Contango Holdings has announced the acquisition of the Garalo gold project in Mali for US$1 million.
Carl Esprey, Executive Director of Contango Holdings, says:
“I am delighted to confirm the acquisition of Garalo for just US$1 million. It is a deposit both myself and our newly appointed in-country mine manager have known for some time and I am confident it is an ideal fit within the Contango portfolio, which is focused on low capex, high margin, near term production assets.
“Once Garalo is in production, there should be a significant opportunity to acquire similar projects nearby, which have typically been overlooked by the larger operating companies in the region that are developing multi-million ounce deposits.
“This, coupled with the prospectivity that remains unexplored at Garalo, should in due course ensure a significant boost to reserves and mine life, which already stands at over 10 years.
“At a stabilised base case of 10,000oz per annum, we would expect the Garalo deposit to generate circa US$1 million of EBIT per month. In the event we are able to increase the production rate to 30,000 ozpa, there would be a further material increase in earnings.
“In Zimbabwe we recently reported two LOIs for a combined 32,000 t per month from our Lubu coking coal project. As previously stated, we expect to move these to formal offtakes over the coming months, thereby enabling construction ahead of first production also in H2 2020.
Discussions are ongoing with other interested parties with respect to additional LOIs and offtakes and we expect to provide a separate operational update to the market on Lubu later this quarter.
If the Company is successful in converting the 32,000 t per month under LOI, the Board believe additional earnings of circa US$1 million per month could be realised from Lubu based on current pricing discussions.
“I would like to thank all our existing shareholders who participated in the over-subscribed £1.8 million capital raise at 5p, as well as welcome new shareholders who are joining the register.
“I believe the demand for the Placing highlights the underlying value now within the Contango portfolio and across our two assets, both of which we expect to have in production in H2 2021 without the need for further funds at the Company level.
“The Company has stated previously it would look to pay dividends once stable cashflows have been established. With the acquisition of Garalo and the potential for both projects now in the portfolio to yield +US$1 million per month of earnings each, the Company remains ever focused on achieving this objective targeting the pay out of ~50% of net profits by way of a dividend.
“I look forward to updating all shareholders on our progress over the coming period.”
The Garalo project
The Garalo permit occupies 62.5 km2 in the Sikasso region of southern Mali, 200 km south-east of the capital Bamako and close to the Guinea border.
The permit is surrounded by a number of multi-million ounce gold deposits and the region is home to some of the world’s leading gold miners, including AngloGold Ashanti, IAMGOLD, Barrick, B2 Gold, Endeavour Mining and Hummingbird Resources, which has helped to establish Mali as the third largest gold producer in Africa.