CONTANGO Holdings Plc, the London-listed natural resources company developing the Muchesu Coal Project in Binga, has now received US$1 million in royalty payments from Huo Investments (Pvt) Limited, its strategic investor under the terms of a Mineral Royalty Agreement (MRA).
The latest disbursement of US$500 000 received since February brings the total royalty income to date to US$1 million.
This forms part of the US$2 million minimum annual royalty commitment by the investor.
Under the terms of the MRA, Huo Investments is required to pay minimum royalties of US$2 million each year.
However, Contango anticipates that the total receipts will “be considerably higher” as production and operations at the +2 billion tonne Muchesu coal resource continue to scale up.
“The company and the investor are finalising the payments schedule of the second US$1 million payment,” Contango said in a statement.
Contango Chief Executive Officer, Carl Esprey, described the royalty payments as a strong indication of confidence in the project.
“We have now received US$1 million in royalty payments under the MRA. These royalty payments strengthen the company’s capital position and reaffirm the Investor’s commitment to Muchesu,” said Mr Esprey.
He added that the Muchesu site continues to attract fresh capital and operational progress, with key infrastructure work now underway.
“Work and capital investment has continued at Muchesu since our last update, including the commencement of installation of coke batteries. An additional RNS will be made addressing operational activities.
“It is, however, highly encouraging to report continued investment and expenditure at site by the Investor, who remains the Company’s largest shareholder (20,42 percent),” Mr Esprey said.
Muchesu, located in the Lubu coalfields of Hwange, remains one of Zimbabwe’s most significant coal development initiatives and Contango’s steady progress signals growing confidence in Zimbabwe’s mining sector.
The company has indicated that further updates will be provided in due course, particularly regarding site development and projected production metrics. The firm continues to make strong progress as it transitions into a cash-generative royalty company.
The strategic shift marks a defining period in the company’s history, significantly reducing previous risks associated with being the sole mine operator at Muchesu.
The move to a royalty-focused business model not only provides investors with substantial growth potential but also shields shareholders from uncertainties related to future operational costs, capital expenditure and working capital requirements.
The partnership with Huo Investments, formalised through a series of agreements, including the MRA and a US$20 million Revolving Facility Agreement, positions Contango for long-term growth.
Upon the completion of the US$2 million subscription, Huo Investments will become the largest shareholder, aligning its interests with those of Contango’s existing shareholders.
Matabeleland North has extensive mining activities that have been crucial to both provincial and national development.
The province serves as a hub for coal-to-energy value chain investments, which are expected to unlock up to US$1 billion under the coal and hydrocarbon sector.