Contango ORE, Inc.

Good afternoon or good morning, depending on where you're logging in from today. I saw some early rising Australians on the list. So thank you very much for joining us. Appreciate particularly everybody joining us on St. Patrick's Day for a corporate update and Q&A session from Contango or related to this morning's press release regarding 2024 earnings. I'm joined today by company's president and CEO, Rick Van Nieuwenhuizen and CFO, Mike Clark. Gentlemen, thank you for joining me. Good to see you again, Romeo. Awesome. So here's how today's going to work for the folks in the room. I'm first going to throw it to Rick for just a quick rundown of today's news. And then I've got some questions I'll be posing to both speakers. After that, though, we are eager to take questions from the audience. This is an interactive event. Please use that chat button on the bottom right of your screen. If for whatever reason we don't get to your question today, or if it's been covered in a previous event, et cetera, uh, all good. I'm going to send that chat transcript to the contango team. They'll get back to you as soon as possible. Uh, last piece of housekeeping. Today's event is also being recorded and will be available probably late this afternoon, um, on both six.com and also our YouTube channel. That's enough out of me. I'm going to throw it to Rick, uh, to get to the protein of today's events.

Uh, thanks Romeo. And, thanks everybody for joining us on St. Patrick's day. Um, We put out our annual one-year news release on our activities for the year, for 2024. It was a good year, I think. We produced more gold than we had planned originally. And our cash costs came in just a little, just a slight bit over our guidance of $1,200 an ounce. And so I think, you know, overall, it's been 2024 was a good year for production, getting Moncho up and running. We started production in July. produced just a little shy of 42,000 ounces. And as I said, that good cash costs. So, you know, for an annual report, I think it's been a good year for us. And we are off and running for 2025. We can certainly talk more about that, but we're in the middle of our, actually probably about two thirds of the way through the first batch of gold pour for 2025. and have three more planned for the year with a total projected goal production of about 60,000 ounces. So that's a quick introduction. Today's release on our year-end results are mostly for Mike to take credit for. So I'm sure there'll be lots of questions for Mike on that. And so, Romeo, we'll just open it up for the Q&A.

Awesome. Sounds great. So like I said, I got a couple of questions to run through first. I did want to ask a question. What were the factors you reckon that led Poncho to exceed that production guidance by over 25% in 2024? How did that come to be is really my question.

Yeah, so I'll start and maybe ask Mike to join in from his perspective. But basically, we've been transporting ore from the mine site since November of 2023. So 2024 had a whole year of transporting ore. And of course, we started mining you know, in July of 2023. So, you know, mining and stockpiling ore at the Manchot site. So, you know, being a direct shipping ore model, it's not your typical mine and mill startup as you typically see in a mining milling operation. So we started mining, we started stockpiling ore at Manchot. And then in November, we started hauling the ore to the mill site at Fort Knox. Now, we didn't start with all 60 trucks. We had to build up for that. So if there was a ramp up period, that was kind of the ramp up period. Bottom line, there was more ore delivered to the stockpile at Fort Knox than anticipated by the feasibility study. And when there's higher grade ore on the stockpile at Fort Knox, they're pretty much always going to run it. uh, through the mill because you're running, you know, seven or eight gram material versus, you know, 0.6 or 0.5 gram material. So from, from Fort Knox. So obviously you always run better grade when you have it available. And, and, uh, that's what we did. So we ended up producing about 10,000 ounces more than, sort of the middle of our plan. We had always guided 30 to 35,000 ounces, and we produced, like I said, just shy of, was it 41,300, I think it was? Yeah, it was the total. We still had some gold that we sold, ended up from the 2024 batch processing, the final processing in November, that we actually sold in 25. But just kind of sticking to the basic numbers, and maybe, Mike, you want to go through the official numbers.

Yeah, the only thing I'd add to that is, you know, originally the feasibility study had five batches or five campaigns in 2025, starting in January and ending in December. They pulled kind of half of the batch in 2024. It was kind of pulled from 2025. And then they've realigned the campaigns to kind of be the middle month of each quarter for 2025. So that was part of the reason there was extra production in 2024.

Great, no, appreciate that extra context, helpful. One thing I've got for you, Mike, with positive operating cash flow in 24, what is the cash flow projection for 2025, but then also beyond that?

Yeah, there's positive cash flow from operations for 2024. And then when you drop below that line, all the excess cash is effectively going towards paying down debt and delivering to the hedges. For 25 and 26, it's mostly planned that all the free cash flow that comes out of operations is basically paying down the debt and then delivering to the hedges so that ultimately we can hopefully be, our goal is to be debt-free and hedge-free by the end of 26. But with the restructure, we have the ability now to push those into the first half of 2027.

Great. I got a number of questions that came in over email. So, Mike, if you don't mind, I'll just kind of rapid fire shoot them at you. First one that came through is, is the hedge coming off once you pay off your debt?

Yeah, the hedge delivery schedule, it kind of mirrors the principal repayment schedule. So both of those mature as of the restructure. Both those mature in June 2027. But, you know, from a principal perspective, yeah. The bulk of that is being paid down this year. So we should finish the year around $15 million left on the principal repayments that would get paid out into 2027 after that. And then the hedge deliveries, we plan to kind of cut in half by the end of this year. So there's 86,000 ounces of hedge gold remaining as of the end of 2024. We expect to finish the year around 43,000 ounces of hedges remaining. And then those are paid down again in 26 and into early 27.

Great. Somebody also asked if you could just, and I know I think this was covered in PRs, but it's always good to reiterate. Can you just say how much Contango had in debt at the start of 24 and how much it finished with and how much you project to come off this year?

Yeah. Okay. So thinking back, we started 2024 with, or in July of 2024, we had $60 million of debt. We paid down just under $8 million in 2024. So bringing the debt balance to 52 million, we since made a just under $14 million principal repayment in January. So the debt's down at roughly $38 million as of today. And we expect to finish the year at about 15 million bucks of debt remaining. And then the hedge deliveries, we started with 124,000 ounces of gold hedges and we finished the year at 86,000 ounces of hedges remaining. So we delivered about just under 38,000 ounces towards the hedges on effectively 42,000 ounces of gold production. So we were aggressive in delivering into that.

Great. It's on the PR. It's an interesting way to think about it. But I'd love if we could just reiterate it here. What percentage of the mine life is unhedged overall?

Yeah. So originally, the way we looked at it when that was restructured, it was always supposed to kind of be about 65% hedged during the term of the loan. But for the life of mine, it was supposed to be about 40%. how we look at it and where we're at today because of what we delivered and the extended mine life or extended Warhol plan. We are roughly 35% hedged, 65% unhedged for the life of mine. And, you know, as I said, we're going to deliver into those hedges mostly between now and the end of 2026. And then after that, we're totally unhedged and no debt.

Great. I'll just throw in that, you know, 27, 28 are big banner years. Not only are we unhedged, but you're the line's way through the mining phase of the project. So you've mined a lot and you have a big stockpile sitting at Monchaux. And so it's really about the ore haul plan then. So relatively, if you're not paying for a lot of mining that's going on, your RRL and sustaining costs are going to be very low. I think they'll be in the $1,000 to $1,100 range at that time.

I'm going to jump a couple questions in the chat just because they're right on topic. So I'm just going to loop them in. Tate from the Maxim group asks if you continue to expect the 2025 ASIC of 1625 crowns.

Yeah, we have no information to change that. You know, I think what you're going to see is, you know, we're going to finish this campaign in Q1. We should have all the costs for that campaign in Q1. So when we put out those results in mid-May, you should get a good indication of what our costs will be. And it'll be somewhere, hopefully, between $1,200 and $1,600. on the cash cost or ASIC. We kind of use the term, ASIC is what came out of the feasibility study, but cash cost is how we report it in our financials, but our cash costs are pretty much fully baked costs and there's really, there's not really many other costs that would add to it for ASIC. So we finished the year at 1,209 for cash costs and effectively ASIC for 2024. And like I said, 25 should be somewhere between that and the 1,600 we guided on.

Great. Um, he also asked what was the realized loss on derivative contracts in 2024, uh, of 19.9 million, uh, 2024.

So we had, um, that we had a $20 million loss on the realized on the hedges. And so that's really what happens when you deliver into a hedge that becomes a realized loss. Otherwise we have, there's a component that's kind of your marked market or your fair value you do at the end of each period. So that total was 35 million at the end of 2024. So combined is $54 million.

Right. That makes sense. If you've got any follow-up questions, let me know in the chat. I'm happy to shoot them in. A couple I got. What is the current timeline? I think we've been over this, but I just want to reiterate if possible. Timeline for eliminating the remaining credit facility balance.

Credit facility balance. Yeah. So it's currently scheduled to be paid down to $15 million by the end of this year. And then the remaining 15 gets paid out between 2026 and mid-2027. Great.

I'm just curious for your thinking, what drove the decision to defer that $10.6 million in debt payments forward into 2027?

Well, it all kind of started, I'll start this, I guess, Rick, and you can chime in if you want, but it all started with the bridge weight restrictions and how much we expected to produce in 2025 when we got the revised mine plan from Kinross. And so when we looked at that and looked at the delivery schedule and the hedges and the principal repayments, And just what we could see in the feasibility study for 2026 for the scheduling, it became apparent that we wanted to realign the repayments and the delivery schedule hedges to better match the, I guess, the extended or hauled mine plan. So it was just pushing out a little bit. It actually wasn't very significant in what we had to push out, but it took time and effort to get there and dealing with two sets of lenders takes a little bit more time. But at the end of the day, I think we're in a better position to better match the new schedule.

Great. No, appreciate that. Yeah. I don't really have anything to add to that. It's just, you know, the, the, the mine plan, everything has been, uh, compared to the feasibility study, which is somewhat typical. And again, this is not your, your normal mind startup where you're, you're, you know, you're mining and putting ore through a mill right away. This is the transportation plan. You know, we basically were in operation. mining and stockpiling for a whole year before we actually started billing. So, um, you know, we, you're basically, uh, your guidance is as per the, the feasibility study and until you get up and running. And now we've learned a bunch of things after, uh, well now, you know, well over a year of, of hauling ore, and stockpiling and all those operating issues that come up, you bake into your new plan going forward. So that's effectively what has happened with the updated mine plan.

Great. While we're on that, actually, sort of bank shot to that last comment, I'd love if you could do just a quick one-on-one lesson for folks in the room of what the economic advantages are to direct shipping ore versus the more classic mill setup.

Yeah, I mean, it's, you know, smaller environmental footprint is sort of the standout. And what that means is you're not building a mill in a tailings facility, which if you start, you know, in order to build one, you have to permit one. And as we all know in the United States and in Canada, I think both jurisdictions, that's a big, long process and can be an extremely long process. five years is probably if you, if you, from start to finish, if you got your permits within five years, you're, you're doing about, you know, five times better than the average for a significant project. So by not building a mill in a tailings facility, we avoid a lot of things that have to be permitted. And obviously when you're not building a mill in a tailings facility, you avoid a huge amount of capital that you have to raise. A bit of a thumbs up number, if we had built a mill at Moncho, it probably would have been in the six, $700 million range. Um, and my guess would have been, you know, obviously it would take a long time to permit, um, and, during that time, in the beginning of that process, we might've said it would cost, you know, $500 million to build. So, um, and then as the process takes longer, it, it obviously costs more cause in, you know, we, we know that there is inflation just normally, and we've certainly seen excess, uh, higher levels of inflation in the last five years. So those are the big things that say, you know, the permitting, you take a lot of permitting risk off the table and shorten the timeline. We got, uh, Moncho permitted both state and federal permits within a year and a half of starting the process. So that's somewhat unheard of in our business. So that's one of the reasons we really like this model, especially for a junior company. If you're a major company, you've got lots of cash flow coming in from multiple other operations, you can plan that out and sort of dial that into the overall development plan. But when you're a junior company and you're looking for capital, minimizing the amount of capital, minimizing that time lag between getting your permits and being able to construct, that's a big deal. So we like the model. We think it applies very well to the other assets, other key assets in the portfolio.

Great. No, appreciate it. Love the one on one lesson. I think it's useful. One question from the chat. Dave F asks, this is my probably last Manchot question before I move on. Can you yet disclose the results from the 2024 Manchot exploration program?

Basically, I think we have the results and there aren't any significant results to report. And just to review, most of the program was spent evaluating the relatively large land position that constitutes the Tetland lease from the Tetland Tribe. And so there was not a lot of drilling done, and it was fairly scattered on a number of different, fairly widespread targets. We're actually going to be meeting here with the joint venture here and other things next week, actually. And so we'll be talking about where to focus this year's exploration effort, and we certainly have some ideas on that that we'll be sharing with the Kinross team.

Great. So I will move on here from Montreux into Johnson Tracks. I know I believe in the relatively near future we are intending to have a PEA for it. So what metrics should investors be watching for when that PEA drops?

Yeah, so expect it to where I keep saying hoping towards the end of the month. Mike tells me I probably should expand that into April. We're working with our contractor there to get that done. It's taken definitely take a little longer than we would have hoped. But basically, it's a pretty typical preliminary economic assessment. But it looks at the project, again, as a DSO project. So we're not building a mill and tailings facility. And we've identified a couple of different options as to where to send this material that we think are realistic. That'll be covered in the PEA. But, you know, standard metrics, you know, NPV of the project, rate of return. Again, by not building a mill in the tailings facility, you're saving yourself a lot on capital costs and the permitting timeline, as we've mentioned. So we think our five-year plan that we've outlined previously and that we're sticking to still makes sense and still is what we want to aim towards. And what that means this year is mostly about permitting the access road up to the mine site from the coast and permitting a barge landing site. So those are the activities that we'll be focused on this year.

You just went silent, Romeo. I'm on mute. What a jerk. It's all me. My fault. My fault, fellas. Jumping into my last question here.

I was trying to try to lip read, but I was not really good at it.

Yeah, I mumble even actually when lip reading. So there you go. I do want to ask a question. Now that we've got many, many months in the rear view after acquiring Highgold, curious how the team feels in retrospect about the transaction and how integrating assets gone generally into Contango's business.

Yeah, good question. I, we were really pleased with the, with the transaction and then, you know, essentially was a, it was a corporate transaction, but it really was by about buying the the Johnson track asset. So, you know, from a, I think from an accounting perspective, that's how Mike Mike's going to treat it. But you know, in terms of you know, are we happy with what we bought or do we have buyer's remorse? We sure don't have buyer's remorse. We're very happy with with, With the asset, we think it fits our model really well. We've developed a really good working relationship with cooking at Regionally Incorporated, Siri. And those are folks that I've known for a long time, just having worked up here in Alaska a long time. As I mentioned before, and I think I've said many times, I have looked at Johnson Track several times in the past as a potential opportunity. And but I just could never imagine permitting a mill in the tailing facility there, but with our DSO model, we get away from all of that. We're simply, it's a run of mine operation. We get underground, we develop a good mine plan, very excited about what we see from the resource modeling work that we've done. And we've done some additional drilling last year to augment that that particularly in the upper third of the deposit, we've pretty much that have that drilled out at the drill density we think is appropriate to develop a mine plan around. We have to get in underground to develop the rest of it to a feasibility level, get the infill drilling done That mountain that you see in the foreground in the photo on our website, it just goes up too steep to be able to drill where we need to be drilling up there. So putting the tunnel in is the next logical step and spending the time to get the infill drilling and all the other information that we need to put a proper mine plan together. You know, the PA will outline that. Um, and I think it'll, it'll start to look at this, what the scale of the operation will be. Um, I think you'd ask this on the other, other question, you know, what, what, what sort of metrics should we be looking for? I think, you know, the scale of the operation is an underground mine. So it's, it's not an open pit. It's underground. It's the sort of selectively mining, uh, high grade material underground. When you look at the block model that we have on the website, you can see a nice high-grade zone there that's going to be right in the middle of where the tunnel goes in. So it's just the perfect spot to start mining this thing. And obviously, that's open at depth because it just hasn't been drilled at depth at all. So very exciting to see all that kind of play out. As I said, this year's activities will be mostly around permitting, so not a lot of ground disturbance type work going on, no drilling, we're not planning on doing any drilling or any road construction at this point in time.

Great. A couple of quick numbers questions for you, Mike, that came in a couple minutes ago, so I'm going to throw it to you for a calculator. But one person asked, what's the average hedged price per ounce at this time?

Well, the hedge price is all kind of flat. It's 2025 for 25 and 26. We did roll out about 15,000 ounces into 27. And those hedge prices came down a little bit for 27 to mid-1900s. And that just has to do with the hedges being underwater. But overall, it's not a big impact on the hedge book.

Good, thanks. Another numbers question. Bevonswee asks, based on $3,000 an ounce for gold, what is management's best estimate for 2025 and 2026 EBITDA?

Sorry, I couldn't hear the last part.

a best estimate for 2025 and 26 a beat does what they're looking for.

Well, I think you're, so the way I don't have 26 in detail we just have kind of the feasibility, but for 25, you know, using, you know, I think we originally modeled everything at $2,500 gold which basically had a, you know, let's say $50 million in distributions from the JV. And then you had And then you had your hedge losses, which were kind of took up about half of that. And then and then just your overheads and your interest costs. So that would have in that scenario, you would probably make five million bucks for the year before principal repayments. But, you know, you need to kind of if you're going to assume today's gold price at a 20 percent increase to those numbers and it should kind of go up respectively. So, Rick, is that how you would look at it?

Yeah, I mean, obviously, as gold price goes up on the 30% of the ounces that aren't hedged for 2025, you're making that delta of, you know, what is it? Almost $1,000 for those, you know, for those ounces, for 30% of the ounces. That's how I sort of quick math think about it.

Great. Somebody right in the end asked if you could please provide an update on any activities related to extending the Muncho mine life.

Yeah, so that really speaks to the exploration effort. And for, I'd say for the last couple of years, Kinross has really been kind of looking at the rest of the property. It is a very big property. I've compared it before to the site. It's the size of the state of Rhode Island, which is albeit the smallest United States. It's still a big chunk of land. And so there's been a lot of, you know, stream sediment type work and follow up and identifying potential drill site, drill areas around that whole area. We like to see more focused exploration around the mine site. So that's what we'll be advocating for when we meet next. And I sort of, I understand as an expert, being an exploration geologist myself, I understand that you've got a big property out there. Well, let's go see what's on it and see if there's any sort of low hanging fruit out there. So that has been a good part of the effort for the last couple of years. We still think there's some good targets to drill right in and closer to the mine site. So we'll certainly be advocating for that, as I mentioned earlier.

Great. Now, one question that came in, this is the one I'll wrap with, came in right as the event started and asked, does anybody out there know how much this company is actually undervalued? So I won't ask you that exact question, but I will ask what your perspective is generally on the kind of market value gap that's on right now and what do you think is going to close that up?

I think that's a CFO question.

Absolutely not. I'm not touching that one. It's the CEO.

Yeah, no, I mean, I think we were definitely oversold. I think the shorts, with our relatively small equity issuance of 12 million shares, I think the shorts had a field day, frankly. I think as we've seen today with Mike's brilliant press release on our year-end results, we're making money. We're not going bankrupt. We heard all sorts of rumors that the banks weren't going to work with us and we were going to be bankrupt and blah, blah, blah. I think today's press release shows that that is indeed not the case. There may have been some speculation that we'll need to raise equity and so we'll short the stock and we'll buy it when we raise equity. We're not doing that. I think that's been pretty clearly broadcast. If we have to hunker down for a year and not drill at lucky shot, that's what we're going to do. We're going to deliver into the hedges and pay the debt down. And we'll make a lot of money in this company when the hedges are paid off. So, you know, and just to, just to speak to it, the reason the hedges are in place is because when we were raising money to build this mine, the equity markets just weren't there. We, you know, we had, we had, I don't know what, 18, $1,900 gold and, and nobody was interested in investing in a, in a development stage gold junior producer at that time. And, and, I think markets have improved, but there's still, in my sense, there's still a reluctance to get down into the junior stocks still. I think there's still a lot of upside potential in the junior stocks. Starting to see the Agnico's and the Newmont's and the Barrick's all get some respect in terms of the amount of cashflow they're generating from their gold operations. I don't think the junior stocks have seen that yet. And I think we're certainly a stock that will perform well as the gold price continues to increase. And like I said, we're making good money. We're paying off the hedges or delivering into the hedges and paying off the debt. And that'll be the focus for this year.

Awesome. Now, some questions that sneak in just as I was saying goodbye. So that won't actually be the last one, but they're short. Somebody asked, are there any plans for exploring the other assets beyond Johnson Tract acquired from Highgold?

Our two core assets being Johnson Track and Lucky Shot. So no plans to drill at Lucky Shot right now at this point in time. We are having a number of strategic discussions. That's something that doesn't cost us a lot of money and we think is really kind of the next logical thing to do for both of those projects. is to find a home to where we're going to process this material. And so those discussions are taking place and I kind of lumped them into sort of having strategic discussions on that. We think that's going to result in some very positive news once we get something hard and fast put together. And of course, until we get to something hard and fast, we're going to be under CA and won't be able to say a whole lot about it other than we're It's a focus for the company for this year for certain.

Okay. Makes sense. And I think that actually also tackles the last question. So there you go. Mike, Rick, thank you so much. I think this was very helpful. Thanks, everybody who's in the room. I know there were a lot of you today. Really appreciate your questions and joining us right before your beer on St. Patrick's Day. But now you are free to go. Please hit the bars. Have fun. Everybody have a great afternoon. Cheers. Cheers.