Contango Ore Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2025

There are 3 speakers on the call.

Operator

With me, Contango or CFO, Mike Clark, and CEO, Rick Van Nguyen, he's gonna go over Contango's q n financials. Mike got top billing because today is about financials, so he'll be the star of today's show. Today, how today's gonna go is he's gonna give a brief presentation summarizing yesterday's release. Then I've got a few questions, but this is absolutely an interactive event. So please do use the chat button on the bottom right hand of your screen to ask questions for the Contango executives at any time during today's event.

Operator

We'll try to get to all of them. I imagine we will actually during today's event, so please do make sure you get in the chat. So I'll try to ask them in roughly sequential order. I'll also today's event is being recorded. It'll probably be in your inbox midafternoon eastern time.

Operator

It'll also be available on events.6.com and on our YouTube channel. Without further ado, I'm gonna go off screen and hand it over to Mike just to summarize yesterday's press release.

Speaker 1

Thanks, Romeo, and good morning and good afternoon. I'm just gonna spend a few minutes just highlighting the the quarter ended 03/31/2025 and just talk on the statement of operations and balance sheet. On the statement of operations, we recorded $19,000,000 in income from operations, which includes 22,300,000.0 in equity income from the Peak Gold JV, which is our 30% ownership in Montchaux. We recorded a net loss of 22,500,000.0 for the quarter, which includes an unrealized loss of 40,500,000.0 related to the head contracts. Now this is primarily driven because gold started the year at 2,600 and ended the quarter around 3,100.

Speaker 1

We also recorded 2,700,000.0 in interest and finance charges related to debt. At the Mancho operations, we sold a little over 17,000 ounces of gold with another 3,800 ounces in recoverable inventory. Our cash costs were about over $13.34 per ounce gold sold, and our AISC was $13.74 per ounce of gold sold. Our 02/2025 guidance remains at 60,000 ounces of gold with an AISC of about sixteen twenty five as we do expect, the AISC will increase in later quarters due to sustaining capital going up related to, replacing tractors on the ore haul route as well as a $5,700,000 exploration drill drill program. On the balance sheet, we completed the quarter with 35,000,000 in cash.

Speaker 1

Our we have marketable securities of about $900,000. Those subsequent to quarter end have increased to about 4,000,000 US, and that's on our Onyx Goldcorp investment. Our trade payables were 9,000,000, at the end of the quarter, and this really related to a gold shipment that happened on March 31 as we had to pay the peak gold, subsequent to quarter end. During the quarter, we made principal repayments of 13,800,000.0 on the facility. And then subsequent to quarter end, we paid another 8.2, bringing the facility balance down to 30,000,000 as of today.

Speaker 1

On the derivative liability, the the hedge balance technically didn't change during the quarter. We had 86,000 ounces to start the quarter, and we also finished with that as a balance at the end of the quarter. Now gold because gold went up, the the liability did increase, but I will highlight that we did do, what's called a carry trade, and so we effect effectively locked in the, April hedge price during the quarter. So we ended up settling that on April 30. And then finally, we have started delivering into the July hedges, and, we have about 2,800 ounces delivered, to those so far.

Speaker 1

Now I'll just hand it over to Rick.

Speaker 2

Yeah. Thanks, Mike. I think it's been a a good quarter, and, we'll actually start the second campaign actually started yesterday. So that'll be our our May campaign. It'll run roughly thirty days.

Speaker 2

And so we'll be looking to report on on the on the total anticipated production from that once the campaign ends towards probably mid June is is roughly when it'll end. And we'll have a bit of an update at that time on our on our won't be the gold sales, but it'll be an estimate of gold produced. And then our q two results will probably be what in Michael, you comment on that probably, what, July or August?

Speaker 1

Yep. Yep. In early August.

Speaker 2

So things are going well. I think, basically, I I can safely say that things are going a little better than planned. I think our our the total amount of gold produced was was more than planned, roughly 30% through q one. We do have that gold held in inventory. So, you know, we we they they campaign process the gold basically in the middle month of a quarter.

Speaker 2

It's not exactly in the middle month, so it'll it'll it'll run over. And and then the gold sales obviously trail that by about 30, roughly. So you'll have to just kinda keep keep that in mind when you're reading our financials. You'll you'll see there's always probably a a golden inventory that's been produced but not sold necessarily. So with that, maybe, Romy, I'll turn it back to you, and we can start with q and a.

Operator

Awesome. I do have a number of questions. Some of them already reflected in the chat, I'll meld them together where where possible. Mike, I'm gonna start with you as the start of the show. I was curious if you could give me a little more color around the carry trade and hedge delivery schedule.

Operator

This reflects a comment in the chat. Wesley asks, hedges remaining. When are you liberated?

Speaker 1

Yeah. Yeah. It's a good question, and I get it a lot. It's it's really it's it's quite complicated, but, you know and and and we've kinda changed our approach. We have been changing our approach since since starting.

Speaker 1

And and and, I guess, I'll just kinda start from the beginning, but the the main challenge we have is, you know, you have your hedge delivery schedule, which is kind of once a quarter. You have a maturity date, and that was kinda designed off the feasibility plan or study. And, and so what what you kind of what actually happens, though, is you end up having shipments every week, pretty much for the whole year, but chunkier ones in the middle of campaigns. And so to to manage to better manage cash, what we what we what we ended up moving towards is called a carry trade so that we could effectively sell the gold at spot price, as the shipments occur and use those proceeds to basically pay the JV for for the gold and then wait for the distribution, you know, a month or so later and then use those extra proceeds to settle that hedge in cash with with our lenders. So it's a better cash management tool for us with a relatively low cost, and it's it's a basically cheap form of financing.

Speaker 1

So so what what actually happened in the quarter is we you know, as you may recall, we we ended up cash settling our January 31 hedge in December. So we we effectively had no hedges, matured during the quarter. But we did start producing in in, in February. So what we did is we ended up delivering we basically set delivered a % of the April hedge into these carry trades during the quarter. So that was about 12,000 ounces of gold.

Speaker 1

So, you know, we we started the quarter at 86,000 ounces of hedges. We finished the quarter with technically 86,000, but when you consider the carry trade, the hedge balance is just below 75,000. And then as of today, we're probably closer to 71,000 as we continue to deliver in July. Does that kinda answer your question? Yeah.

Operator

No. That's great. I think that's useful extra color, so I appreciate it. One question I got just for folks who don't know, and it's popped up in the chat a bit too. Where do the Onyx shares come from that are now worth that $5,000,000?

Speaker 1

Yeah. So when we acquired HIGOLD, they owned 5,000,000 shares of Onyx, which was spun out of HIGOLD booked, I mean, maybe a year and a half ago. And so we had those on the books. I think when we acquired them, they they were probably valued around 5 or $600,000. We finished the quarter at 900,000, and, you know, as of today, the the shares are at about a buck 5 Canadian.

Speaker 1

So those shares are now worth about 5,000,000 Canadian. So we thought we would just put it in the press release to to highlight that there, you know, there's another source of capital for us.

Operator

Great. And somebody in the chat

Speaker 2

asks I'll just I'll just add in Romeo. I think, you know, Darwin and and the team over at Onyx are yeah. They've got an interesting project, so we'll we'll keep an eye on that. They're they just raised some more money to do some more drilling. So I think it's definitely definitely an asset on the books for us.

Operator

Yeah. There you go. Something that Chad asked just for clarity. Is that stake now unavailable for sale security for Contango?

Speaker 1

There there's some hooks on it with lockups. So, you know, it's but I think anything anything's possible if if if if really you wanted to, but we're not in any

Speaker 2

of that. I think I should consider it in friendly hands.

Speaker 1

Yeah. There

Operator

you go. Yeah. Appreciate that. One question I got is, so on the the PR, can you discuss that dismissed lawsuit and what it means for both Mancho but generally for for Contango?

Speaker 2

Yeah. I'll weigh in here. So, yeah, we've had a as as you may have known or we've certainly reported on the Citizens for Safe Communities, a local anti development group, anti mining group in Fairbanks launched a a lawsuit to try and shut down the the truck haul program. And this has been pending for, I think, well over a year. I think it's been almost two years now.

Speaker 2

And they had originally four four arguments that were before the court. The the court dismissed three of the four, and this was the last one that the court had not dismissed. But there had been not really any sort of follow through on on on the side of citizens for safe communities. So we learned a little bit ago that they were considering dropping the lawsuit, and apparently, you can't just drop a lawsuit. You have to come to a settlement.

Speaker 2

And so that took, I don't know, a little over a month, maybe two months, somewhere in that time frame for them to settle without prejudice. So it's gone. I think this is obviously it's a good it's a good thing for for the project and for the Montreal project. But it's also, I think, a good thing for mining in general because if you can't, you know, give people who are anti mining groups that are that don't want trucking of ore, that means you can't truck concentrates, and maybe you can't truck this or that. That's that's, you know, servicing the mine.

Speaker 2

So I think it's a it's a good it's good that this has gone away, and I think it's good not just for our project, but also for mining in general in Alaska.

Operator

Great. No. Appreciate that extra flavor. One question I have is what will the balance be on the facility by the end of the year?

Speaker 1

The facility will finish the the year around $15,000,000, just under.

Operator

Great. No. Appreciate that. What I wanna say, obviously, congratulations on beating quarterly guidance. I think that's really impressive.

Operator

But you mentioned the PR incremental improvements in ore transportation and processing at Fort Knox. And I know, Mike, you you alluded to it for sure, but what helped get that significantly lower ASIC of 1374, versus the target of 1625?

Speaker 1

You want me to start on this? And then, Rick, you can Yeah.

Speaker 2

You yeah. You go ahead, Mike, and I'll, I'll weigh in with my, board technical technical thing.

Speaker 1

I'll let you talk about the incremental improvements. I'll just comment on our guidance remaining at sixteen twenty five for ASIC. And and, you know, the the main driver is that is there is gonna be more sustaining capital during the quarter. There wasn't a lot in q one, and there's also gonna be an exploration drill program. So the the cost ASIC will go up as a result of that, And so that's what's kinda driving the increase.

Speaker 1

And so and, you know, we did produce more, you know, more gold in q one, and I I do expect, you know, you'll have strong strong q one, q '2, and q q '3. And then in q four, I think there's a little less production in that period. And so when you smash those altogether, you're gonna end up with around $1,600. We still hope to beat that, but we still think that's a reasonable estimate.

Speaker 2

K. Yeah. So on the incremental improvements, I think, you know, starting with the bridge weight restrictions are still in place, so that's that's still part of, you know, the day to day haul truck haul truck hauling. The improvements are really all about water and whether it's frozen frozen water in the wintertime. And, obviously, q one reflects wintertime operations, and they were basically just knocking the snow and ice off the trucks.

Speaker 2

When they come down the the hill from where the the Montrose Mine is, Montrose up on top of a hill, and then, basically, there's a 20 mile Road that connects it to the Alaska Highway. And that's where most of the snow and ice is is picked up. It's along that, you know, it's a mine access road, basically, not a not a paved highway. So at the end of that, they had some cattle guards put in put in there that was knocking some of the ice and snow off, and then they literally just run around with a big sledgehammer and knock it off before they got onto the highway. Once you're on the highway, you don't pick up a lot of ice and snow unless unless it happens to be snowing.

Speaker 2

But, you know, it's Interior Alaska, so you just really don't get a lot of snow. So that was one that's been, you know, one incremental improvement. The moisture content of the ore is another one. Obviously, in the wintertime, it's things are frozen, so you don't you don't pick up a lot of moisture. In in summertime, which we're, you know, we're obviously operating now, it's mud that you pick up.

Speaker 2

And so they've established some wash plants, truck wash stations, basically, just before they get on the highway as well. So those are all the incremental things. I guess the other one was that that'll come into effect for the summertime is that we in the in the pit, the I think there's just more water management in the pit to keep the water away from the where you're mining and to keep the water away from where you're stockpiling it. You know, last year was a start up year, and I think people sometimes forget that, you know, this this was not your normal mine sequencing of, you know, feeding stuff right into the mill right away. It's it's goes into a stockpile, and and then it gets transported and stockpiled at at the at the Fort Knox facility.

Speaker 2

And so it was kind of a in in that sense, it was a bit of a long start up from, you know, sort of turning on a mill and and figuring out how that But even a mill typically has a a three to six month start up plan. So, anyways, long story short is you learn from as you're operating, you learn where things are going right, you learn where things are going wrong, and then you, you know, you put in, make changes to make, you know, incremental improvements. And so that's exactly what's happened. And, you know, we're it obviously reflects in producing more gold and and at lower cost and guidance. So I I think it's it's all been very, very positive.

Operator

Great. I got, one more on, just general strategy before I jump into a quick Johnson track question. I'm curious with gold prices obviously significantly increasing during q one. How does Contango balance the benefits of spot prices against hedge obligations? Are there any potential adjustments to the hedging strategy or where your head's at?

Speaker 2

That's definitely my question. That's that's

Speaker 1

not one I really wanna you know, we we look at this obviously a lot. We're currently selling 30% of the gold in the at effectively spot price for the year, 70 into the hedges. You know, you can try to get cute and look at swapping out hedges for, you know, gold prepays. And, you know, at the end of the day, you're you're kinda you're kinda getting to the same result, but just a different look. You know?

Speaker 1

So I I guess my focus right now and and I won't speak for Rick, but I I think just continuing to deliver into these hedges, get ahead of them as much as we can, you know, try to just manage, you know, the the the carry trades and and just and, you know, just trying to keep that seventy thirty, that ratio, as we deliver this year and and make sure that we're we're we're ahead of schedule by the time we get to the end of the year. We'll finish the year with about 43,000 ounces in the hedges. Our debt will be down 15,000,000. I I I think this will be less of a concern by the time we get to the end of the year and and and demonstrate another solid year of production, and they won't they won't, just won't be as significant, on our balance sheet. Rick, anything you wanna add to that?

Speaker 2

Yeah. I'll just say, you know, I don't you know, we're a junior producer. I don't think we wanna get cute with betting on gold. I don't think that's what I don't think that's would be good for our shareholders. I don't think that's what our shareholders want us to do.

Speaker 2

I think they want us to, you know look. The hedges are in place because that's the only way you could raise money a couple you know, two or three years ago when equity markets were pretty much dead. So, you know, it is it's it's part of the part of the DNA of the company. And as Mike says, we'll just keep paying down the debt and keep delivering into the hedges. Let's not be cute here and make a big bet on on gold going up and it goes down, and and then you're in a worse spot.

Speaker 2

So, just, you know, kind of businesses as usual, and and think we'll be in a good spot. I think we're already a good spot, but I think we'll be obviously in a better spot when we're unhedged. So that'll that'll come soon enough. Liberated as they say in the comments. Yeah.

Speaker 2

Liberated. Liberated. Liberation day.

Operator

Yeah. So I wanna pivot to to Johnson for a quick second because I know we we talked about it recently, but I really do want to emphasize really impressive NPV of over 400,000,000 at current gold prices. So I'm curious, as your folks in the room, what are the next key milestones in in developing Johnson Track? And more specifically, what's the timeline for permitting that underground access tunnel?

Speaker 2

Yeah. So, you know, permitting is not the sexy part of the story for sure, but that is the next stage for for Johnson Track. That's why we wanted to put the get the the the initial assessment out. I keep want I still keep wanting to call it a PEA, but full assessment out. You know, to let people know that this is a this is a pretty valuable asset.

Speaker 2

But as you said, the, you know, the next stage is permitting the tunnel, and that's a sustainable Alaska mine operating permit is technically a mine when you're starting to when you're starting to drive tunnel. You're not producing ore necessarily, but you're you're you are mining. You're under ocean, M Shad, all those things. So we think that'll take about a year. It's a it's a state permit.

Speaker 2

There's there's no specific federal permitting involved. We already have the access road between camp and the the proposed tunnel site permitted, so we can we could build that anytime, but it doesn't really make sense to spend money that you know, building a road unless having having it sit there. So we'll get the permits. We think that'll take about a year. At the same time, we're permitting the the easement and barge landing site that have been granted to Siri by the federal government.

Speaker 2

So it's you know, when you when you grant an easement, typically, means you're already permitted. So we it's it's just the special arrangement that Siri has with the federal government that they were granted the easements. We have to figure out exactly what the road alignment is. And so you go through sort of the normal permitting parameters. In in this case, one of the driving ones is wetlands for your wetlands four zero four permit, and the edict there is to minimize impacts to wetlands.

Speaker 2

The other things that you're paying attention to just as a responsible, you know, miner miner and and constructing roads is to minimize impacts to model and and fish specifically. So fish passages and making sure that all the the any stream that has fish bearing fish or fish bearing stream that the the fish can go back and forth across the river or across the the water underneath the road. Large landing site, I think, in general, we've selected the best area for that. We've gotta do more work specifically on on where that's gonna go and the specific design there. We'll be doing work in tech set panel specifically to study where the beluga whales are, where they hang out, and do they use the channel?

Speaker 2

Are they north of it? Are they south of it? We know they're generally in the area, and they are an endangered species. So that's obviously a very important thing for us to understand more. So we'll be doing work on that this summer as well.

Speaker 2

And, you know, so this year's focus in terms of the road access down to the bar down to the bar site, and that just to cover off, it's about a 20 mile road length, which is almost exactly what Mancho is. So it's just very similar scale. So we'll gather all the information this year, and then we can start permitting those formally next year.

Operator

Awesome. No. Appreciate the JT update, of course. I got one last question that I know you kinda answered, but I just wanna keep it clear before we jump into the million questions from the audience. With you got strengthen strengthen cash position, reduce debt.

Operator

What are the capital allocation priorities for the remainder of this year?

Speaker 2

I think Mike kinda covered it. Keep paying the debt down, keep delivering in the hedges. We're going to review our budget here shortly. Next week, Mike and I'll be sitting across the room from each other, and we can, you know, take a look at, do we have money enough to look at drill program at Lucky Shot this year? I'd like to, but I also wanna be prudent and, you know, make sure we've got plenty of cash in the bank to to do what the the main main business is here, get Johnson Track permitted, and and deliver into the hedges and pay the debt down.

Speaker 2

There's a few other things that we can look at, but, I think those are those are the main order main main business for right now.

Operator

Awesome. Gonna jump into the chat. We covered some of it, but there's a lot of questions. So bear with me. I'm gonna put you on a run through as many as I can.

Operator

We've covered this a bit, but Jan asks, where is the next likely drilling for Contango going to be?

Speaker 2

I'd say probably definitely lucky shot. I think, you know, if we don't get a drill program going this year, I'm I'm very confident we'll be drilling next year. We're all set up. You know, we're the underground's permitted there. So it it is it is technically a mine.

Speaker 2

We we we do we have it currently on care and maintenance, but we are we are carrying and maintaining it. So that's that's my best guess. I mean, I I'm saying this separate from Mancho. We've got a a five I think it's a $5,700,000 joint venture program at Montreux, and and the focus of that drilling is to is to evaluate targets in and around the the current pit. They'll be doing a bit of work further afield, but I think the lion's share of the exploration program is in and around the pit there.

Speaker 2

Obviously, the the pit feasibility level pit was done at, I think, 4 or $14.50 gold. Gold is, you know, almost $2,000 more. So it won't I don't think it I mean, it'll be very unusual to me to see that that pit doesn't get a little bit bigger. Go a little deeper and a little bit more you know, just go after some of the stuff that obviously didn't make it into the pit at a $1,400 gold price. So I think we'll you know, we won't have results in the until until late later in the year.

Speaker 2

And I don't believe we'll be in a position with that $5,700,000 budget to upgrade our resource. But if we find some interesting things, I think we'll we'll, you know, more more than likely continue to focus the effort there going forward.

Operator

Great. On that exact same topic from the chat, Tate from the Maxim Group asks, that of that 5,700,000.0, is it taken out of your share of sales in the JV, or do you write a separate check?

Speaker 2

It's it I'll have my answer too, but it's it's all part of the an annual budget that's approved. And then so the cash sweeps, basically, that's that's included in but, you know, before we get a dividend, I guess, is the way I would put it.

Speaker 1

Yeah. And so right now, you know, we're we guided to getting about $80,000,000 in cash distributions from the the JV this year for our 30%. That's done at about $2,800 gold. So that that that includes kind of our 30% of that $5,700,000 program.

Operator

Great. Thanks. T Decker from the chat asks internal question, why is the increase in shorts? Who are these guys? It's an interesting question.

Speaker 2

The shorts. We love the shorts. We wanna see them hang, but that's another topic. Short answer is, I mean, they're look. I mean, the the the I think this is all speculation on my part, and, Mike, if we if I were across from him, he might be kicking me.

Speaker 2

But, you know, look, we were you know, we got hammered last November with the the the reduced amount of gold production and the increased cost from from what the feasibility said. You know, the again, the feasibility is three years old now. So I I think that's where these things started. I think there was an effort to once we were down down lower, I think there was an effort to boot us off the the Russell. So I I think that's been some downward continued short shorting the stock to to boot us off at Russell, and then then that's a million shares that the Russell has to sell.

Speaker 2

I think that's gone away from them in the sense that our share price has gone up because we've we've performed better than than guidance, and, you know, we've continued to deliver more gold than than planned and and at lower costs. And I think the other direction is, I think, the Trump tariff discussions have gone against the Russell valuation, and the Russell's gone down. So while the Russell's gone down, we've gone up on a relative basis, which means that lower threshold on the Russell is lower than than, you know, us being, you know, on the cusp sort of thing. So I think the shorts are in trouble, and I I think today's a good demonstration of that.

Operator

There you go. Somebody in the chat said a short squeeze would be lovely. Wouldn't we all agree? There you

Speaker 2

go. Please.

Operator

You go. Bevan in the chat says, congratulations on a fantastic quarter. Looking for a small bit of clarification on something from the last call. I suggested that you'd finance Johnson Track with bank debt and free cash flow so long as gold prices remain robust. Just making sure that that's accurate.

Speaker 2

I saw you just came in a bit broken there. Romy, can you repeat that?

Operator

All good. They're just curious on Johnson Tracks, mentioned that last event, you suggested you'd finance the project with bank debt and free cash flow so long as gold prices remain high. Just making sure that that's accurate.

Speaker 2

Yeah. I think so. I mean, look. We're we're a couple years away from from that decision. So and just to go through it.

Speaker 2

So, you know, this year, permitting the tunnel. Hopefully, next year, starting to think about building the tunnel. And then it's a year to build a tunnel, a year to get the the underground drilling in place and and completed in a in a mine plan around. So just, you know, straight up, it's at least three years away. So we've got time.

Speaker 2

When I sort of fast forward three years from now, we will no longer be hedged. We will have we we'll have zero debt. So which means we could take on more debt, and we'll be producing, you know, in the neighborhood of 60 continue to be producing in the neighborhood of 60,000 ounces of gold a year out of Manchu. So, you know, with that sort of as a leader and an and an assumption, we'd, yeah, we'd be in a good place to debt finance the balance of of the, you know, building the road and the barge barge landing facility in that. And, again, using the DSO model, you're not building a mill in the tailings facility and all that.

Speaker 2

Now as I mentioned, we may go buy one, and that's something we'll continue to take a look at. We'll look at opportunities to do a d DSO direct shipping or model to Asia. That might that might be an alternative. It it is an alternative for us to evaluate. But there are at least three at least three or four other mills to to to have have discussions with, and and those discussions are taking place.

Speaker 2

We're we're not in a hurry here. We wanna, you know, we wanna make the right decisions. I kinda like the idea of owning a mill and applying the DSO model in it with a sort of a hub and spoke twist, if you will. You know, delivering our own ore to that mill, but maybe finding some other advanced stage projects that might supplement that and and extend the mine life or, you know, grade always will displace grade. So if we can find something better out there, we'll we'll certainly go with that.

Speaker 2

But I don't I don't expect to just find a lot of things that are much better than Johnson Track. It is an awesomely good project from a mining standpoint, simple, you know, and and good grade. So

Operator

There you go. One question from the chat. What gives you personally confidence that Manchukuo Life of Mind can be extended beyond 2029?

Speaker 2

Yeah. I think just kind of repeating what I said before, but, again, the the feasibility study pit and I I I can't remember if was '14 or 1450, but it was one of those two numbers that, you know, the at the bottom of the was run on. And our costs have not gone up dramatically. I I think our lie life of mine cost is for is is gonna remain 1,400. This year is gonna be a bit of a high year.

Speaker 2

As Mike said, we're buying some more tractors, the trucks or they they call them tractors. These are the the the pulling part of the of the truck and trailer assemblage. So we'll be buying some more of those this year, and and we also have a this is a higher stripping year than than average, and this year and next year are are much higher than average. And then they go down. So I I you know, I think we'll we'll continue to see very strong cash flows out of Mancho for the next four years.

Speaker 2

And and, you know, if gold prices are in the neighborhood of where they are, we're gonna make a hell of a lot of free cash flow. So we're in a very strong position. Great. And, again, we only have 12,000,000 shares outstanding. So when you do this on a cash flow per share basis, it's it's I don't I don't see anybody else that's our near neighbor.

Operator

That's healthy. Now as I promised, I'm only gonna do one bridge question for webinars. So I'm gonna combine a few bridge questions into one because you mentioned that it's already, there is still the restriction. But is there any chance the weight restriction will be resolved with the states in a time frame you you can comment on?

Speaker 2

Yeah. I think the the what I can say is that the the current plan, now that the annual or the department transportation budget has been approved by the federal government with the matching funds and all that, as I understand it, it's scheduled to be repaired. Shouldn't say repaired because it's not really broken, but just updated. The bridge the bridge updates that were planned can now be taken place or they take place a year later than the original plan, but that would be in 2026.

Operator

Great. One question is when the bank debt's paid off, is Contango able to authorize a small, let's say, $10,000,000 repurchase?

Speaker 2

Yeah.

Speaker 1

K. It's time on the buyback program. Right?

Speaker 2

Oh, yeah. Sorry.

Operator

Yeah. Great. One question just about company marketing. Is there anything to look forward to in regards to sell side coverage, roadshows, etcetera, in the near future?

Speaker 2

Yeah. So we're next week, we're actually headed to Las Vegas for the Canaccord Genuity conference. I think we've got over 20 meetings already set up. So and that's largely an institutional, and investors are are attending that. So that'll be that's a that'll be a good one.

Speaker 2

It goes quiet in, you know, most of June and July are quiet, and then and on August. And then we'll start with Beaver Creek. That's sort of the start of the the roadshow season, if you will, for for between now and the end of the year. It starts with the Beaver Creek conference. We'll be at the Denver Gold Show in Colorado City or or Colorado Springs.

Speaker 2

Sorry. And and then I think we've got a few other things, and we think we end the year. We've got some marketing in Europe that we're doing, and then we end the year, I think, with the New Orleans conference. Yep. So, yeah, we'll be on the road quite a bit this starting in in in September.

Speaker 2

They'll be definitely the the summer hiatus for sure.

Operator

And racking up miles from Beaver Creek through the end of the year. There you go.

Speaker 2

Yeah. Exactly.

Operator

Jared Road Yeah. Road Warriors. Jared Braffen asked from the chat, any plans to initiate a dividend?

Speaker 2

No. I'm not not right now. Though, again, the main order of business is paying back paying off the debt and delivering the hedges. I think that's gotta be our our gotta stick to that stick to our knitting and and that that basic plan. You know, share buy buybacks are interesting.

Speaker 2

It's another form of compensating shareholders. So those are things that we'll be thinking about.

Operator

Right. I got two two tough questions to answer, so answer to the best of your ability. One is the the the eternal. What do you think the stock is worth?

Speaker 2

I don't think we're supposed to say that. Can we I don't either. You're gonna

Speaker 1

do what you wanna do. So

Speaker 2

More than $15. How's that?

Operator

There you go. Good answer. And Jan asked another, I think, impossible to answer question. Are there any active takeover bids for Contango right now?

Speaker 2

Yeah. Short answer is we're not aware of any.

Operator

Great. What's Siri's stake in Johnson Tracks?

Speaker 2

I didn't sorry. I didn't understand the question.

Operator

What's Siri's stake in

Speaker 2

Johnson Siri. So Siri, they are the landowner. So they are yeah. They own the mineral and the surface rights on the the the track that that the deposit is located current resource is located on. And they have these special rights with the federal government with regards to access, which is why they've already been granted the easement for the road access to the coast and for a barge a barge facility or a port facility is actually technically what is described as.

Speaker 2

So those are their their their the basic arrangement that we have with Siri. They do have a right to participate as a as an equity owner in project, and I'm sure we'll be having that discussion at some point. But I I think that's probably a you know, a year a year away probably.

Speaker 1

And they have royalties?

Speaker 2

Yeah. Sorry. The yeah. The royalties. As a as a landowner, they have royalties.

Speaker 2

Yep.

Operator

Great. One really specific question about Johnson Tract. What happens if you come across archaeological sites while you're exploring the project?

Speaker 2

So it's, it's actually a big part of of what I'll call permitting. Mhmm. It is an assessment of of the archaeological or or cultural sites. And, obviously, that's something that we work closely with Sirion. Again, it's their land.

Speaker 2

It's their traditional land. So but, basically, there's a a a set protocol for for evaluating the the the access route, the easement, if you will. And it's it's managed overseen by what we refer to as SHPO, which is a state historical remember what the p and the o stand for, office. But they're so that that's the group that sort of manages historical and cultural things of of importance. But more important than Shippo, frankly, is Siri.

Speaker 2

It's it's their it's their land. It's their and it's their traditional and and cultural heritage. So that's that's the driver for us, and those that'll be the driver for the for the evaluation of where the best place to put that road is. Short answer is if you find know? And you have to kinda realize where this area is.

Speaker 2

It's not on a main, you know, a main trading route or anything for and and Siri's told us this. So, you know, it's it's yeah. And the coastal areas are are probably where most people would have would have been. But certainly up at the mine site, it's definitely out of the way and, you know, you're right up next to the very, very steep mountains. So, you know, you're not gonna find an old village up there for, you know, that something like that.

Speaker 2

So but that's you know, it's a big part of the big part of the permitting effort for sure.

Operator

Yeah. No. Appreciate that. That's useful useful info. I know we're not just over time, but coming up on our hard stop.

Operator

I got two more questions that I'll throw at you. One person with the chat asks, will the derivative liability be declining by approximately 20,000,000 a quarter for the rest of the year?

Speaker 1

I think that's that's a little higher. I think, you know, if when I looked at the April 30 hedge, I think that that represents about $13,000,000, and that was about 12,000 ounces. So I I think I think I think if if gold stays where it is, our our hedge liability should be cut in half by the end of the year. So that's about $50,000,000 for the year, and and then it'll gradually go down from there.

Operator

Great. Thanks. One last one from Roger. You know, it's no public options are available for Contango. Do you expect to have options available in the near term?

Speaker 2

We don't I mean, the the the option market's a it's an independent thing. Right? It's not something we control, and we don't issue options to employees. So, yeah, there that's why there aren't There's we have some warrants, but they and I don't know.

Speaker 2

Do you know, Mike, if they trade?

Speaker 1

No. I'm not I don't believe they do at

Speaker 2

They do. Yeah. They're not there aren't that there aren't that many of them. So They're the problem. That's probably one reason why they don't.

Speaker 1

700,000. Yeah. There's about 700,000 of them, and they're all pretty far out of the money. And they have about two years left.

Operator

Great. Just gonna point to a couple comments in the chats. People said, what a balance sheet transformation. Keep up the good work. So appreciate your time.

Operator

Rick and Mike, thanks so much for joining us and talking to folks and, you know, answering our questions. So I really appreciate it very much, and hope to talk to you soon as we have more updates.

Speaker 1

Thank you.

Speaker 2

Oh, thanks, Romeo. Good to talk to you. Take care.

Operator

Have a good afternoon, guys.

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Key Takeaways

  • Contango reported $19 million income from operations (including $22.3 million equity income from the Peak Gold JV) but recorded a $22.5 million net loss in Q1, driven by a $40.5 million unrealized loss on gold hedge contracts.
  • At the Manh Choh operations the company sold over 17,000 ounces of gold with cash costs of $13.34/oz and all-in sustaining costs of $13.74/oz, while maintaining full-year 2025 guidance of 60,000 oz production at ~$1,625/oz AISC.
  • Contango ended the quarter with $35 million in cash and $0.9 million in marketable securities (rising to $4 million post-quarter) and cut its debt facility by $22 million to a $30 million balance.
  • The company held 86,000 ounces of hedges through the quarter, used carry trades to cash-settle April contracts and deliver into July, effectively reducing hedged ounces to ~71,000 and targeting ~43,000 oz by year-end.
  • The Johnson Track project boasts an NPV above $400 million at current gold prices, with underground access tunnel permitting expected to take one year and summer studies underway for road and barge‐landing approvals.
AI Generated. May Contain Errors.
Earnings Conference Call
Contango Ore Q1 2025
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