Zimbabwe-based Chinese investor Wencai Huo has agreed to acquire 51% of London-listed Contango Holdings (Contango)’s Muchesu Coal Project (Muchesu) in the southern African nation.

Contango said on June 17 that Huo will, in terms of the term sheet, invest $20mn to match what the company has so far pumped into the 2bn-tonne coal project. The funding will be provided either in cash or through the purchase of agreed equipment necessary to advance and expand Muchesu including wash plants and screens. 

Huo, an established businessman in Zimbabwe, will also secure 20% of Contango.  The parties also agreed that Contango will receive life-of-mine royalties over gross production with a minimum of $2mn yearly.

The intention of the Chinese investor to become a major shareholder in Contango, as well as become the lead partner in the project, commented chief executive officer Carl Esprey, is testament to the upside this agreement offers to shareholders.

“By investing a further $20mn at Muchesu we will be able to quickly ramp up operations and satisfy some of the larger contracts we have been reviewing or are aware of,” he added.

“Our intention has always been to develop our suite of coal products, as well as the manufacture of coke at site. This transaction will position us to subsequently benefit from this, without requiring the shareholders of Contango to be diluted by further capital raises or to reinvest cashflow to fund expansion.”