8-K: Contango Ore Announces Second Gold Production Campaign at Manh Choh Mine and Provides Corporate Update

Contango Ore has commenced the second campaign of gold production at the Manh Choh mine and provided updates on its Johnson Tract project and other corporate activities.

Summary

• Contango Ore, a 30% owner of the Peak Gold JV, has started processing the second campaign of ore from the Manh Choh gold mine through the Kinross Fort Knox mill.
• The second campaign is expected to produce 10,000 ounces of gold for Contango's share.
• The company sold an additional 1,500 ounces of gold and a minor amount of silver from the remaining Campaign #1 inventory, bringing total sales from Campaign #1 to $36 million.
• Total production from Campaign #1 was 16,200 ounces of gold and 3,500 ounces of silver.
• The company expects a blended gold price between $2,100 to $2,200 per ounce for Campaign #2, with 60% of gold hedged at $2,025 per ounce.
• A third campaign of similar size is planned for November, bringing the total gold production guidance for 2024 to approximately 36,000 ounces.
• Contango received a 404 Wetlands Permit for the Johnson Tract project, allowing construction of an access road and airstrip expansion.
• A Memorandum of Understanding (MOU) was signed to begin permitting the exploration portal and laydown area for the Johnson Tract project.
• SRK Consulting Canada Inc. has been engaged to complete a Preliminary Economic Assessment (PEA) for the Johnson Tract project using a Direct Shipping Ore (DSO) approach.
• The 2024 surface drilling program at the Johnson Tract project is half complete, with 1,500 meters drilled, and is expected to finish by early October.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the commencement of the second production campaign, strong gold sales, and progress on the Johnson Tract project. The company's focus on a hybrid royalty model and DSO approach also contributes to the positive outlook.

Positives

• The start of the second gold production campaign at Manh Choh is a positive step for the company's revenue generation.
• The company has successfully sold $36 million of gold from the first campaign.
• The blended gold price for Campaign #2 is expected to be between $2,100 and $2,200 per ounce, which is a strong price.
• The receipt of the 404 Wetlands Permit for the Johnson Tract project is a significant milestone for development.
• The company is making progress on the Johnson Tract project, with the PEA underway and drilling on schedule.
• The company expects to finish the year with a strong balance sheet.

Negatives

• The document mentions that reconciliations of non-GAAP financial measures are not included due to the difficulty and impracticality of quantifying certain amounts.
• The company relies on Kinross for information related to the Manh Choh project, which could limit its control and transparency.

Risks

• Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• The company is exposed to risks related to the exploration and mining industry, including operational risks, geological uncertainties, and commodity price volatility.
• There are risks associated with the availability and cost of financing.
• The company's ability to realize the anticipated benefits of the Peak Gold JV and the Johnson Tract project is not guaranteed.
• Government policies may change, political developments may occur, or governmental approvals may be delayed or withheld.

Future Outlook

Contango expects to finish the year with a strong balance sheet and is well-positioned to advance its Lucky Shot and Johnson Tract development projects. The company anticipates an average of 67,500 ounces of gold annually from Manh Choh in 2025 and beyond.

Management Comments

• Rick Van Nieuwenhuyse, CEO and President, stated it is great to see the start of the second campaign of Manh Choh ore going through the Fort Knox mill.
• Mr. Van Nieuwenhuyse also mentioned that the company is making great progress advancing the Johnson Tract project.

Industry Context

This announcement highlights Contango's progress in gold production and project development, aligning with the current high gold price environment. The company's focus on a Direct Shipping Ore (DSO) model is a strategy to minimize environmental impact and lower capital outlay, which is becoming increasingly important in the mining industry.

Comparison to Industry Standards

• Contango's hybrid royalty model is similar to companies like Wheaton Precious Metals, Royal Gold, and Franco Nevada, which focus on cash flow per share.
• The company's revenue per employee is projected to be significantly higher than major development companies like Barrick, Anglo American, Kinross, Agnico Eagle, Rio Tinto, and Newmont.
• Contango's projected annual free cash flow per share is also higher than junior producers like Lion One, Ascot, i-80 Gold, Aya Gold & Silver, and Andean Resources.
• The company's DSO approach is a strategy to minimize environmental footprint and lower permitting risk, which is a growing trend in the mining industry.

Stakeholder Impact

• Shareholders will benefit from increased gold production and potential cash flow.
• Employees will be involved in the ongoing operations and development projects.
• Customers will receive gold from the Manh Choh mine.
• Suppliers will provide goods and services for the mining operations.
• Creditors will be impacted by the company's financial performance.

Next Steps

• Complete the 2024 surface drilling program at the Johnson Tract project by early October.
• Process the third campaign of Manh Choh ore in November.
• Announce All-in Sustaining Costs (AISC) and financial results for the quarter ended September 30, 2024, in the first half of November.
• Continue permitting the underground exploration tunnel at Johnson Tract.
• Complete a Preliminary Economic Assessment (PEA) for the Johnson Tract project.
• Advance the Lucky Shot project with drilling in 2025.

Key Dates

Keywords

gold, production, Manh Choh, Johnson Tract, mining, exploration, DSO, permitting, Alaska, Peak Gold