And as the room is filling up, I'm just gonna go ahead and get started. So I'll say good morning, good afternoon, good evening, depending on where in the world you're signing in from today. It looks like quite an international audience, so thanks everyone for joining us. Today, we've got a very exciting event between Rick Van Nieuwenhuyse, President and CEO of Contango ORE, and Darwin Green, President and CEO of HighGold. Gentlemen, welcome. Thanks for joining me today.
Great to be here, and thank you, 6ix, for hosting this conference. We're, I think we're both excited and, I think you know Darwin. You know me from Contango, so appreciate everybody joining us today, and to talk about our recent proposal to acquire HighGold and their exciting Johnson Tract project. Of course, we will be making forward-looking statements, so draw your attention to our cautionary language here. And just want to start out by, you know, talking about Manh Choh just quickly. We continue to mine ore at Manh Choh and stockpile it and transport it to the Fort Knox mill. Last I checked, there was over 100,000 tons of ore stockpiled there and about 15,000 tons coming every week.
So, we're still scheduled for production in the first second half of the year, but I think we're shooting for first gold pour in July. So, that's kind of forms the backdrop, because that will generate cash flow and allow us to advance not only more exploration at Manh Choh, but Lucky Shot, and our hope is to do the same with the JT prospect project and on HighGold as well. But obviously, we've got to get the transaction closed. So with that, you know, we now have a platform to have three mines in Alaska, looking at the, you know, the prospect of having three mines in Alaska. Manh Choh, very near-term production.
Our Lucky Shot project, we've talked about, a wash, rinse, repeat of Manh Choh, except we own 100% of that one. And now Johnson Tract, and, they're all high-quality projects, all in Alaska, which we, I think we, and Darwin will chime in on this as well, but, I think great, great juris- great jurisdiction to work in.
Yeah, absolutely. A great lineup of projects.
Just start with, you know, a map that shows everything. The red star, Fort Knox Mill, the gold star near the Yukon border there is the Manh Choh project. Again, expecting to be in, in production shortly and, and generating very, very strong cash flows. Our Lucky Shot project, located just a little bit north of, of Anchorage there, about two-hour drive north of Anchorage. 100,000 ounces outlined there. Again, good grades, near infrastructure. And, Darwin, why don't you go ahead and introduce Johnson Tract?
Yeah, well, it's a system that we've generated or defined over 1 million ounces gold equivalent at 9.4 grams per ton gold equivalent. It's very well located right next to tidewater. And it's a very fat deposit. That's really what differentiates it from the crowd. It's high grade and fat, 40 meters true width, and we see a lot of opportunity to find a lot more.
So, you know, Darwin just went through the numbers. I mean, it really is a spectacular deposit, not just from the grade. The grade's great, but the true width is, this is one of the things that really impresses me. And you want an ore body that will be, you know, as easy, easy to mine as possible, and I think this one fits that description, very well. Obviously, the critical metals aspect of it is, is an interesting one to to talk to in, in the, in today's world. Darwin, why don't you take this one on?
Yeah, no, for sure. You know what? I think it kinda sets the stage a little bit for why this transaction makes so much sense in terms of a business model we see that we've seen Contango execute perfectly with the Manh Choh project, where you have a high-grade deposit that can overcome the cost of shipping it some distance to an existing mill facility. In that case, it's a joint venture with Kinross, and it's going to the Fort Knox mine. This is exactly, for anyone who's been following our story, exactly what we've been talking about. We've kind of been independently pursuing the same opportunity. The beauty of being on tidewater is really the ocean is a highway to anywhere.
There's several hungry mills in sort of Alaska, on the coast and northern BC, but there's also opportunities further afield in Asia, and it gives you a lot of optionality in terms of developing a project. And, you know, it ends up leading to projects that are a lot lower capital cost to build, have a lot smaller environmental footprint and fundamentally a lot quicker to reach the finish line, which I think is one of the key advantages of this business model.
I'll just add in one of the other opportunities, in terms of who, you know, who might process this or, the smelters are another group. We've got grade, and the smelters like flux. This is the kind of material that they like. So, we'll just add that one, too. It's not just existing mills, but the smelter groups as well. Maybe I'll just start here. You know, we think this is a win-win transaction. We're gonna create a company that has exposure now to 1.6 million ounces of gold equivalent. That's a threefold increase, from where Contango sits today, and it gives us... You know, we're, we're very bullish on the gold market.
I don't want to get distracted on macro issues, but it's clear that the gold market is the gold price is ahead of the equity valuation. So having more exposure to gold, I think is the right thing, right move for Contango to make. And then, I'll let Darwin speak to this slide as well.
... Yeah, I mean, from my perspective, I think the business model makes a lot of sense. I think in a, you know, in a, in a market where, where capital is, is hard to come by, it's a, it's a beautiful marriage where you can, you can get, you know, basically self-fund organically, the advancement and the development of projects. That really gives you a whole lot of strength, a lot more strength than, than most of the peers in the early stage development space. And, and it's a beautiful pipeline of projects here. So increased, you know, ounce count, multiple projects, and a great platform for growth. You know, that's, that's one of the things I like. And then added to that, there's still a tremendous amount of exploration upside on this portfolio of properties.
Yeah, Darwin and I are both fundamentally ex-explorers and we're geologists at heart, and that's what drives all of our decision making is driven by the geology, not, you know, not by a spreadsheet or something, so. Darwin, I'll let you speak to this, of course.
Yeah, no, for sure. I mean, it's, you know, obviously, when you look at these deals, there's, you know, there's an immediate upfront premium to shareholders, and this is speaking directly to the benefits to the HighGold shareholders. You know, going into this, we've certainly been strategically thinking for quite a while on the, on the HighGold side, and it's... We like this premium. You know, we've been trading in the, really over the last six months, anywhere from $0.20 to $0.35, and this is a deal that's being done at $0.55. So we think there's a very immediate upside win for our shareholders. But that's, you know, that's really not what this is about.
This is about forming a company that I think you get early participation in an emerging gold producer that I think is gonna be leading the pack in terms of high-grade gold. It's hard to beat the project portfolio that I think this combined entity has. And again, that strength of having that cash flow to fund that development and advancement of those projects is kind of a unique story. And I just don't think you can get a better fit, right? Like, if you look at strategically, there's a lot of deals done out there in the market, some make some sense, some you really scratch your head on.
This is one I think anyone can look at and see the strategic fit from a jurisdiction, from teams that know how to develop in Alaska, from, you know, the profile of the deposits themselves, you know, the combined grade of, you know, now pushing over 1.5 million ounces. And fundamentally all have the same opportunity for DSO-type development. You know, further, I think, you know, we've been in a market where the last two months, you know, gold's traded above $2,100. We're still not seeing a lot of inflows into the funds. And that dilution risk that hangs out there, that perpetual overhang on the junior explorer that has a single asset, and you get a huge discount because of that.
Whereas if you're a producer with cash flow, it's the opposite. So I think this is a deal where it's one plus one equals three or four. It's a win for HighGold shareholders, it's a win for Contango shareholders.
Yeah, I'll just add, you know, you know, the market doesn't always... And I think that's the case here. There's been a lot of great work done by the HighGold team and at advancing a project. And, but the Lassonde Curve is accurate. It's an accurate fit and accurate description of what happens, and particularly in tough markets, and there's no question that we've had a very tough market for the last several years. So, as Darwin says, I think this is a one plus one is three story. So, we're very excited to get this combination done.
One last point on that, Rick, there too is I think the exposure to the U.S. market, the NYSE American listing, is actually a huge advantage, particularly for our American-based assets. And I think when the gold bull run does come, I am a believer that it will eventually happen. I mean, there's not that many equity issuers on the NYSE that are in the gold space, in the junior market, and you're gonna get, I think, an outsized increase in share price as a response to that funneling of those dollars when that eventually happens.
Yeah, I think that's a great point, and we certainly see a lot more liquidity in the U.S. markets than than we are seeing in Canada. And the Russell, you know, the Russell 2000 exposure certainly adds to that liquidity. I won't go through this in any any detail. It's a, you know, it's a plan of arrangement. We've talked about the the the premium and the and the board going forward. I'm really pleased to to have have Darwin on the on the board when this is all said and done. You know, obviously, we do want shareholder votes support, so we, you know, we wanna explain why this is a really good deal for both companies. Darwin, over to you.
Yeah, I mean, this is... Obviously, I love this project. Yeah, there's not very many assets that carry these kind of attributes. This rare combination of grade and thickness. We've talked about it before, but it really is something unique because that translates directly to lower cost mining, simpler mining. Very, very attractive and rare combination to have. You know, it is polymetallic, so one of the questions you ask is: What about the metallurgy? And that's something you know, we've spent a fair bit of time on this project, really significantly de-risking the project. So we have the metallurgy. It's good. Good recoveries, the high grade concentrates, that will be in demand. Social license, another big question. You know, we are on Native Corp lands, Alaska Regional Native Corp lands.
It was selected specifically for mining, and they're gonna receive direct economic benefits. I do think in this modern era, you know, the U.S. is a great place to be, and the state of Alaska, in particular, is a great place to be.
This is awesome-looking core.
Yeah, some beauty intersections, for sure, and there's more of it out there. There's no doubt.
Yeah, this is, you know, this is... You know, people ask: Well, why, why do you like this project? Well, this is why we like this project. It's a great high-quality asset and great grades, but over good thicknesses. And as Darwin says, you know, you've got 40 meters of this kind of looking stuff, that's pretty awesome to mine. Darwin, maybe explain who CIRI is a bit and, you know, why they're important.
Yeah. So CIRI is our partner on the property. They actually are the landowners, the mineral rights owners here. CIRI is an Alaska Regional Native Corporation. They're one of 12 land-based, native corporation, regional native corporations in Alaska. And Alaska's... it's got a really unique way that it settled, indigenous land claims, incredibly progressive. It was done about 50 years ago. And I think it's the model system anywhere, you know, on the globe, to be honest. And, so what happened out of that, for those that don't know, basically, they created these for-profit corporate entities, these large regional corporations. They were then able to select lands with natural resource potential, and they became stewards of those lands to develop them.
And they become quite good business entities in the process, and some of Alaska's biggest deposits and mines are actually currently being developed on Native Corp lands. So great group to work with, very sophisticated group, wonderful relationship there. They will get royalties from this project if it goes into production.
So I'm gonna just comment a little bit here that I used to work for Anaconda back in the late 1970s and 1980s, and CIRI formed a partnership with Anaconda, and it was out of that joint venture partnership that deposits like Johnson Tract were found. So, you know, my history here goes, definitely goes back a ways, too, and got fairly... know the people at CIRI, know the deposit well. You know, my background in Alaska, know a lot of Alaska Native Corporation leadership, so I think the good work that High Gold's done, we'll just build on that.
You want me to talk to this one, Rick?
Yeah, go ahead.
Yeah, yeah, just kind of more of a location map. We are... You know, Alaska is well endowed with minerals, so a lot of them are not close to infrastructure. We consider the ocean infrastructure because it's, you know, it's a highway to anywhere in terms of marine transportation. We're reasonably close to Anchorage and other communities on the Kenai Peninsula. I mean, there's a workforce close enough at hand, but we're not right close to any particular community. So kind of that perfect distance. The history here is quite interesting, right? The Native Corp selected their lands, and you'll see we're surrounded by a park, but that park was created after the land selection occurred, and CIRI and other Native Corps were willing participants in that process, and in fact, relinquished quite a bit of land to help its creation.
But really on the strict and sole provision that they'd be able to mine here. The only reason they selected this land was for its mining potential, and so in addition to the land, they have an easement right written into federal law for, for a port and a road. So the core asset is sitting down, like, the, the deposit is sitting on that darker colored portion of the property there. But there's a huge amount of regional land, north and south, that covers similar geology that's been underexplored, that we like as well.
There's a nice view of the deposit. It sits behind the hill, the mountain there. It's steep country, but you can see where the camp and the airstrip is located. The next real step in developing the project is the access road over to the proposed portal site and work that's underway to get that first permitted and then get underground and drill the heck out of this thing to develop a mine plan. Darwin, any other comments on this?
Yeah, just basically, lots of flat ground to work with here, and that the deposit is actually sitting... You know, it's been drilled to the depth of the valley floor. It's a bit counterintuitive for most people to think you'd actually go up to your deposit, but the tunnel we're looking at going in, the ramp, exploration ramp, will get you down to the bottom of the deposit. And, I think the next slide might speak to that. Yeah.
Yeah, you see the three, three-dimensional view here and the location of the deposit, kilometer long, kilometer long, long tunnel. That, mountain behind is the one that you're seeing in the photo there from, overlooking camp and the airstrip. And so the mountain goes up, and the drill holes have to go deeper, and that gets expensive, and so both for just exploration and for infill drilling. So that really is the next step here. And Darwin and his team of, you know, progressing the permitting on that too is moving along and that's—but that is really the next step here. And this is just more of a longitudinal view that shows the decline access point. As Darwin says, you're, you know, you're above the valley floor.
That makes for, you know, easier amount of water to deal with, and, but you can see the exploration upside here is significant, but it requires a lot of capital to get that underground development in. You know, it can be used for exploration, but also obviously can be used as a main haulage tunnel, designed appropriately, and that certainly would be the plan. And, you know, and we don't have an exact number, but it's probably in the range of $25 million to get that infrastructure in place to be able to talk about how do you develop a mine plan around this. So, Darwin, if you have any other comments?
No, I think you did a good job of capturing it, but you can see the benefits there, starting at the bottom and mining your way up as well. You know, the ore passes, drop your ore down. Most of that deposit is all sitting in one big chunk. It's very attractive that way, but there is a lot more to be found at depth. Some of it's been displaced deeper down, and it is getting challenging to drill from surface, so the ramp makes a lot of sense in the world at this stage in the project's development.
I will definitely let you speak to this one.
Okay. Yeah, I mean, I think for us and for you know Rick, and I know you've tracked this project for a long time, it's. There's very clear regional exploration upside. In addition to Johnson Tract, we've already discovered a second system. It's called the Ella Zone. It's 4 kilometers to the northeast, where we have some very spectacular numbers. And you'll follow up on it, and it's you know it's growing. It hasn't grown quite at the pace of JT yet, but it defined clearly that there's opportunity for multiple deposits. And the style of mineralization you see at JT is clearly present, or the conditions that were present to allow its formation are more widespread on the property. And so last summer, we flew for the first time a regional survey.
It's a MT survey, and we did some pretty sophisticated processing with that. And what it did is it kind of was a one-to-one detect of the areas that we knew we had mineralization. And then there were a lot of areas in between those known areas of mineralization that were undercover, you know, under gravel or in the valley floor, and we saw very comparable looking anomalies. So we see a lot of opportunity for future growth here. Separate, in addition to that, and sort of as you go to the north, are two bullseye targets. They're... It's hard to get an appreciation for scale here. You know, we're about 12 kilometers long, is the main trend of epithermal to VMS style mineralization.
But we think to the north, we have these big, big systems that are intrusive driven, based on multiple layer, layers of data. So it, it's kind of a unique project in that we've, we've established critical mass, we think, on the deposit itself and are ready to get underground and pursue that advanced exploration phase. But there's this, this regional exploration upside as well. And this all requires capital, and I think, you know, merging a company together like this allows one to do both at the same time.
I'll just add that, you know, it's definitely a district, an early developing district, of scale. And when you look at our Tetlin land lease and the Manh Choh project and the exploration upside that's available there on private land owned by a tribe, our Lucky Shot, we control the, you know, the lion's share of the Willow Creek District. A district that's produced over 1 million ounces of alluvial gold, and we have demonstrated high grades of low potential mining there. This adds, you know, a nice, solid third leg of the stool as far as district exploration goes. So I think we'll wrap it up there and turn it over to a Q&A period. Daniel, over to you.
Awesome. Thank you very much, gentlemen. Now, there are tons and tons of great audience questions, so I'm gonna keep mine to just a couple, just the things that we can run through before we jump to those audience questions. I'm gonna start, Rick, with you. What made HighGold the most attractive acquisition of all the juniors available? And almost as importantly, why was now the right time?
Yeah, well, I think now is being the right time, we're on the cusp of generating cash flow. We have a very high degree of confidence that, you know, gold pour is gonna take place, and we're gonna start to get money coming in the other direction. So cash flow for a junior company is, I don't say it's king, I think grade is king, but cash flow is queen. And, you know, in terms of why High Gold versus other things, it meets our three criteria that we've been talking about for looking for opportunities. It's got grade. It's got infrastructure. As Darwin just said, it's on the water. So, and most importantly, for a junior company, in my opinion, is the ability to permit something.
So you have to have a simple, relatively simple project. An open pit in the bottom of a big river valley is not a simple project. We're mining... This project would be mining above you. Now, eventually, you may find more stuff deeper, but... And you can worry about what the permitting and all the other things are available that need to get done for that. But to start off with, it's a relatively simple project to permit. Road access down to the port, which, which is, you know, which is, hardwired with CIRI, and then, and then, a tunnel into the mountain where your ore body is above you, and it's a fat, juicy ore body. Can't get better than that.
There you go. Darwin, on the flip side, with a significant deposit and existing exploration upside, what made you and your team decide that now was the right time to do a transaction?
Yeah, good question. I mean, you know, with... I think, as Rick touched on a little earlier, a little bit of this Lassonde Curve challenge in the space, and we're a little bit different because I think we can shorten that dramatically as part of our business model. But we put a lot of work to get to critical size threshold. And, you know, Rick dropped the number of, say, $25 million to get underground. There's some big, big bills to come to really move this forward. And, the reality is the market's gonna keep you down. It's gonna hold you down when it knows you need to raise that money. And it's gonna really give you a huge discount to the NAV of your project and where it should be.
And so for us, we've been thinking strategically for a while about the path forward. You don't want to languish and just be kind of hand to mouth with your financings. And, you know, we did actually look and evaluate quite a number of different strategic alternatives, and this was a very, very obvious fit. Like, I don't think you can get a better fit in terms of grade profile of assets, business model, jurisdiction. You know, Rick's got a tremendous amount of history in the state, you know, ensuring we're kind of moving the project into hands that we trust and are gonna move forward, that are a good fit with CIRI and Alaska, in general, were critically important to us.
So yeah, we've got a great premium off a baseline right now, but it's, it's really about, to me, you know, this timing was the right timing to get in with, with Rick as they're about to rerate, as they become a producer, and as we're at the front of a good gold market, and, and I think a story that, people can get behind, where you get early participation of, of an emerging new gold producer with a, with an awesome profile of, gold deposits.
... right? And in the same, you know, adjacent to that, in your esteem, why do you think High Gold shareholders should maintain or grow their position at this time?
Well, a lot of the same reasons. I mean, I think it is a pretty unique business opportunity right here that's being presented, right? I think, in my view, in the space, you know, there's not a lot of other peers that kinda have this kind of a business model. And I think to be able to get in on it early, as we are, as prior to Contango actually hitting full gold production here, and sort of build a growing company around this, and I think there's more of these kind of opportunities. You know, I'm gonna stay on as a director. I'm really committed to this story, and I wanna see it be a success, and, you know, I'm certainly not selling into this.
I think it's a great opportunity for shareholders. You know, if guys wanna move on to do something else, that's fine, but I actually think this is a very, very unique growth story, that's a very compelling investment opportunity for shareholders.
Great. And shouldn't you, Rick, actually, speaking of your business model, I know there's a lot of investors in the room who are not typically in attendance at Contango events. I was lucky enough to talk to you a few weeks ago about the Contango business model. I'd love to hear your perspective on how this acquisition is simpatico with that model.
Yeah, so, you know, when we, when Contango discovered Manh Choh, it's a great deposit. It's, it's... But it's not huge. It's not a, you know, 10 million ounce deposit. It's 1 million ounces, but it's great grade. And so when we, we had the decision to make, do we advance this ourselves, or do we, do we partner? And it was clear that partnering with Kinross, who had an existing mill, underutilized mill, and you have good grades, so you can afford to transport it, and that's, that's a key part of any of this whole business model. We're not gonna go after, you know, 1-grammers that are out in the middle of nowhere. They're just, those are gonna sit there for a while.
But this, you know, this, it saves capital, it saves permitting timeline, it reduces your overall environmental footprint, including things like greenhouse gas measurements that people are paying attention to, investors are paying attention to now when they decide, "What do I want to invest in?" Those are all part of why this model makes a lot of sense, especially for Alaska, where we don't have a lot of infrastructure. So if you've got to permit a project with infrastructure, and I know this, like, really well, it's gonna take you a long time, and it's gonna be a long, slow, painful process, and the market will not stay with you. It just won't. So, you know, and Darwin mentioned this, you know, this is what's unique about HighGold's asset at JT.
It's next to the water. Water is your, is your infrastructure. Yeah, you gotta find somewhere to go process this, but look, we made $50 million, or I should say Kinross made $50 million of mill modifications to accommodate the Manh Choh ore. So, but that's a lot less draconian than, you know, building a new, a new $600 million mill with a tailings facility that who knows how long that would take to permit. So-
When you think about it, like for Johnson Tract , the way we envision it, is being processed offsite, even your waste rocks going back underground for backfill. So who doesn't like a mine? It's an underground mine, where at the end of the day, you plug the portal and you walk away, and there's really no long-term environmental legacy issues. Like, that should be attractive to everyone. The world needs the metals, and these are the kind of mines that I think are great solution to, you know, moving forward. And for the capital markets, for the investors, you're not hung out for 10 years waiting for something to come online. You can actually get these things into a timeline that will maybe bring investors back to our space.
Because in my view, that's one of the fundamental things that's been killing the appetite for our business. It just takes too long, and people, it's capital destructive.
True. One thing I wanted to talk about, and this will, I think, cover some of the audience questions as well, not, certainly not all of them, but some of them. And this will be really for both of you. I'll start with Rick. I guess, does represent another project in Alaska, in Contango's portfolio. Look at your perspective on why this jurisdiction is such a sweet spot in your esteem and for you personally.
Well, I grew up in Alaska, so I know it really well. I've worked up there a long period of time. I've also worked all over the world, so I do have an appreciation for how things work elsewhere. And that is one of the things that I really appreciate about Alaska. Things work well there. The regulatory environment, the regulatory people in Alaska, they understand mines. They know what it takes to permit a mine, and they know how to do it so that it's done right. And that's something I don't think that the world appreciates or that, you know... We're often, we, the U.S. government, is off investing in projects in Africa. Well, they don't do it right in Africa. I will guarantee you that.
You know, it probably is easier, but when you look at a mine like Red Dog, and the partnership between Teck and NANA that has developed over a 30-year period, and what that mine has done for the Northwest Arctic Borough region, it's first of all, it's Northwest Arctic Borough, it's self-governing. That's a native-driven governance process. That's ESG to a T. That's what ESG is supposed to be about. So I think it's high time, you know, I don't want to get distracted on our government, but that's... Investors need to start realizing that if they're truly interested in ESG principles, they need... Those are the metrics they need to really start paying attention to. I'll get off my soapbox.
No, we put it right up for you, Rick. Feel free.
Yeah, I think one of the things, too, jurisdictionally, when you do have the expert level of experience that both Rick and I do in Alaska, it does give you an advantage to understand what will work and what won't work, or certainly what has much better odds. There are certain areas that are gonna be tougher, they just are, and there are certain areas that are gonna be less tough. And this, the Native Corp side of things, I mean, it really is a model for the world. It's very unique, you know, to Rick's point, and it's a tremendous advantage, and if anybody spent any time around the Alaska state government or just generally the people of Alaska, it's a can-do state, right?
They're not looking for handouts, like, let's get out there and get it done. So, we love, we like it. I like it a lot.
Awesome. One last question out of me before I jump to the audience. So just one last one, guys. Curious, just in detail, and be as specific as possible, what's up next for the Johnson Tract projects? Like, what should investors be looking for in the coming months?
Yeah. So, and I'll ask Darwin to comment on this as well, to fill in the gaps there. But, you know, generally, it's infill drill to known deposit. We want to move this thing, you know, execute our model as quickly as we can. And the next step is permitting, and infill drilling, I'd say, on the surface. And so, there's some surface infill work to do. That's work that can get done this summer. The underground work has to wait to get the permits to get the access road over there and, you know, the plan for the waste rock and all those things. So maybe Darwin, maybe you can fill in the gaps there and add-
Yeah, yeah. I mean, we've been very busy doing the boring stuff for a little while, which is great stuff to be doing in a crappy market. You don't get any love for it anyways, but, but they're things that are fundamental de-risk, and value add, I think, and then probably helps lead to transactions like this. You know, means, you know, the starting point now is not starting from now and waiting two years to get your permit to get underground or your permit to get roadwork. We're, we're literally weeks away from having the road permit that Rick was talking about, on the front to get us to the portal.
We did a lot of work last year to tee ourselves up to initiate permitting of the underground exploration ramp, and that should be initiated in the last half of this year. You know, we're expecting a lot of the team to stay together here, so there's gonna be continuity on the project and with our contractors and be able to move this forward. You know, it's a nice merge that way as well, I think, for the company in terms of personnel and complementary skill sets. But yeah, those, those are big pieces. And continuing to work on scoping and engineering is what we've been working on in the background as well, and I'm sure Rick's and team are gonna carry on on that and figuring out what's the best destination to be dropping our ore off at.
I think there's several options out there. It's very attractive ore, so there should be folks that are interested.
Yeah, I'll just say one, you know, I'll add one comment to that, and I think I've said this several times when we've talked in the past, Romeo, that, you know, 8-9 grams will displace 5 grams every day in a mountain.
Fast.
I mean, I think, as you put it very well, Rick, like, looking, you know, at Manh Choh, it's, it's a long ways to truck it. They're trucking it about 240 miles, I think, and, for Canadians in the audience, or 400 kilometers. Yeah, I think you described it as, you lose a gram for transportation. You know, when you got... And that's an 8-gram deposit, that's, you know, still not too bad, right, for an open pit at 8 grams, 7 grams. So it's, it really does give you a lot of, flexibility.
Awesome. I know there are tons of audience questions, so I am gonna try to get through as many as possible. Some, where they're similar, I'll try to group them, but we'll just go through them mostly in order otherwise, just so we can get through as many as possible. BW King asked, this is for Rick: "You once mentioned a royalty angle to Contango. What's the view on that from this point?
Yeah, I think that's still a longer-term objective. The first thing, the first order of business when with cash flow from Manh Choh, we obviously have to pay the bankers back. They're, that's, you know, that's something we're- that's the first order of business. But, you know, we're gonna have a really sweetheart margin here, and, you know, we're not gonna go out and spend, you know, $25 million this year, on JT. You know, it's gonna, it's gonna... It takes time to execute these plans. But, long-term, strategically, I still like the idea of looking at paying a dividend to shareholders at some point in time.
I appreciate it. Question from Mark, also for Rick: "What synergies do you see, if any, with DSO operations at Lucky Shot and Johnson Tract? He's... We're curious if you can now send Lucky Shot ore to other places rather than Fort Knox.
Sure. Short answer is yeah. I mean, Lucky Shot can go a long ways. If you can ship by truck, you know, 1 gram out of 8 to Fort Knox, 240 miles. Yeah, there's other options out there, and we're you know, the first order of business at Lucky Shot is to demonstrate, you know, like you said, 400-500 thousand ounces of ore that's 12-15 gram per ton kind of range. That's kind of our target. Yeah, that, you'll be able to put a mine plan around that, and part of that mine plan is, okay, where does the ore go? We've got rail at Lucky Shot, so that gives you a cheaper way to get it to Fairbanks, certainly.
But there are certainly other projects, and without naming names, you know, or, sorry, there are other companies out there, mills out there, that without naming names, that, you know, would probably be worth a dialogue or two.
Fair enough. This is a question for Darwin. It combines a few questions, so, if anybody in the chat thinks I didn't quite capture theirs with this, let me know. They're curious if HighGold is expecting other bids as well.
Of course. You know, hard, hard to say, honestly, and it's an interesting one, right? Because, it's not always just about premium, but premium's important. You know, you know, and I highlighted at the beginning about, you know, premium plus the ability to really be part of something that I think is a great company going forwards. You know, sometimes this shakes things out. You know, we have a big senior as a 9.9 shareholder, and there's others that may have interest, but, I'll leave it there. You know, our board recommended this deal, and we looked long and hard at some options, and we thought this was a very good deal and a constructive deal for our shareholders.
... Mike, if you don't mind me just adding, you know, because I want to speak to the HighGold shareholders. I think what Darwin outlined in the one plus one is three in building a platform and being able to execute on this plan, which is, you know, our business model is a bit unique. It's a bit more like a royalty company model, where you have a fair bit of gold being produced with a small number of people. If you have a mine, you're gonna have, you know, 500 or 600 people reporting to you. Not my cup of tea.
So, having an operation where the bigger companies are using their existing infrastructure and all their people, and all that knowledge that goes into how that mill works and the tailings facility works, that's where the big value add is here in my mind, with this model.
Appreciate it. This one I, I think we've been over a bit, but it might be good to reiterate. Mike from the audience asks: So the focus at the outset be on exploration of Johnson Tract, will you prioritize production via DSO? He wants to know, if the latter, what's your best estimate on when Johnson Tract will be selling ore, and what are the permitting regulatory hurdles to get there?
Yeah, I think it's a bit early to sort of outline a specific timeline. You know, let us get the access road and the underground permitted, and we can lay out a plan for that. Lay out a plan for doing the infill drilling, you know, to a I'll call it a feasibility level of knowledge, because there's other stuff we have to do. You know, the metallurgy is good, but we probably need to do a bit more metallurgy, and that'll depend on where this stuff goes. So that's you know... Give us some time to outline a plan. We're gonna be talking to potential, I don't know, lack of a better word, off-takers. I mean, people who are, you know, where would you process this stuff?
So, you know, give us, give us some time. It's, you know, it's not a, it's not a, in the next couple of years, sort of a story. There's, there's a lot of work to do here. But it is a great ore body and, you know, it lends itself to, to application of this model to a T.
Mm-hmm. Adding to it, though, I do think timelines sync very well with Manh Choh as it sits right now. I mean, I think Manh Choh is gonna have some more life to it than what you see in front of it. But above and beyond that, I think that they're very, very well synced. From what I see, its potential timelines that what things could be achievable, for sure. I'm hoping Rick's gonna be putting some budget to the drilling here. I'll be on the board, so I'll be voting for it.
Exactly.
There's a thumbs up.
Up there. Yeah.
One quick practical question from the chat. People are looking how they can get a copy of today's slideshow, just so they can read through it.
It's on our website, and I'm not sure if it's up on yours yet. I think we are on the website right after this presentation.
Yeah. Not 100% if it's up on ours yet, so.
Perfect. Tom Calandra asks... Thanks for joining us, Tom. He congratulates both of you, but he notes when it comes to Alaska roads and transport and concerned citizens are always an issue, and governments, federal, state, local, et cetera. So he's looking for your thoughts and perspective on that.
Well, the water is, as Darwin eloquently referred to, you know, it's the world's highway. So, you know, look, no project's ever without its issues, especially if it's a mining project. But, you know, with Lucky Shot, we have the rail, so you know that if people are concerned about more trucks on the highway, we can alleviate that because rail is cheaper and but barging and shipping is cheaper yet by a big margin. So, you know, it's capital to build the infrastructure to load it onto a ship and all that. So, you know, these things aren't free. But, I think, you know, as with any project, the simpler it is, the better.
And the fewer things you have to permit, and specifically, the fewer things you have to permit with the federal government, makes it easier. Those are like I said, those are all part of our, you know, keep it simple criteria when we say it's a simple project. One of the things we're referring to specifically there is, it's a simple project from a permitting standpoint.
Great. T. Sullivan from the chat asks: If Contango is gonna use free cash flow from Manh Choh to develop both Lucky Shot and Johnson Tract, and curious if you're gonna use some cash flow to expand the Manh Choh asset?
And so we've got a $4.7 million exploration program approved this year at Manh Choh. That's a 100% joint venture budget. So our shares, you know, roughly $1.5 million there. That exploration budget is focused on what I refer to as MinEx. It's, you know, all within sight of the two open pits. It's a long strike for the most part. So short answer is yeah, and but not expansion in terms of again, there's no mill here, so there's no mill to expand. There's plenty of capacity still at the Fort Knox mill. The mill, what we've referred to as the mill modifications at Fort Knox are wrapping up.
And, in the month of May, they'll be doing a bunch of commissioning work and doing the commissioning work on all the different mill modifications, which, as I've said before, aren't really modifying the mills proper. The mills, or the SAG mill and the ball mills are the same. It's all the ingredients that go into processing the ore. The more cyanide, a bigger cyanide destruction circuit, more lime and cement, more carbon, bigger elution circuit, all those things. You need a bigger furnace to pour more gold, which is always a good thing. So, yeah, that's kind of where we're at there.
Makes sense. Stephen Soock notes in the chat, first, he congratulates you both. He's curious what the timeline to production is, that we're thinking for Johnson Tract. I'll start with that question, but it's a two-parter.
... But as we said before, I don't think I wanna sort of put any sort of timelines out there, but, you know, the timeline for the next event is to get through the permitting for the road and the portal access, and then put a plan together to get the drilling done. But the surface drilling that you can do, you know, we would like to start doing that this year. So, but then the underground drilling is the key step of putting that, you know, roughly 1.5 km tunnel in. We did that Lucky Shot. It's a little, not quite as long, but it's almost that long.
So, you know, this isn't like a really difficult job that we've never done before, so, if we-
And I mean, I think one of the key things here is that you've removed that overhang of where you're gonna get the money to move it forward. And so that was the key link. And I think in our timeline going forward, you tell people, it's like, "Now we've got a path here." That it's, you know, you're not gonna be spending that money this year. It'll... At best, it'll be late next year. But that's it-- I think when you have that certainty of, or a bit greater certainty anyways, on the ability to self-fund something like that, you're a bit more in control of your own timeline versus having to be at the mercy of where the markets are at and wait for the markets to come around. And I...
I think it's a tremendous advantage that way for the project.
Absolutely. I mean, the Lassonde Curve, it's a tough reality of our business.
It's a cruel curve, for sure.
It's a cruel curve.
Lassonde Curve. The second part of that question, though, Rick, was what's your relationship with current CIRI management, and did they have to provide an approval for this transaction?
Well, I'll let Darwin speak to that, but I certainly have a lot of relationships in Alaska, including with the folks at CIRI. So, you know, they're an integral partner in this. And all of the different companies that I've worked with and developed over the years, NovaGold, Trilogy, Contango. Having a good working relationship with the Alaska Native Corporation partner is paramount to making things work. So there will certainly be... I think Darwin and his team have done a great job to date, and we're just hoping to take it to the next level. Pretty much like we did with Kinross.
So Contango started early on and developed a really good working, healthy working relationship with the Tetlin Tribe. And then now Kinross was a great platform for Kinross to take it to the next level. So that's how I see that working.
Yeah. Yeah. I mean, they're very supportive of the project, been our experience to date. And, you know, again, you know, there were other opportunities for us as we're advancing this project and, interest from other strategic partners set in. You know, it's critically important to me, with the stakeholders we have involved in this project, that we find the right fit. And I think Rick, given his history in the state, and, you know, Alaska-based, I mean, how many Alaska-based mining companies do you know of, right? That have the kind of experience that Rick has. So, you know, I think that was very important to me, and I know it's gonna be important to CIRI there.
You know, when they chose us originally to take on the project, it was based on relations and choosing people that had good history and track record in the state. And I think this is just a continuation of that, and I will continue to be a part of it as well as we go forward. And, yeah, so we have no hesitation on their support of the deal.
Great. One question from Sonia in the chat: What is Contango's cash on hand after this acquisition, and will you need to do a placement in the near future?
Cash on hand is, I think we're $8-ish million, and with our line of credit, it's gonna stay around that level.
Great, thanks. EBL Consultants asked: What is CIRI's NSR royalty percentage, and do they still maintain a back-end right of up to 25% participating interest?
It's a sliding scale. I can't remember it off the top of my head. It's somewhere. It's pretty conventional in terms of if you did a deal with another company. It's, I think, from 2%-4%, so it's not overbearing, but certainly they will generate revenue from it, which is the idea. As far as the back, and they do have a one-time back-in right, it's on a production decision, and they'd have to fund their pro rata share on a go-forward basis, and that's anywhere from 15%-25%. You know, it's a little bit of a win if they do and win if they don't.
If they do, you've got somebody else funding their share of mine building, and you've got a native corp that's got even more skin in the game from a social license and, I think, political support standpoint. If they don't, well, you have 100% of the assets. So that's always the way I've looked at it, for sure.
As kind of a follow-on to that, are there obligations to process the ore in Alaska?
I don't think so, no.
Nope.
Great.
Not that we can see.
We'd love to, but we don't need to.
There you go. Mark Erickson asks, and this is... We've kind of touched on it a bit, but it's probably best to, to reiterate it again: I ask, being in Alaska, do you foresee any situation similar to Ambler Road with respect to U.S. federal interference? I'll use this to cover a couple of the political questions that are, that are in the chat.
Yeah, sure. I mean, good question. I mean, you know, and people know my history with Ambler Road, know it's something we've worked on, long and hard. I guess what I would say is, part of the experience of Ambler and part of the experience we had with, with Donlin, which, you know, is, from a federal standpoint, fully permitted, it just, it, it takes a long time. It's a, it's a heartbreak sort of a process. You know, we found Donlin 25 years ago, and it's, it's still not built, and there's no, no imminent decision to build it, even, even though it's fully federally permitted.
You know, and the Donlin and the Trilogy and Ambler Road saga is just, you know, I just, I don't wanna get angry here, so I'll keep it cool. But, you know, the federal government's breaking the law, so, okay, well, that's what's new with that? This project, and this is why we've developed our business plan, okay? Basically, sort of, what's the Einstein's definition of insanity is, you know, keep doing the same thing. You know, stop hitting your head against the wall. There's a better way to do this. For junior companies, I'm speaking for junior companies here.
You know, we can't survive the Lassonde Curve, going out and trying to tell somebody you're gonna raise $600 million to build a mill facility at Manh Choh, and take 5, 6, 10, maybe never years to build a tailings facility. So that's how we've developed this model. That's why this is a good fit, and that's why it gets around... I, well, can't say all of the federal permitting, but a lion's share of the federal permitting. And the part of the permitting that is the hardest is the infrastructure, building roads. Well, there are NGOs don't like roads. They don't like mines, but they really don't like roads. And so we're on the water, and CIRI has the right of way to get to the water.
CIRI is a Native corporation, and, you know, they're. NGOs tend not to mess with the Native corporations. So I think those are all the reasons why we've developed this business plan and this business model of not trying to tackle the difficult task of building a mill and a tailings facility, find high quality deposits, near infrastructure, and that are relatively simple to permit. Nothing's gonna be simple to permit, and permitting shouldn't be simple. You know, we wanna do things right, and regulators in Alaska know how to do things right. They know how to permit things right, you know? Red Dog is the largest zinc mine in the world.
It's a fantastic operation, you know. Fort Knox has been operating outside of Fairbanks, you know, it's about 20, maybe 20 miles outside of Fairbanks. It's a, it's a great piece of infrastructure. Let's use it. Hope that answers the question.
No, I think so. I think so. On a quicker question, I think from Sonia. What's the expected closing date of this deal?
I believe it's July... I don't think we put a date on it yet.
Yeah. Yeah, I mean, the process is, we'll get a mail out to our shareholders. Our shareholders need to vote on it. You know, we'll set the, we anticipate setting the meeting date for that late June, and then usually it takes a bit of, you know, a week or so to clear up after that. So info circ should be going out within a couple of weeks here, along with information on that meeting date. And that's the timeline we're targeting. You know, these things can always change a little bit, but the idea is to be nice to have it closed off at the beginning of summer so we can get out there and hit it, assuming our shareholders are on side, and I think they will be.
Appreciate it. [Uncertain] for Rick, asks, "Is Contango looking at Black wolf and its Niblack mine, which is on an island?
Very, I worked there for Anaconda. Anaconda is a great company, right, because I got the opportunity to work all over the place. Worked in Niblack and actually, I broke my back there almost, but or my collarbone. But yeah, no, it's not something of interest to to Contango, and I don't really think it fits our model for for a variety of reasons that I won't, I won't comment on, but-
It's an asset I know very well as well. I was involved in underground there in 2007, 2008, so...
There you go.
We've crossed some paths, Rick and I, it seems like.
There's one question that obviously answer to the best of your ability, but CJFPD asks: How does this deal compare to other peer M&A deals in the near past?
Um-
He's gonna tell it quicker than me, but...
Yeah, I'll go first, and then, Darwin, go ahead. But, I mean, clearly, again, this is... Keep talking about the Lassonde Curve and having the reality of the Lassonde Curve when you're, you know, trying to put your feasibility study together for, and permitting plan and all that, that's boring to the market. And it's really boring to the market when it's a crappy gold market. And we have not had a good gold market. So, you know, so it doesn't mean the project's not good, and that's what I... You know, the market doesn't get it right a lot of the times, and it's completely wrong on this one. So, but the reality is, that's, the market is the market. It is what it is.
So, we, you know, the value of the project is a good project, so you're gonna have to pay a good, healthy premium. And you can see that by other project, other junior companies that have crappy market caps. I think it was McEwen bought Timberline here recently for a 100, 100% premium. So, I mean, but it... If the share price is completely in the, you know, trading at $0.05, a 100 pre- a 100% premium is $0.10, but, you know, you've gone from, you know, paying, I don't know, I'm just making up numbers here, but, you know, gone from $10 million to $20 million. So it- you just have, it's a reality of the market.
Shareholders, you know, need to be rewarded, but the, and Darwin's spoken to this, the real attraction here isn't the premium. The real attraction is getting and keeping your shares in the vehicle that's gonna take this to production, and it has exposure to now 1.6 million ounces of gold that's generating +$50 million of free cash flow a year. Fantastic story to be a shareholder.
Yeah, I think that's fair. I mean, you know, in general here, I mean, it's we had a value in mind when we started talking, and Rick will know that I was pretty not moving off of that value. So it was value driven more than premium driven, and, you know, we've been talking for a while. But I think it's fair. You know, if you look at explorers in our comp group, maybe $20 an ounce is kind of the realm. You look at producers, they'll get valued at $100 or more an ounce. So there's a lot of room there to play with, right? Where we can get a premium that's maybe above market, you know, 30%-40% is pretty typical.
Getting above 50% is not as common. Sometimes in these really small deals, you'll see +100%. So we think this is a very respectable premium in the context of the market, but we also think it's still tremendously good value. And those are the best deals when it's a win for both sides, and I, and I think it is, because these values are gonna be valued at 4x what they are in a company like Contango that has that ability to self-fund, than in a junior where you're getting this excess discount rate down. And that's how I see it.
Appreciate that. Unfortunately, we are running out of time for questions. I do want to thank everybody who was in the audience today, and it was quite a large group, so I really appreciate you taking time to watch today's event. Rick and Darwin, thank you both very much for running through your presentation, obviously answering questions. I did want to give you both a last opportunity to speak to both shareholders and interested parties on the call before we jet. So I'll throw it to both of you before we close for the day.
Darwin, go for it.
Yeah, I was gonna say, you know, for any of my shareholders, please reach out to me. I'm happy to talk more about the deal and the lead up to this deal. And again, why I think it's good. Everyone, you're certainly able to make your own decisions on what you want to do, but this wasn't done lightly. We put a lot of thought into it. We think this is a great company going forward. And similarly, if you know, any of Contango's existing shareholders, I'm happy to field some questions on that if they want to know a little bit more about the asset. So yeah, looking forward to getting this done and building a great company together.
I genuinely think this is a company that you could see being a billion-dollar company in the next two, three years or four. You know, it's got that capacity, and it's not often you get that ability to get in early, participate early on a true growth-driven gold story.
Yeah, just Romeo, thanks to you and 6ix for hosting this platform. Great, great interaction, great group of questions. And, you know, really speaking to HighGold shareholders specifically, we really think this is 1 plus 1 is 3 or 4 story. And we want to work closely with Darwin and his team to continue to advance this project and realize the value that's inherently there. And it's a great fit for our other assets in Alaska, and it's a great fit for our business model, which we think is unique.
and I, you know, kind of referring to it as a bit of a hybrid royalty model, and which is why I think it should attract a premium valuation in the market once the market really understands why this is different, how it's different, why it does simplify the typical path that a junior unfortunately takes with the Lassonde curve. A cruel curve , as you referred to it.
The cruel curve . Well, gentlemen, thank you so much for your time today. If anybody in the audience has additional questions that we couldn't get to, I will pass them along to management, but please do reach out to either company for any additional questions you've got. But otherwise, everyone, thank you so much. Have a great rest of your day.
Cheers.
Thanks.
Thanks, Romeo. Thanks, Rick.