8-K: Contango Ore Set to Pour First Gold at Manh Choh Mine, HighGold Acquisition Approved

Contango Ore is preparing for its first gold pour at the Manh Choh mine on July 8th and has received shareholder approval for the acquisition of HighGold Mining.

Summary

• Contango Ore, Inc. is set to achieve a major milestone with the first gold pour at the Manh Choh mine scheduled for July 8, 2024.
• The Manh Choh project is a high-grade open-pit gold mine, with mining operations having commenced in August 2023 and ore hauling starting in November 2023.
• Contango holds a 30% interest in the Peak Gold JV, which operates the Manh Choh mine, with Kinross Gold Corporation holding the remaining 70%.
• HighGold Mining Inc. shareholders have overwhelmingly approved the acquisition of HighGold by Contango, with the transaction expected to close around July 9, 2024.
• The acquisition of HighGold will increase Contango's outlined resources threefold, adding the Johnson Tract project to its portfolio.
• Contango plans a $3 million surface exploration drilling program at Johnson Tract this summer, focusing on in-fill drilling of the 1 million ounce resource.
• The company also completed a $15 million public offering of units on June 12, 2024, at a price of $20.50 per unit.
• A legal challenge regarding the Manh Choh ore haul route was partially dismissed, with one claim of public nuisance remaining.

Sentiment

Score: 9

Explanation: The document conveys a very positive sentiment due to the upcoming first gold pour, the successful acquisition of HighGold, and the clear growth strategy. The company is executing its plans effectively and has secured necessary funding.

Positives

• The Manh Choh mine is on schedule and on budget, with production expected to commence in early Q3 2024.
• The HighGold acquisition significantly increases Contango's resource base and adds a high-quality asset in Johnson Tract.
• The Johnson Tract project is well-suited for low-cost underground mining due to its subvertical, bulk-mining widths and ramp access.
• Contango has a strong management team and a clear strategy for growth, focusing on high-grade assets near existing infrastructure.
• The company has secured project financing arrangements, including a US$70 million line of credit.
• The company has a hybrid royalty model that reduces risk and capital exposure.
• The company has a low overhead cost and a low share count, resulting in strong cash flow per employee and per share.

Negatives

• The company is reliant on Kinross for the feasibility study and related information for the Peak Gold JV.
• The company has a debt of $62.5 million.
• The company is facing a legal challenge regarding the Manh Choh ore haul route, although most claims have been dismissed.
• The company is exposed to risks related to the volatility of natural resource prices and the uncertainty of estimates and projections relating to future production, costs and expenses.

Risks

• There are risks inherent in the exploration and mining industry, including operational risks, geological uncertainties, and the speculative nature of the industry.
• The company faces risks related to the volatility of natural resource prices, including gold and associated minerals.
• There are uncertainties regarding the availability and cost of financing.
• The company could face potential delays or changes in plans with respect to exploration or development projects.
• The company is exposed to health, safety, and environmental risks, as well as risks related to weather and other natural disasters.
• The company's ability to realize the anticipated benefits of the Peak Gold JV and the Johnson Tract Project is not guaranteed.
• The company is subject to the risk of losing key employees or consultants.
• Government policies may change, political developments may occur, or governmental approvals may be delayed or withheld.

Future Outlook

Contango aims to become a significant Alaska gold producer by leveraging the cash flow from Manh Choh to develop the Lucky Shot and Johnson Tract projects, targeting over 200,000 equivalent ounces of annual production within 5 years.

Management Comments

• Rick Van Nieuwenhuyse, CEO and President for Contango, stated that the first gold pour at Manh Choh is a grand milestone event for the Company and its shareholders.
• Rick Van Nieuwenhuyse commented that the combination of HighGold and Contango makes a tremendous amount of strategic sense.
• Rick Van Nieuwenhuyse noted that the Johnson Tract acquisition increases Contango's currently outlined resources three-fold.

Industry Context

The announcement aligns with the trend of companies focusing on high-grade, near-infrastructure assets to reduce risk and accelerate production. Contango's strategy of utilizing existing mills and infrastructure is a common approach in the mining industry to lower capital costs and permitting risks.

Comparison to Industry Standards

• Contango's Manh Choh project, with an expected average grade of 8 g/t gold, is considered one of the world's highest-grade open-pit gold mines, which is significantly higher than the average grade of many open-pit gold mines globally.
• The Johnson Tract deposit, with 1.1 Moz @ 9.4 g/t AuEq and a 40m true width, is considered a high-grade deposit compared to many other gold projects, and its thickness is 10x thicker than high-grade peers.
• The company's strategy of using a hybrid royalty model is similar to other royalty and streaming companies, which typically trade at a premium of 15-30x EBITDA and/or 1.25-2.0x NAV.
• The company's focus on acquiring assets near existing infrastructure is a common strategy to reduce capital costs and permitting risks, similar to companies like Barrick Gold and Newmont, which often prioritize projects with existing infrastructure.
• The company's plan to use direct shipping ore (DSO) is similar to other companies that focus on high-grade deposits that can be processed at existing mills, such as some operations in the Australian gold sector.

Legal Proceedings

• The Committee for Safe Communities filed a lawsuit against the State of Alaska regarding the Manh Choh ore haul plan.
• The Superior Court granted the motion for judgment on the pleadings in part and dismissed three of four claims in the Complaint.
• The remaining claim that was not dismissed alleges public nuisance and the Superior Court lifted the stay of discovery for that claim.

Stakeholder Impact

• Shareholders will benefit from the increased resource base and production potential.
• Employees will have opportunities for growth and development.
• Customers will have access to a reliable supply of gold.
• Suppliers will benefit from increased business opportunities.
• Creditors will have increased confidence in the company's ability to repay its debts.

Next Steps

• The first gold pour at the Manh Choh mine is scheduled for July 8, 2024.
• HighGold will seek a final order approving the arrangement from the Supreme Court of British Columbia on July 2, 2024.
• The closing of the HighGold acquisition is expected to complete on or around July 9, 2024.
• Contango plans a $3 million surface exploration drilling program at Johnson Tract this summer.
• The company plans to initiate permitting for the Johnson Tract project in H2 2024.

Key Dates

Keywords

gold, mining, exploration, Manh Choh, Johnson Tract, Lucky Shot, Alaska, acquisition, production, resource, cash flow, HighGold, Peak Gold JV