of the existing signed LOIs into formal offtake contracts is expected to generate +US$1M of EBIT per month”]
Then on 26th March they had to cease progress to deal with Afrochine
Thus I expect the mine to be ready for production very quickly. Probably just waiting for the council to sign it off
I don’t think mining costs are anywhere near $100pt
“ Contango is targeting an initial 1Mtpa of coal product sales, focussing on the production and sale of semi-soft coking coal for export to southern African countries. Although the project has a total resource in excess of 1 billion tonnes of coal, we are focussing initially on a small area of the B2 Block of Lubu, where the deposit starts at surface and goes down to a maximum depth of 47m. Site preparation has begun, and we are planning to use contract mining to fast track production whilst minimising capex. The Board expects that combined contract mining and processing costs will total US$15 per tonne, versus the sales price (minus potential transport costs of a further circa US$15 per tonne) of between $70 and $105 per tonne, highlighting the significant margin achievable using this model”
I think they only commissioned it in the last few weeks.
They need lots of coal as they have multiple collieries to build
Also CGO have an off take arrangement with southern mining which was going in to production in May but got postponed - Carl said that he will start production next few months
A side note - the co mentioned that they had potential two of the worlds biggest steel manufacturers interested. One being Afrochine (Tsingshan).
On the border of Zimbabwe, MC Mining have a met coal resource but their main asset is struggling to get in to production due to finance issues. That specific asset has an off take agreement with Arcellor mitral who need 350,000tpa
https://www.caesarsreport.com/blog/mc-mining-signs-offtake-agreement-with-arcelormittal/
They still haven’t solved the finance issues
https://m.miningweekly.com/article/idc-reaffirms-support-for-mc-mining-2021-10-29/rep_id:3861
While I’m adding 1 + 2 and coming out with 8 (lol) there remains a shortage in South Africa and some new explorers are struggling. So it makes sense to complete independent mineral / metal testing in South Africa where they do also have a coal shortage
Morning,
Some good questions there.
I’m a long term holder. I will provide my view on things.
1) They said:
“ Contango will now focus on extracting bulk samples of the high value coking and metallurgical coals found in the 1A Lower and MSU seams…enabling the Company to focus specifically on the high value product of particular interest to the Potential Offtake Partner for its newly built coke batteries, expected to be commissioned later this month.
Given the increasing likelihood of a positive outcome with the Potential Offtake Partner, CONTANGO WILL SHORTLY APPROVE THE APPOINTMENT OF A MINING ENGINEER, WHO WILL BE CHARGED WITH IDENTIFYING THE BEST AREAS FOR UNDERGROUND MINING…In addition, liaising with Contango's technical team, the engineer will also help SELECT THE BEST EXCAVATION POSITION FOR A 4m x 4m SHAFT FROM WHICH THE BULK SAMPLE WILL BE TAKEN”
So my take on this is that CGO we’re doing work for themselves while also satisfying the requirements of the potential partner. The cost was shared. Furthermore it makes total sense to have an independent test bc CGO will need to have an idea of the quality of the coal in order to raise debt for finance mine expansion - they have already stated in RNS’ they want to use the off take deals for debt. Banks will want lab tests from recognised and trusted mineral / metal experts
2) When CGO acquired Garalo their plan was to buy a number of cheap small gold resources ie 250,000 to 500,000 oz resources. Essentially mines that larger co won’t be looking at. However, having acquired the licence and competed an updated review they realised their small operation became 1.8moz - much larger than anyone anticipated. Furthermore, the G1 & G3 seams extend in to Ntiela hence why they rushed to confirm purchase of that too. By the way - the warrants have pretty much covered the cash cost of this. £750k cost c £740k warrants. Having better understood the resource they completed a thorough assessment which is now being analysed. What was original a small scale operation processing 30,000oz PW, is now “identical to Kalana” (from CGO RNS) which is a 1.8moz mine bought by endeavour for $120m and they put a NPV5% value on it of $320mz. Aim to increase production to 150koz pa. Now note that’s the same as Garalo alone. Carl also says Ntiela is identical. So we could have anywhere between 2m and 5min across both which makes it a v big mine. So I forgive Carl for pushing back the production time - albeit I wouldn’t have been surprised if he changed the plan
3) warrants & Conv Loan are frustrating but also underpin the SP. Clearly those investors believe they are getting value. Similarly, that’s cash in the bank at a known price thereby protecting the co a bit from raising capital on bad terms
I suspect Q1 production is south mining as that was prepped pre Chinese
From memory, Chinese deal will require upgrading the mine to accommodate the supply
And I think they said off/take would be used to borrow money to do the development work
Just managing expectations in case I am right.
I think the Chinese deal will happen but production may be a little further on
So I’m expecting $1m to $2m EVITDA per month from existing off take deals
Bridgedogg1
If you go back through the RNS’, we were about to start mining before it was put on hold for Tsingshan
14th August 2020
“Contango Holdings Plc, the London listed natural resource development company, is pleased to announce that it has signed a Letter of Intent ('LOI') with South Mining (Pvt) Limited ('South Mining') relating to an offtake agreement for coal products produced at the Company's Lubu Coalfield Project in Zimbabwe ('Lubu')”
1st September 2020
“ Formal negotiations regarding the previously announced LOIs for 32,000 tonnes per month coal off-take agreements from Lubu are progressing well and are expected to be concluded in the current quarter”
29th Jan 2021
“Carl Esprey, Executive Director of Contango Holdings, said: "Our Lubu Project is advancing well ahead of the unveiling of the first open pit next month. I must commend the hard work and dedication of our on-site team in Zimbabwe who has persevered through pandemic adversity with relatively modest disruption to the planned development schedule.
"Our offtake negotiations continue to progress well and the opening of the pit in the next few weeks will allow these discussions to be finalised. Conversion of the existing signed LOIs into formal offtake contracts is expected to generate +US$1M of EBIT per month. Clearly any additional contracts, either for coking coal or coke, would further boost this figure”
26th March 2021
“Contango, the London listed natural resource development company, is pleased to advise that it is currently in discussions regarding a potential long-term offtake for coking coal produced at Contango's Lubu Coking Coal Project with the Zimbabwean subsidiary of a major Chinese industrial company and one the world's largest stainless steel producers (the 'Potential Offtake Partner')”
Currently CGO has two assets - Mali Gold, Zim coal.
Gold plans were well-telegraphed. Buy up a number of small 300k oz to 500k oz assets (normally too small for larger miners) and mine from each. However upon the first deal they ended up hitting 1.8moz and two seams extending in to Ntiela (which they had an option over and committed to it as soon as they they realised what had been found at Garalo)
Ntiela is deemed identical. But unproven as yet.
However two seams of the three in Garalo extend in to Ntiela
So they are currently completing an aero magnetic and geo physical assessment to:
- Assess how far and wide 3 known seams extend in Garalo
- Assess / look for new mineralisations in Garalo
- Assess how far 2 seams extend in to Ntiela
- assess whether there are any other potential mineralisations in Ntiela
Now Garalo alone is deemed identical to Kalana which has 1.8m oz and was acquired by endeavour for $122m. They put a NAV5% value of $330m and intend to boost production to 150,000oz pa with a mine life of c.11 years minimum
https://s21.q4cdn.com/954147562/files/doc_presentations/presentations/Kalana-Project-v1.pdf
So I wouldn’t be surprised to see Garalo/Ntiela develop in to a much larger 3-5m oz asset
Irrespective of the above, they also have an agreement to mine up to 30,000oz pa with an implied EBITDA of $12mpa (£9m pa and c.£54m on a conservative 6 x multiple)
So I believe the gold deal alone is worth a lot more than the current market cap
Re Lubu - they already have an off take deal in place (I think for thermal coal (not coking coal)) worth $12mpa EBITDA
That deal was put on hold for the purpose of closing the site to mine the lower coking coal, and then test it.
This testing is for the purpose of establishing an off take deal with Afrochine a subsidiary of Tsingshan (1 major steel producers.
However, in a more recent RNS, they said they are in discussions with two major steel producers - so Afrochine (Taingshan) + another (unknown)
To clarify - when they reference a major, that is Tsingshan (but the deal will be with Afrochine)
Like every AIM stock, investors focus on the big prize and ignore the fact that this is vastly undervalued (in principal) relative to the original off take deals for gold & Coal.
Increasing gold reserves further is a cherry on the cake
Any Chinese off take deal is a second cherry on the cake
If this deal doesn’t happen, Contango is still worth SIGNIFICANTLY more than Mcap
$24mpa EBITDA x 6 is $154m or £114m
Evening all,
CGH / Sable had a deal with CITIC to supply a coal fired power plant. CITIC didn’t follow through with that plant
https://www.gem.wiki/Lubu_power_station
CITIC Group either did t fulfil the construction or delayed it.
In the mean time, despite proving up the resources further, Groves got entangled in a Liberian bribe issue and Sable was taken off AIM.
As soon as Emmerson Mnangagwa became president, it seems Groves did the deal with Contango to buy the asset and in return give CGH shares in Contango - CGH won’t be tradeable. But CGH will still benefit from the value of CGO shares when the rise in value
I’m not sure what the “issue” is with regards to not having access to CGH shares- that’s a non-listed co so the shares can’t be traded
Upthecoast
Not quite sure how I was ramping
Basically proven almost 100% accurate on the average price they have received c$59 and all I did was take the median PoO from Low & High each month
I also used the 100popd within their RNS’
Not quite sure how that is a “ramp”, it was reasonable estimates
Even better, net reserves up 27%
Increased debt facility so no dilution
In my opinion I think what I said was reasonable and suggests NTOG is undervalued
Pine Mills - found 37’ of Oil & in production with 100bopd (limited) & no decline. Costs <$10pb
Cypress - doubled in size & 2nd well planned. Remaining average owned 100% by NTOG
Permian - near term prod’n. 15 existing wells. 3 planned redemptions. 6 addl wells
So @ 100bopd net base on monthly median price:
Jan $148,800
Feb $159,600
Mar $193,700
Apr $184,500
May $199,950
June $212,700
July $220,100
Aug $210,025
Sep $213,000
Total $1,742,375
If you assume ave of median monthly price for rest of year (being c.$63.75pb)
Oct $197,625
Nov $191,250
Dec $197,625
Total $586,500
Total annual $2,328,875
Assume $10 lifting =
Prod’n 36,500 bo x $10 = $365,000
Total profit $1,963,875
And so much more to come
Market Cap c£3m
Conservative 6 x $1.9m is $11.4 or >£8m (SP 1.16p)
Even if net profit was $1m
Conservative 6x multiple is $6m or c£4.3m (SP 0.65p)
Excluding NEW WELLS, PERMIAN & TUNISIA
This is referring to Chinese plants.
China reduce their CO2 by off-shoring their dirty / polluting operations to another country - mostly another continent. It doesn’t mean they won’t want the supply, it just means they are not operating in China
My gut feel is we could see news this week
TMS tweet feels like a hint
Massively undervalued due to bored investors - this should be trading nearer 50p towards production, currently 11p
Craig said in podcast that the government officials were fast tracking zoom meetings etc - that’s positive as most government officials sit on their hands
Production 2022