Filtering in. I'll say good morning or good afternoon, depending on where in the world you're signing in from today. Thanks, as always, for joining us. Today I'm pleased to have on Rick Van Nieuwenhuyse, the Contango Ore CEO, and Mike Clark, the company CFO, to discuss this morning's press release. Gentlemen, how are you today?
Doing well.
Morning.
Awesome. Here is how today's going to work. I'm first going to throw it to Rick for a quick kind of state of the union based on this morning's news. Then I'm going to jump back on, go through a few questions, including some that came in advance via email. I am going to get into questions from the live chat. This is an interactive event. Please feel free to enter questions for Rick and Mike at any point during today's event, just using the chat in the bottom right of your screen. We'll get to as many as we can. If for whatever reason we don't get your question today, I'll make sure that the team gets them so that they can respond to you just via email or call soon thereafter.
Last piece of housekeeping is today's event is being recorded and will be available for replay this afternoon, very likely by 2:00 or 3:00 in the afternoon Eastern Time. It'll come right in your inbox. At that point, you can share it. It'll be up on both YouTube and Events.six. Without further ado, I'll throw it to Rick to get started.
Thank you, Romeo. And thank you to Six for hosting our webinar today. Yeah, important press release out. Obviously, it's taken us a little longer to get this out than we really wanted to. But we have come to an arrangement with our lenders on rescheduling the hedge delivery dates and the debt repayment schedule. A lot of this, obviously, is really the job of the CFO. You'll be hearing a lot from Mike today. He'll probably answer most of the questions. I'll probably chime in here and there. Without any further delay, Romeo, why don't you go ahead and start with the questions?
Awesome. I got a quick number. Mike, this is going to be a bit of a grilling for you, as Rick foreshadowed. We are going to hit you with a bunch. We have some that came in over email in advance, too. I will get to those and then jump into the chat. First, originally, distributions were around $50 million from the JV. Do you see any change in coming from that?
Yeah. No, the original distributions were forecasted by Kinross were based on a $2,500 gold price. So with gold currently above $2,900, we would expect those distributions to increase. Typically, at the end of each campaign, after a couple of weeks, Kinross will go through their forecasting and budgets to come up with what the actual distribution will be. I would expect we should find that out in the end of March for the first campaign of this year.
Great. Into March. No, appreciate that. One clarification, just from reading it. Before, Contango was exposed to 40% spot prices and now only exposed to 30% spot prices. Can you explain what the dynamics are there?
Yeah. It's a combination of a few things. The 40% was always kind of based on the feasibility study, which at the time had higher production in 2025 than what we're currently budgeting. In addition to that, we actually produced more in 2024, which kind of took away from a lot more gold that would have been produced in 2025. We were only about 50% hedged in 2024. With kind of the extended kind of ore haul plan, you'll just see kind of the production stretched out over a longer period of time. Like, life of mine, it doesn't change much. For the next two years, we're going to be about 30% unhedged or 30% unhedged. In 2027, when we pay this off and deliver those last ounces, it comes out to about 80% unhedged that year and then unhedged thereafter.
It's really just kind of moved.
Yeah. Just shifted over slightly.
That makes sense. What did the lenders charge you for this restructure?
There was no charge to make the amendment. It is just a matter of resculpting everything to make it work. No change in the interest charge.
Oh, great. OK. Here is a tough question, obviously, answer just to the best of your ability. Do you anticipate having to do an equity raise in the near future?
No. The way this was resculpted or recontoured, however you want to word it, it was based on current gold prices and forecasted costs. We anticipate we should have enough money to make all the principal repayments and deliver the hedges without having to do a big equity raise.
Great. Another one, this is just from my perspective. Forgive the tell me. Why did this take so long?
I guess I'll start with this. Rick might have his opinions. I think the main reason this took so long is, first of all, we extended beyond the original maturity date, which requires a certain level of due diligence to be conducted by the lenders to get it through their risk departments when you go beyond that date. Having this happen over Christmas and then having the cost go up slightly on the tolling and processing that we announced at the end of Christmas, there was a bunch of factors that came into play. You throw on having two sets of lenders and just another set of parties to go through.
The due diligence from a third-party engineer required about a month of work or a little more than that. All those factors ended up taking the better part of two months. Finally, documenting is, you think it would be simple to stretch to change your principal repayments and your hedges slightly. There is still a fair amount of documenting to be done and thought to go into it just to make sure you are not going offside with your covenants or anything like that, which we are in compliance on. That took a little more than we anticipated. Originally, our goal was the end of January, and we are two weeks into February. It could have been worse. We finally got there. Rick, anything to add to that?
Yeah. I'd just say working with two bankers, they're not 100% aligned on everything. So that their.
They're both, one's a Dutch bank, one's an Australian bank. They just view things differently. That certainly was part of the factor. It's probably something we didn't really anticipate because we kind of view it as one aspect of debt repayment and delivering to the hedges. It definitely took longer than we all anticipated. I think very happy with the result we have. It does basically just spread the hedge delivery out over another six months, essentially. As Mike pointed out, we're in 2027, which is a very strong year for gold production. We're only 80% unhedged, only 20% hedged, I guess, let's say it that way.
Yeah. That makes sense. I got one big question for what this means for this year. Is this restructure going to allow you to do any work this year on Lucky Shot and Johnson Tract, just so we get a bit more info there?
I'll start on this. Currently, the way we've forecasted and budgeted is we've allocated a couple million bucks to go towards permitting at Johnson Tract. That's the primary focus right now. That's all that's currently allocated. Rick, do you want to add to anything to that?
Yeah. I'll jump in because I think the important next step at Johnson Tract specifically is permitting. As you know, last year we permitted the road. We received a 404 permit to construct the road between camp and the future portal site so we can get underground and do the proper exploration and feasibility level work to evaluate the ore body from underground. Again, we do anticipate that this will be an underground mine. The other set of work that has to be done on permitting is permitting a road down to the coast and permitting a barge landing site. Very good news there is that CIRI received their easements for both the road easement and what's called the port easement at the end of the year. Now that allows us to go through the formal permitting process.
We're getting a programmatic agreement in place, which kind of is a document that just outlines how the permitting will proceed, how the planning stage, the execution stage, and then goes all the way through closure. It is a very comprehensive document. That is being finalized. Once that is finalized, we can initiate the formal part of permitting, again, both the road access down to the coast and the barged landing site. Lucky Shot is already fully permitted. The next big step we want to take on both projects, and this is given the cash flows that we're anticipating, the next big step we want to take is let's find a home where to process these two great ore bodies. We are spending a fair bit of time on that, which does not cost a lot of money, frankly.
It is a lot of conversations with existing facilities that, either as is or with some modifications, can accommodate both ore bodies. That is going to be the focus for the year, that and permitting, as we just discussed.
Great. No, appreciate that. There is one question from the chat that I will throw in here before I get to some of the emailed ones. Mike, it is definitely for you. Let me know if you need to drag up some facts, just let me know. It is, what are expected total cash flows to Contango from Manh Choh for 2025 through to 2028? As additional details, are the cash flows net of taxes and debt amortization? He says you can use $2,500 or $2,900 spot price. Just clarify which assumption. I am putting you to work here, Mike.
I do not have all those numbers in front of me. Basically, what we have right now is we have our detailed mine plan from Kinross for 2025, which is what we are using. Outside of that, all we really have is kind of feasibility study level kind of work. For 2025, we published that the distributions were currently scheduled to be about $25 million or $50 million. We think they will be higher at current prices, assuming they stay there. Those are pre-tax numbers. That number does not include your hedge loss when you are delivering these hedges. There is going to be $20 million-$25 million there probably going to the hedge loss. From a tax perspective, we do have losses. Currently, we are not forecasting any major taxes for the next couple of years. We are still working through that.
It is not as straightforward as just saying we have this many losses we can offset because there are rules on how you apply it. There is actually only 80% of your losses you can actually apply to your income in the year. There is always potential for small tax bills at the end of the year. We are structured in a way that can hopefully offset that with other costs in the company. We are working on that right now. It is not something I have answers to. Going forward, we did talk about what we expect our free cash flows to be in 2027 and 2028 in the press release, which is pretty high level and based on $2,500 gold. I think that was, I think it was $80 million and $70 million for the two years.
A lot of that actually has to do with the fact that mining costs come way down in those years. For 2026, there was not too much free cash flow, basically, because a lot of the money is going towards the principal and the hedges. I do not know if I have answered your question clearly or if I missed anything. Rick, if you want to jump in.
Yeah. No, I think that kind of covers it. I mean, the big cash flows are going to come in the latter years when you've already mined a lot of the material and you're basically just transporting it. That is just a consequence of the overall mine plan. That is fairly typical for a mine that has a five-year mine life.
Sure. Chris, I'll deliver your question exactly as written to the Contango team. If there are any follow-ups, I can get back to you. I think that did mostly answer the question.
The one thing I'll add, Romeo, is in 2027 and 2028, we will probably have exhausted our losses at that point. You could start assuming some taxes. If you're spending money on the other projects that we have, then those costs will go against it. Until we get there, we just don't have those answers.
Right. No, makes total sense. One question that came in over email is that they mentioned Kinross reporting had positive comments about exploration at Manh Choh. They'd love to know if you can comment on that or if you have any related information.
Sorry, I missed their question. There's some background noise here.
All good. This is about Kinross' comments about exploration at Manh Choh. They just want to know if you have any related information.
Yeah. No, we don't really have any, I'd say, significant results to report from the 2024 drill program. A lot of that work was spent, a lot of that effort was spent on, I'd say, target generation on the rest of the property. There was some drilling done, but it was kind of very targeted, a few holes here, a few holes there on existing targets, what I would say sort of along strike and down dip. We certainly think that's where the effort needs to focus. Again, short mine life. Let's extend it by a year or two by doing some work between the pits. There are some interesting areas, as we've all talked about in the past, the two north zone and main zone dip towards each other. What's in the middle?
Of course, as in any ore body, just incremental growth along strike and down dip is where we think the focus ought to be. We will have our joint venture meeting here in March, which is typically when we have it, to discuss the drill program for the year, the exploration drill program for the year. Hopefully, we will be able to update people once we have that set.
Awesome. Appreciate that. One question. This is about the bridge. Somebody wrote in asking, with the Trump admin, can you appeal to get the bridge weight increased?
Yeah. Sorry, you came in really broken there. Romeo, can you repeat the question?
Yeah. All good. Somebody just wrote in a note that with the new Trump administration, is there a potential to appeal to get the bridge weight increased?
Oh, yeah. I actually don't expect it to be an appeal at all because at the very end of the year, the Alaska State Department of Transportation and the federal government DOT actually came in alignment on accepting what they call the STIP plan, the State Transportation Plan. With that, the money now is allocated to do the repair work on the Chinook Floodplain Bridge. They'll undertake that here over the next couple of years. That should result in eventually a total lifting of the weight reduction that was put in place.
I also understand that because they now have an end date on when the bridge will get repaired, they'll be doing another evaluation step and saying, "OK, now we know that bridge is going to be repaired by such and such a date." That's part of the calculus that goes into determining whether there should be bridge weight restrictions at all. It is a dynamic process. It would have been nice to have had that budget approved last September or whenever, but that was not in the cards. Just to make sure it's clear, we're not magically going to get another 10 tons on the trucks. We're going to have small incremental improvements from the bridge weight.
If the bridge weight restrictions come off, we'll have, there were other factors that went into the overall sort of net efficiency of the truck transport, how many tons of actual ore were being transported, not of ice and snow and mud. We'll make incremental improvements there just by, in the wintertime, knocking the ice and snow off as frequently as you can. Same in the summertime with the mud. They have a wash station that they'll set up before the trucks get on the highway. Most of the ice and snow and mud get picked up on the road between the mine site and the highway. Once you're on the highway, you're generally going to, if it's a snowstorm, obviously, you're going to pick up ice and snow before that's cleared off. That is the Department of Transportation's job, to clear the highway of ice, snow.
Those are the mitigating steps that will take place that we can control, trying to knock the ice and snow off before you get on the highway and then the wash station to clean the mud off. Those are incremental, not quite 2 tons apiece, but they are kind of in the 1-2.5, 3 tons each of those. The other one is moisture content. Obviously, in the wintertime, there is no water, so it is all frozen. The steps that will take place this summer are to get proper drainage around the stockpile area and around the bottom part of the pit.
I think we lost Rick for a second.
Reduce the amount of moisture that you're picking up. All those are small incremental steps that you typically do with any mining operation. You find out what the issues are, and then you figure out a plan to address them. In our case, a lot of the costs are related to the transportation. The mining is actually going pretty smoothly and pretty much on budget and on schedule. The focus is on the overall transportation plan, making that efficient and cost-effective.
No, appreciate that update. Lucian and Paul from the chat, I think that should cover your questions too. Let me know if you have anything specific. Aiden asks, just kind of a corollary to that, what impact, if any, occurs when the bridge is being repaired? Will there be reduced haulage rates if the bridge traffic is slowed or closed for periods of time during repairs?
Not anticipating anything. Obviously, traffic will slow down. Alaska, all along the highway, that is pretty typical what you see. You've got a good four or five months of construction season. Alaska highways are, and people who drive the Alaska highways are, used to that. That was part of the original, when we had the original feasibility plan in terms of how many trucks a day and how that was factored in, that the road repairs are ongoing. Like I say, it's costs in Alaska. We've got a four or five month period to fix the roads, and that is pretty typical. I'll also say that we are, and I think I've talked about this before, there's a self-imposed cap of 60 trucks a day. We're maintaining that. We're not trying to go above that.
The effort is really into getting as close to the 50-ton limit as we can with working out these efficiencies. Obviously, the bridge weight restriction is part of that. If they relook at the math and relook at the calculus and say, "OK, we don't need to have that extra bridge weight restriction," then we can take that off. Keep in mind, because there already were bridge weight restrictions in place, this was a further bridge weight restriction that was placed last fall.
Sure. No, it's helpful for people to remember. One question in the chat. Christian just asks, discuss short position. It's a little baffling. I think we did get a question in email about it as well. I'd love if you just could speak of and about your shorters.
Love to hate on the shorters. Obviously, they're betting against the company. I'd love to squeeze the hell out of them. I think last year was a successful year in terms of gold production. We produced more gold than we said we would. We guided towards between 30 and 35. You take the midpoint, 32, 50, and we produced 42. Almost 10,000 ounces more than scheduled in plan. The bridge weight restrictions and the other incremental, I'll call them ore ton losses, compared to the feasibility study, were definitely a hit. I personally think it was an overreaction. I chose to buy shares on that reset price. I think the shorts haven't wrong. I think we've got a good mine plan. Kinross is a good operator. They've been in Alaska for 25 years.
We hear all the, they're shutting the road down, they're going to take the bridge out, or there's no other way to get there. None of that's true. This is one of the main arterial highways to get everything into Alaska. I'm talking about food and fuel. There is no way that that road is going to get shut down. It's a very important highway for Alaska. I think as long as we're operating under legal loads and legal truck drivers and all that, I think we're in good shape. I don't know if you have anything to add to that.
No, no. I think that was good. Nothing to add.
Mike, I got one for you. Just that's towards the top of the hour. I apologize. I missed it. TB just wants to know how much cash is in the bank right now for Contango.
Cash in the bank, we just made a principal repayment at the end of January for about $14 million. I think we finished the year around $20 million. I think our cash today is a little over $3.5 million today. This is probably the tighter part of the year. We expect our distribution at the end of March, which will get our cash higher up there. I think our first three batches or first three campaigns are much bigger than the fourth campaign for this year. The majority of the distributions are going to be front-end loaded.
Great. Christian from the chat asks, what's the timing for production at Johnson Tract in a best and bad case scenario?
Yeah. I mean, it's obviously a bit early to get too predictive here. I'll say it this way. We have a five-year plan. I think we're still on target for a five-year plan to get this into production. Next steps, as we've discussed, I say are twofold. Permitting effort on the easement, the road easement, and the port, what we envision as a barge site easement. With the easements in place now with CIRI, those are easements from the federal government to CIRI for the right of way to construct a road and to build a barge landing site. That's really the, on the one side, it's all about permitting right now to stay on track. I think the other important thing is, as I mentioned earlier, let's find a mill that can process this ore.
If it can process this ore and Lucky Shot as well, then that's kind of a double win. There are some mills out there like that. We are having those discussions now. Those two things will be the focus for this year, 2025.
Great. Thank you. PDX.Guy from the chat asks, I've got kind of two questions, but I'll throw it in as one. He asks, is the main priority to pay down debt? If debt is paid off early, can we float the spot gold price?
Yeah. I'll take a stab at that. The two priorities, delivering to the hedges and pay the debt off. No, the answer to the question is no. Paying off the debt doesn't free you up for spot price gold. The delivery of the hedges does that.
Great.
Mike, you want to clarify that maybe?
Yeah. No, I think you answered it well. Yeah. Our objective is to make our payments. If we outperform what our current forecasts are from a cost perspective or a production perspective, which we kind of hope we do, we will look to pay things off earlier as much as possible. If it goes back to where we were on the original plan and delivering all that into 2026 and being done by the end of that year, then great. We will do that.
Awesome. A couple of questions from Dr. John in the chat. Great screen name, by the way. Any hope for stock price improvements? What's going to turn the stock around? Basically, the thrust of his question.
Yeah. I mean, I think getting rid of the shorts will help squeeze the shorts. I think one piece of information that can help with that is putting value on Johnson Tract. I do not think we get a lot of value for Johnson Tract. It is a fantastic ore body. It is good grade. As an ore body goes, it is a simple ore body from a mining standpoint for an underground mine. We are finalizing the PEA, hoping to have that out in March. I am hoping for, I am hoping for, I know we are going to get a good result, but it is just you have got to do the work. We want to do a good quality PEA that really captures how you would go about mining this using a, I will call it a third-party mill, an existing mill somewhere else. That is the plan.
That's the evaluation work that we want to do. I think you'll see that this is a very, very valuable ore body that really supports that the model we have, we call our hybrid royalty model using a direct shipping ore approach, really makes sense for a junior miner. I mean, it's a tough business trying to get things permitted. If you can reduce the permitting load by not building a mill in a tailings facility, that certainly will help. I think will be a huge value add, even including the cost to transport the ore to the mill and for whatever the cost of the mill is going to be, whether it's a toll arrangement or whether you acquire the mill or whatever. We're looking at all those scenarios.
I think you'll see that both Lucky Shot and Johnson Tract fit really well into this model and will be huge value adds for the shareholders.
Awesome. Thank you. CW from the chat asks, have any royalty payments to the Tetlin Tribe been made from Manh Choh?
Yes. Short answer is yes. They're made on a per-batch basis.
Those are paid out of the joint venture.
Correct.
Great. A couple of questions at the end here from Christian. Just generally, how does the new Trump regime help Contango? Generally, is it positive for the company?
Yeah. It's on permitting. I mean, obviously, if you've got a federal government that views mining as a value add for society, then that's a positive. I don't think we had that with the previous administration, especially in Alaska. I mean, we had, I think it was 82 specific executive orders that were targeted at shutting down resource development in Alaska. Yeah, it's a breath of fresh air having an administration that actually sees the value that mining can contribute to society. This includes meeting the objectives of a zero-carbon energy and transportation future. I mean, you can't get there without mining. I think some folks in the previous regime understood that, but not enough to actually make a difference. Like I said, there are 82 executive orders specifically shutting down Alaska, mining and energy. That's a big change.
I'm hoping that with an alignment in Congress, with the Senate and the House and the executive all focused on permitting reform, they can actually get true permitting reform done. I think that will be a huge positive for all things permitting. It's not just mining. It's about permitting windmills and solar plants and nuclear power plants, all the things that we need to meet the future energy demands and the future demands on metals as a result of that, of the increased energy demand. I mean, you can't look at this equation and not get there without a lot of mining. If you want a domestic supply chain control of your domestic from a domestic side from the whole supply chain, otherwise, you just got to recolonialize Africa and be done with it.
There you go. One question from the chat. This is on strategy. Have you given any thought to spinning out advanced projects as a new SpinCo?
Yeah. Actually, I don't think spinning out Lucky Shot or Johnson Tract, which would be the two that I consider advanced projects. We do look at our early stage assets, and we kind of think they don't really fit anymore with the approach that we're taking with using a DSO and the hybrid royalty model approach. That's something I think we'll be working on. I'd say it's not the first priority in that continuing to advance the Johnson Tract permitting is certainly first priority in terms of our advanced projects. That is something that we are taking a look at.
Now, I'll just take this opportunity to say there's a lot of ways to skin the cat in the sense that if we can demonstrate that Johnson Tract is a very viable project and with a high NPV, we can have a discussion to acquire a mill, or we can have a discussion to have a form of joint venture to develop it. I think there's a lot of things on the table that we can take a look at here that don't require a huge amount of outflow of cash. I would just caution investors and shareholders not to assume that we're going to go pay a bunch of cash to go buy a mill. We're not going to, we're not just going to hand over the keys to Johnson Tract.
The NPV of the project will demonstrate that it's very viable, and that'll set a milestone for that value.
Awesome. I appreciate the insight into strategy. I think it's always helpful. Mike, it looks like the last question is for you. Devin asks, what is the company's current debt level?
Current debt level. Our debt is currently at $38 million. That includes our last principal repayment at the end of January. I consider our hedges kind of debt in a way. We ended up actually buying out our January 31 hedges in December when gold was down at $2,600. We bought those 16,000 ounces out early, which I think generated a little over $3 million to us overall as an overall benefit. We bought those out in December, which kind of formed part of the whole formula with the restructure. That brings our ounces, our gold ounces that are hedged, to about just over 86,000 ounces. Those are the two items related to the facility. We have a $20 million convert with Queens Road Capital that matures in 2028.
Great. Thank you. We got one last comment from Dr. John in the chat. Hate those shorts. There you go. Gentlemen, thank you so much. I think this was great. There are a lot of really good questions. I think we got to them all, but I will send the full transcript over. Just in case we missed anything, please do reach out. We'll make sure that the Contango team gets back to you as soon as possible. Rick, I'll throw it to you for a final word before we jet today.
Yeah. Thanks, Romeo. Thanks, Six, for hosting this webinar and our investors for tuning in. Yeah. I think obviously it's a bit of a reset with the adjusted mine plan, but we're delivering the same amount of gold over a longer period of time. I thank our lenders for working with us to accommodate that at no cost. I think that's a big win. We'll focus on advancing the Johnson Tract permitting and looking for a mill to process both our Lucky Shot and Johnson Tract ores over the course of the year here. I look forward to reporting and updating shareholders on that. Let's go squeeze the shorts.
There you go. Rick, Mike, thanks so much for today. Looking forward to seeing next news that's up.
Thanks.
Thanks.
Have a great day.