Contango Holdings Plc / Index: LSE / Epic: CGO / Sector: Natural Resources

8 April 2024

Contango Holdings PLC

("Contango" or the "Company")

Placing & Operational Update

Contango Holdings Plc, a company focused on the development of the +2 billion tonne Muchesu coal project in Zimbabwe ("Muchesu" or the "Mine"), provides details of an equity placing as well as an update on current operations.

Placing

The Company has raised gross proceeds of £940,000 through a placing (the "Placing") of 94,000,000 new ordinary shares of 1p each (the "Placing Shares") at a price of 1p (the "Placing Price"), arranged by Tavira Financial Limited. The Placing has been conducted within existing share capital authorities and represents approximately 16.6% of the enlarged share capital following Admission of the Placing Shares.

Project Update

During 2023 the Company finalised all the necessary infrastructure upgrades and installed the necessary capital plant items to enable steady state production to commence from the open pit operations. The Mine was formally opened in August 2023 by a delegation of dignitaries, led by his Excellency Dr Emmerson Mnangagwa, the President of Zimbabwe, with the subsequent intention of commencing stabilised and increasing sales of coking coal under existing offtake arrangements entered into earlier in 2023. As previously reported, this offtake arrangement did not result in the anticipated order for the coal products as initially discussed. Therefore, the Company has subsequently been focused on identifying and securing additional offtake for its coking coal, industrial coal and thermal coal products.

The Company is currently in discussions with numerous potential offtake partners, from both domestic and international markets, for its suite of coal products. Some of these ongoing discussions require the Company to provide samples and to perform additional test work as offtake groups require specific specifications for their usage. Accordingly, samples are provided on an ad hoc basis from the relevant stockpiles or freshly cut coal. The Company expects that the outcome from these discussions and work undertaken on the coal to crystalise during Q2 2024.

Whilst the Company does not expect all of these discussions to result in a positive outcome, the Company reasonably believes that based on the engagement thus far, several contracts are likely to materialise. To quantify, cumulatively these discussions represent more than 50,000 tonnes per month for industrial and coking coal, far exceeding current washing capacity at Muchesu.

Given the Company has not derived any sustained material cash flow from operations to date the Placing will allow the Company to strengthen its working capital position to support the ongoing work required for engagement with the various offtake groups and to meet short term creditors who supply products and services for operations in Zimbabwe.

The Board has been unilaterally deferring its remuneration since the start of Q4 2023 and will continue to do so until such time that the Company's balance sheet is in a more stable position.

Thermal Coal Opportunities

The Company has now commenced extraction from the shallower thermal coal seams to provide product for coal burn tests for certain groups ahead of potential contracts for the sale of thermal coal of a similar tonnage. Whilst thermal coal is a lower margin operation, the potential large quantities of demand could provide material cashflow, especially given it is unlikely to encroach on washing capacity and the Company's surface miner has capacity of circa 1.5 million tonnes per annum.

Financial Update

The Company's financial position following the Placing will not provide sufficient cash resources to repay outstanding non-secured shareholder loans of £2.7 million, however, these loans were provided by a number of highly supportive and long-standing shareholders. All loan note holders have been appraised of the Placing and the current operational situation and have confirmed they remain supportive of the Company's business plan to reach positive cash flow and a self-sustainable business from operations. Several of the loan note holders have elected to participate in the Placing.

Corporate Update

Finally, as previously stated, having built the Mine the Company has received (and continues to receive) interest from a number of strategic groups relating to a variety of structures including JVs or outright purchase at project level. These discussions remain "live" with several parties, which have entailed additional site visits, drone surveys, sampling and coal testwork. There is no guarantee any of these discussions will lead to any formal proposal, nor a proposal that may be acceptable to the Board and shareholders. However, the Board believe it is in the best interest of shareholders to continue to engage with these lines of enquiry, whilst in parallel continue to look to finalise offtake arrangements enabling the business to grow organically. The funds raised in the Placing will therefore also enable the Company to pursue this dual strategy.

Related Party Transaction

RAB Capital Ltd, its subsidiaries and Philip Richards (collectively "RAB Capital") currently own 53,049,432 shares in the Company. RAB Capital have agreed to subscribe for 15,750,000 shares in the Placing. Following the Placing, RAB Capital will have an interest of 68,799,432 shares in the Company, representing 12.1% of the enlarged share capital following the Placing. RAB Capital is deemed a related party under DTR 7.3 and their participation in the Placing is defined as a related party transaction. Roy Pitchford (Non-Executive Chairman and independent director) considers the terms of their participation fair and reasonable insofar as the Company's shareholders are concerned.

Admission and Total Voting Rights

Application will be made to the London Stock Exchange for admission of the Placing Shares to trading on the standard segment of the Official List and the London Stock Exchange ("Admission"). It is expected that Admission will become effective and dealings in the Placing Shares will commence from 8.00 a.m. on 11 April 2024. The Placing Shares will be issued fully paid and will rank pari passu in all respects with the Company's existing Ordinary Shares.

Following Admission, the total number of Ordinary Shares in the capital of the Company in issue will be 566,724,023 with voting rights. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company's share capital pursuant to (i) the Company's Articles, (ii) the Financial Conduct Authority's Disclosure Guidance and Transparency Rules and/or (iii) the Standard List Rules for Companies issued by the London Stock Exchange plc as amended from time to time.

Carl Esprey, CEO of Contango, commented:

"I understand shareholders' disappointment at the need for the Company to undertake an equity raise at this time. The Board had tried to defer this until such time as several new offtakes had been crystalised and potentially some positive developments from our ongoing corporate discussions. However, the Company has needed to undertake this capital raise to address creditors and ongoing working capital, thereby providing a runway for these various discussions to formalise. We have not issued any shares at the plc level since November 2022 and accordingly our capital structure and value proposition remains robust. This capital raise will hopefully provide a springboard for recovery.

"We have a world class deposit at Muchesu. Collectively over US$30 million has been spent developing the Mine  to this point. Whilst I appreciate the lack of sales to date is a concern I can assure shareholders we are focused on addressing this. Over the last few months we have significantly ramped up our marketing of Muchesu coal as we have sought to diversify and expand our offtake relationships, going directly to underlying users. I believe we are now seeing the fruits of these labours and am optimistic we will be able to conclude a number of offtakes in the current quarter.

"I thank shareholders for their patience and support, especially those who have participated in this capital raise. I hope to be able to provide updates to all shareholders later this quarter on our progress."

**ENDS**