8-K: Contango Ore Announces FY2024 Results: Gold Production Surpasses Guidance, Debt Reduction Continues

Contango Ore reports strong gold production at Manh Choh, exceeding guidance, and significant debt reduction, while advancing the Johnson Tract project.

Summary

• Contango ORE, Inc. announced its financial results for the year ended December 31, 2024.
• The company's unrestricted cash position as of December 31, 2024, was $20.1 million, compared to $15.5 million as of December 31, 2023.
• Total income from operations was $26.3 million, but the company reported a net loss of $38.0 million, which includes a $34.3 million non-cash expense from an unrealized loss on derivative contracts.
• Gold production at the Manh Choh mine surpassed 2024 guidance, with 41,325 ounces of gold produced for Contango's 30% share at a cash cost of $1,209 per ounce.
• The company achieved an average blended gold price of $2,281 per ounce.
• Contango has reduced its credit facility by 36% to $38.3 million and settled 37,861 ounces of gold hedge contracts, reducing the outstanding hedge contract to 86,739 ounces.
• The first campaign of 2025 is over 50% complete and on track to produce between 15,000 and 18,000 ounces of gold for Contango's account, with guidance of 60,000 ounces for the year.
• The company expects to complete and release a preliminary economic assessment (PEA) for the Johnson Tract project in the next few weeks.
• Net cash provided from operating activities was $0.7 million for FY2024, a significant improvement compared to net cash used of $9.4 million for the six-month transition period ended December 31, 2023, and $14.7 million for FY2023.
• Cash flows from financing activities amounted to $36.0 million for FY2024, including $30 million drawn from the Facility, offset by $7.9 million in debt repayments, and $15.5 million in equity issuance proceeds.

Sentiment

Score: 7

Explanation: The document presents a mixed picture, with strong operational performance at Manh Choh and debt reduction efforts offset by a net loss and unrealized losses on derivative contracts. The future outlook is positive, with a focus on advancing the Johnson Tract project and generating robust cash flow.

Positives

• Gold production at Manh Choh exceeded guidance, indicating strong operational performance.
• The company's cash position improved, providing financial flexibility.
• Debt reduction efforts have significantly lowered the outstanding balance on the credit facility.
• The company is advancing the Johnson Tract project, with a PEA expected soon.
• The acquisition of HighGold Mining Inc. expands the company's portfolio.
• Net cash provided from operating activities improved significantly due to gold production at Manh Choh and cash distributions from the Peak Gold JV.

Negatives

• The company reported a net loss of $38.0 million for FY2024.
• The net loss includes a $34.3 million non-cash expense from an unrealized loss on derivative contracts.
• The company incurred $4.1 million in exploration expenditures, primarily related to the Johnson Tract drilling program.
• The company reported a $54.2 M loss on derivative contracts.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• The company's performance is subject to the volatility of natural resources prices, including gold.
• The company relies on Kinross Gold Corporation for the operation of the Manh Choh project.
• The company's ability to obtain mining permits could be delayed or withheld.
• The company's estimates of AISC, resources and EBITDA have been prepared by Kinross and are based on IFRS accounting standards and detailed information that the Company does not have access to at this time.

Future Outlook

Contango anticipates robust cash flow due to approximately 30% of net gold production for both fiscal years 2025 and 2026 being linked to spot gold prices. The company is focused on critical permitting efforts at the Johnson Tract project and ongoing discussions regarding milling facilities for Johnson Tract and Lucky Shot ores using their direct ship ore (DSO) approach. The company expects to complete and release a preliminary economic assessment (PEA) for the Johnson Tract project in the next few weeks.

Management Comments

• Rick Van Nieuwenhuyse, President and CEO, stated that gold production at the Manh Choh mine surpassed 2024 guidance.
• Mr. Van Nieuwenhuyse noted the focus on repaying debt and hedge obligations.
• Mr. Van Nieuwenhuyse added that the company is well-positioned financially following the recent restructuring of the Facility.
• Mr. Van Nieuwenhuyse stated that the company remains focused on delivering the PEA for the Johnson Tract project.

Industry Context

Contango's focus on direct ship ore (DSO) projects aligns with a trend in the mining industry to reduce capital expenditures and accelerate project timelines. The company's Alaskan focus provides a degree of geopolitical stability compared to projects in other regions. The company's success is tied to the performance of Kinross Gold Corporation, the operator of the Manh Choh project.

Comparison to Industry Standards

• Contango's cash costs of $1,209 per ounce are competitive within the industry, but it is important to note that this is on a by-product basis.
• The company's focus on DSO projects is similar to strategies employed by other junior mining companies seeking to minimize upfront capital costs.
• The Johnson Tract project's resource grade of 9.4 g/t GEO is considered high-grade compared to many other gold projects globally.
• The company's ability to secure permits in Alaska is a positive differentiator, as permitting can be a significant hurdle for mining projects in other jurisdictions.

Stakeholder Impact

• Shareholders will be impacted by the company's financial performance and progress on key projects.
• Employees are affected by the operational performance of the mines and the company's overall financial health.
• The local communities in Alaska benefit from the economic activity generated by the company's operations.
• Suppliers and creditors are impacted by the company's ability to meet its financial obligations.

Next Steps

• Complete and release the preliminary economic assessment (PEA) for the Johnson Tract project.
• Continue permitting efforts at the Johnson Tract project.
• Continue discussions regarding milling facilities for Johnson Tract and Lucky Shot ores.
• Advance permitting at Johnson Tract.
• Look for new synergistic opportunities.

Key Dates