Good afternoon or good evening, depending on where in the world you're logging in from today. Just between all of us on stage, we already covered several time zones, but I'm glad all of you could join us on short notice after this morning's news. I've got with me today Rick Van Nieuwenhuyse, CEO of Contango Silver & Gold, and Dave Larimer, the company's resident rockstar and Vice President of Exploration. Gentlemen, how are you today?
Good. More than morning.
Awesome. A couple housekeeping notes as usual. I'll be brief, I promise. I know a lot of you are regulars. There's a chat button at the bottom of your screen. I know that some of you did submit questions in advance over email. Please do use it. I'll try to get to as many questions as I can during today's event. If I don't touch it for whatever reason, I'll make sure the team gets it and can get back to you afterwards. They usually do a pretty good job of getting to most of them. This event is being recorded and will be available to replay mid-afternoon Eastern Time, so certainly before the end of the day for most people watching. It'll come right in your inbox, but also be on 6ix's YouTube channel. Finally, there's a meeting request button at the bottom of the screen.
Please do use that if you'd like to get in touch with the Contango Silver & Gold team, and somebody will be sure to give you a call. I need to get into the Lucky Shot results because I think it was a very exciting news release. Rick, I'll start with you. This morning's release, just for folks who don't know, the second batch of assays from the Coleman surface program, the first since the whole program wrapped at the end of August. To sum up, 5,800 meters, 27 holes, five pads, and now excitingly, a 140-gram hit in LSS-23-018 on top of the earlier results. With the rigs off the hill, most lab work back, how does the summer grade out against what you sent the crews out to do?
I think they accomplished everything they set out to do. I think we were two holes short of the overall objective. We just had an early winter here, so the material up there has more than 6 inches of snow on the ground. It's moving, especially up there. It's really steep. I don't know if you've seen the photos.
Sure.
It's super steep, so that was more of a safety call. I think we accomplished all the objectives in terms of most of that drilling was infill and the expansion of the vein down dip and long strike. I think that all worked out as planned. The 140 grams per ton is a great hit. Obviously, it's going to put that over to a mining width of 2-3 meters. All this information is going to get incorporated into our mineral resource update, probably April timeframe, somewhere in there.
Sure.
See when we get all the assays back from QAQC. I think we'll be drilling, Dave Larimer will probably comment on this as well, but I think we'll be drilling probably into February. A couple of months to get all the assays back to the QC mineral resource update, then we'll use that to incorporate into a feasibility study, which we'll have done before the end of the year, and the year being uncertain. That's the plan. I think it's not just a single assay, it's a whole suite of assay-
Sure
-basically demonstrating vein continuity. There are a few more veins that we've identified. That just means more tons in them. They all just, they've got to all fit into a mine plan. We've got a lot more drilling to do underground now. We'll have one more batch of assays to release, I don't know, probably two to three weeks or a month or so. That's kind of wrapped it up for the surface drilling and then several more months of underground drilling.
Well, exciting. Dave, I got a bunch of tech questions for you.
Yes.
We're going to nerd out for a few questions.
Nerd out.
If that's okay. Rick, feel free to jump in whenever you'd like.
Sure.
Coleman four is a vein that seems to keep showing up. It carries that 140-gram interval in 018 on pad D, the 118-gram subinterval, in 19 on pad E, and it's half of the 18-gram intercept in 21 pad F. That's three pads, one vein. Is Coleman four, in your opinion, turning into the backbone of the system? How much strike does that give you between those pads?
Yeah, I would definitely say Coleman 4 is emerging as definitely an important part of the picture. It's definitely encouraging, when you maintain that structural and continuity across multiple pads through there, it's demonstrating that the models really are behaving as they should. I would be a little cautious and a little careful calling it the backbone quite yet.
Sure.
These are vein systems. I would interpret it more as maybe a major artery. We're dealing with vein systems. We're dealing with fluid pumping through openings through there. I would almost consider Coleman four, as it occurs over and over again, a major artery as it's passing these fluids, precipitating our quartz and our golds out through the system, giving us that lateral spread through the system on the Coleman side. It's interesting to know, put this back into context, the Coleman side was last modeled in 2023 through that last mineral resource update. Strike length, it was about 500 meters by 500 meters. It is a substantial part. We've known that. But it is a substantial part of the Coleman vein system.
To be able to come in here and do this drilling inside of it just to demonstrate the increased grade that we're seeing and this upgrade centering on the Coleman four, I think is a very compelling story where you have a central artery and the rest of your plumbing around it supporting the gold grades passing through there. It's definitely interesting to look at. We're looking at these drill holes, especially pads D, E, and F. They were specifically designed to target the heart of the Coleman system. What we saw in the last resource model was some historic drill holes, and historic pre-1960s, that were, I wouldn't say suspect, but we couldn't confirm the assays. What we did is we took them out of the model because we didn't have the confidence to say exactly, and we couldn't QP the results of it.
By taking those historic drill holes out of the model, what it did is it left our resource into an inferred category, excuse me, an indicated category. Being able to target these drill holes in the middle was an upgrade exercise for us. Can we increase the classification, de-risk the system? These are the results that are coming out of this drilling from it. To me, it is really exciting to see this picture coming together from basically the heart of the system of Coleman on the way out through the drilling.
Oh, great. Appreciate that. One thing I wanted to ask about the 4.57 meter interval in 018, grading near 10 grams. It is assigned to Coleman seven.
Yeah.
For a lot of us, me included, Coleman counts stop somewhere lower than seven.
Yeah.
I guess, where did this vein come from, and how many Coleman structures are actually in the model today?
Yeah
versus a year ago?
Absolutely. I know it's confusing. Most of what we've talked about in the past year has been the Lucky Shot side. This is the first time we've really been able to get into depth on the Coleman side. Again, taking it from that 2023 mineral resource update, through that model and through all the historics up to that point, there's actually eight named models. Colemans 1, 2, 3, 4, 5, 6, 7, 8. We currently hold six of them, and it all kind of explained this through there. Colemans 1, 2, 3, 4, 7, and 8. Coleman 7 isn't a new discovery. It's always been in our model. It's a little on the fringes, but it's always been there.
What you see when you start working in historics, I got a great analogy through this, is as you start to develop your understanding of the systems, you find a discovery. Oh, you got to give it a name. Well, I've already found this one. I'll call it Coleman 1. You got to remember, this dates back all the way to the early 1900s, these vein systems. The exploration and developing these systems has gone on for decades, 100 years. It's basically a notion of adding on. Hey, I found a little more. Geologically, can you prove continuity? Can you prove structure? How do you tie these things together in space through drilling? That's how you end up with eight named veins.
I will say in the 2023 mineral resource update, when we did the remodeling through that and all the current drilling in there, the realization is, well, hey, two of these veins really are these other ones, just laterally connected. That's where Colemans 5 and 6 dropped out. I will say, I know it's confusing. We've had a lot of conversations, but at the same time, we need to maintain our disciplined approach right now, and we can't just willy-nilly start changing names.
Sure.
Because then it just starts looking like, oh, my God, Contango's got 15 new discoveries. That's not what we're trying to do. So right now, the disciplined approach is, hey, we're going to maintain these as we go throughout there. The appropriate time to do this will be next spring when we do the next mineral resource update, and leading into the feasibility study. This is the appropriate time to rename these on our best geologic picture of what we got. So I expect to do a name change, and we'll put it out there so everyone understands it. Ideally, especially in an underground mining scenario, you like to name these things sequentially, top-down, Coleman 1, 2, 3, and 4. However, it doesn't always work like that, and the perfect example was Pogo. When we were working there, we had the L 1 vein, the L 2 vein.
Well, then we found stuff in between it, and we're like, "Oh, God, what do we call this?" Well, this is the L 1.5. I thought we found something a little higher. Well, it's the L 0.5. So things do got to remain a little dynamic, but we do intend to clean this up, especially for clarity, going forward and really a clear understanding of the next mineral resource update.
Great. No, I appreciate that.
Then I definitely won't do that. Yeah.
That's probably for the best. LSS-23-021 is interesting to me in reading through the release because it tags the 3.65 meter 18-gram intercept as Coleman 1 and Coleman 4 together. For a neophyte like me, when two veins show up in one run of core like that, what are you looking at? A junction, two veins pinching together, something structural? What does a vein intersection do to grades and the kind of width that you guys and investors should care about?
Yeah, absolutely. You got to take this back to the context of plumbing, fluid pathways. We know these are narrow veins. We know we're dealing with fluid pathways through there. They do kind of converge together. When veins or your plumbing systems do converge together, you'll generally get a larger dilated space. So potentially you get larger areas, potentially get blowouts, potentially get ore shoots. So being able to see where veins converge together is a good thing. You want to target those intersections. It does give you greater thickness. Your grade is obviously based on the assays, but these are good things in understanding these. Again, when we come back to the vein models, geometry changes. With these systems, they pinch, they swell, they bifurcate, they split just like your veins in your body. They go all over.
You're sitting in the general trend of your geology up there, but they can go wherever they want, wherever that broken rock is, that fluid pathway. By understanding that and drilling it, you're also targeting where these intersections are. If you do get blowouts, those are great areas to model and pull up and be really restrictive on how far you extrapolate out that grade, knowing that this could be a local phenomenon through there. But all this does is helps us pull together that geologic understanding. This tighter drilling that we did helps us get better constraints on the geometry of these veins, where they're sitting, how they pinch, how they swell, where they merge together, and where they truncate. This will lead into next year's plan of, hey, how do we overlay a mining plan on this?
This is how we get that conversion from resource to reserve, and it all starts in this detailed drilling and understand this geology. In the drill core, when we're logging this, we're looking for very specific stuff. Again, some of these composites compromise two veins, just because that's the way the composite works out. Hey, I have a small little piece of internal, but by our compositing rules, we're going to composite this together. We do go through there in our logging. Our geologists are very detailed looking at the quartz veins, the structures, what's breaking up, the alterations. So we can see on a finer result of, is this really coming together? Is this an internal selvage where the whole vein came together and this is just the internal selvage through there?
Our geologists do a great job logging this, and this gets dumped into our models, which then will ultimately get put into the mining plan going forward in the future.
Great. One thing, I look at a lot of tables, as you can imagine. I think there is a lot of honesty in table 1 featured in this release. There are vein assignments marked unknown, a few marked unassigned, and two intervals in 19 and 31 flagged as shallower than the model vein.
Yeah.
You are hitting gold the model didn't predict above where it said the veins should be. Just as a geologist, how do you decide when an unassigned interval has earned its own name? What does mineralization of the model tell you about how much is still out there?
Yep, absolutely. For me, the unassigned, we went back to this. We want to designate unassigned. We just want to get to something. Really, to me, it was important that we didn't have enough geologic context on some of these intercepts to definitely quantify it into a vein. Once you do that, you call this a Coleman 4 intercept. You are taking that last Coleman 4 and you are drawing your line and you are saying, "Yep, we have enough geologic confidence that these connect together." The way these intercepts were lined out and looking at the model, it just wasn't there. I am okay calling something unassigned. To me, that means we got mineralization that we can't confidently yet say which vein system does this belong to.
Back to our vein system, these things can swell way off, and it very well could be, is this a splay of a Coleman 4? Is this a Coleman 4.5, if you will. This is the stuff we want to be very, very diligent on and is our disciplined process of modeling out there is we're not quite sure we got gold here. This means we have to follow up this area in the future to tie this together, to tie that plumbing back into it. For the unknowns, those are interesting ones. We're drilling down through the systems, and we are discovering that top of that plumbing system. We got some vein systems up there. We got gold grade. It doesn't correlate to anything up there, or we don't know what it is. We only got two intercepts on this yet.
Well, this is unknown, so this is another target area for us down the future. You can put a goose egg on it and be like, "There's still more up here." At the end of the day, we're dealing with a system. I always look at these small vein systems as fluids passing through a sieve, and we're trying to target the best parts of it, and the more you drill, the more you find out. Additionally, kind of through experience, you end up finding what you look for. If you're looking for flat-lying veins, when you drill, you have that preferential understanding, oh, it's a flatline, and you connect everything up. Are you looking for high angle structures? For us in this program, we drill through this, and we look at each intercept with open eyes.
Sure.
How does this thing fit? You spin the model around. Does this truly fit with one of our model intercepts? Oh, yep, that's very definitely there. It fits on plane. We see the core axis angles and the orientation of the core. It all lines up. That's definitively assigned to that one. If it doesn't, it's a target area for us in the future of the system that we're exploring.
Oh, cool. Thanks.
One thing to keep in mind is that the drill density here is on the order of 25 meters, so it's pretty close. Our objective in doing that is to have measured indicated resources so that we can-
Sure
just take this, develop a mine plan, and then with our DSO model, a feasibility study is basically a mine plan, a transportation plan, and an off-take or a tolling arrangement.
Great.
It's pretty simple.
Simple is good. Simple is my favorite. There's two holes I want to talk about.
Yep.
The 07 and 08. I like to be a contrarian. They came back with nothing significant to report.
Yep.
I want to spend a minute on them because I think that's still useful.
Yes.
They land northeast and hit the Lucky Shot Fault.
Yep.
What, in your opinion, did those two holes teach you about where the Coleman veins stop against that fault and about the fault itself?
Yep, absolutely. Pad C was on the lower, it is on the northeast corner of the Coleman, specifically designed to test the down-dip extensions of the Coleman. Can we bring this thing deeper? At the same time, let us look at the larger context. We got the Coleman vein system. We know it is high. Then the Lucky Shot vein system that is an offset. We know we have a Lucky Shot Fault that offset. We know it is in there somewhere. Basic geology. In our underground program, if you remember half a year ago, a year ago, when we were having these discussions, we were drilling on the western end, and we found the Lucky Shot Fault in the Lucky Shot system. So we could pin that fault lower down at depth where the Lucky Shot system was really well.
We knew she goes up, and she knows she goes up and offsets the Coleman somewhere. This drilling was specifically designed to offset and step off the Coleman vein system down dip.
We wanted to target where this Lucky Shot Fault was. We got it. These two drill holes intersect with the Lucky Shot Fault, gave us extremely tight controls of where the Lucky Shot Fault is up at surface. We know where it is at really well at depth, and we can pull that up. So now we got that great plane of that offset between the Coleman and the Lucky Shot. I would say these drill holes to me were probably one of the most exciting ones we have had.
Sure.
I mean, the gold grade is good, do not get me wrong. But for me, modeling this and pushing forward, we now know how far much further we can push the Coleman down into that fault. She is offsetting. We are stepping off. We now can pull that line, and we know where the Coleman terminates into that fault area. Additionally, some interesting things we were seeing, through that drilling and that drill pad, is we could also find small little bits of quartz chunks in the faults. So you could see where this thing ripped apart from the Lucky Shot and Coleman, dragging down some quartz vein with it, which just supports the basic geology theory that we got going on in the system. So on a pure geologic, economic geology deposit standpoint, this was a huge success.
No one wants to report no significant assays, but to me, this was a huge one. When you look at the model, you look at the cross-sections, you can terminate where it was at. We had enough confidence in these drill holes that we actually terminated and didn't drill two other drill holes that would have been on the other side of the drill. We're not just going to wing something out there. So we're able to invest that footage back into the other programs going out there. So to me, these were extremely successful holes, and we have tight geologic controls up on the Coleman in that area, and it was exactly what we designed to do up there.
Oh, that's great. And the last question before, Rick, I'll throw it back to you. The pad D interpretation.
Yep
Now includes a modeled West Coleman fault.
Yep.
So that's a new structure in the picture for people who are following the project. What is that fault doing to the veins? Is it moving them, cutting them?
Yeah
bounding them? How do you design your next holes so a fault like that works for you and not against you?
Yep. I totally agree. Again, this was another success story. While we were drilling in the heart of the Coleman, again, a lot of drilling up there through the decades. We were drilling down there specifically targeting some infill. What our geologists were able to see is we were finding significant faults. Again, I'll caveat this, but this is Alaska. This is interior Alaska. There are faults everywhere. But it's how important are the faults to the displacement and direction of movement. What our geologists and our loggers and our project geo are seeing down there is we're having a consistent plane through the orientation.
They looked at that, and they got the leeway of, "Hey, if you see something in there, follow it up." Our project geo followed it up and said, "This is a fault. I got a great plane." When you tap that fault out there and you pull it down from all the drilling, it goes and it just truncates the drilling to the southwest right there on the Coleman. We know where the mineralization was, and that fault was able to come down, and it just projected right down to where the known extent of the Coleman was. Yep, that's definitely a fault, put it in there. What that tells us is that's the offsetting boundary for the majority of the Coleman in that area.
Now we know, and we have this approach going forward, hey, when we follow this up, when we do the step offs, we don't need to target drilling specifically in this area. We can expend resources and refine our search target area a lot more based on this high-density geology confidence we have in our model going forward. Again, another great technical success story of what we can do through our infill drilling when we keep our eyes open and have that holistic approach to the model and let the geology dictate what's in front of us.
That's why I love the detective work of exploration geology.
Yes.
I think it's fun. Rick, I wanted to read to you for a number that I've already seen screenshotted on x.com and elsewhere. With gold north of $ 4,000 an ounce, 140 grams a ton, that's a slab of rock you just got in your hand worth $ 19,000, which is a hell of a bar tab where I'm from. Even the 18-gram run over 3.5 meters is a couple of thousand dollars a ton. For a retail investor who I know hears high grades every week, I say it 10 times a week on a webinar, put those grades in context for what a project like Lucky Shot has to look like to make money.
I'd say, what we're targeting is 10 to 12 grams.
Okay. Wow.
That's universal. It's over the whole ore body. Certainly, if you just take 10 grams or call it a third of an ounce, if you want to think in ounces and dollars, it's a little easier maybe.
Sure.
That's good rock that you can mine. If I break it down, I think we can mine for probably $200-$300 a ton.
We could process for 50, and we can transport for 50. Those are your total costs. You're under your $400 a ton. Then your admin is a bit more than that. When you've got rock that's worth twice that, you're going to make a good margin. Again, it's simple. I think we said before, rocks in the box and send them up to Fort Knox. It is a beauty of the model. Now, we're going to look at other options, too. We've got Fort Knox is there. It's got plenty of capacity. I think Kinross would love to have it, but we'd have to work. We have a business relationship already.
Sure. Of course.
I think there's something to be done there, discussion to be had. But there are other options. We're going to evaluate. There's a group that has a processing facility in Taiwan. That's something we can take a look at.
Sure.
It's the same thing, except the rocks, instead of going north, you go on the train that goes south to Seward, and then they can be loaded on a barge or a ship and headed to Taiwan. That's another option. Maybe we end up buying our own facility and processing it at our own facility. We've talked a lot about that, and I know we've had several questions in the past.
People do love to ask.
Where's the mill? We're still evaluating a couple of different options, but it's nice to have choices. When you have grade, it gives you a lot of flexibility. We like the big numbers. Everybody likes the 140-gram number. I love it. It's only split that over a mineable width, but it's still way above 10 grams per ton. Like you said, 10 grams per ton, third of an ounce, rough numbers, you can make a lot of money on it. Good margin on that. I think the results are showing the continuity, and the grade is good enough to make money.
There you go. Hey, look, a high grade and a simple plan. That's hard to beat, really. I want underground. Moving there, you're at 450 of 830 meters. As I understand it, running two shifts around the clock with three headings going at once. 2070E, the Enserch Tunnel extension, and 2300E. If you could, walk us through what each of those three headings actually gets you. Where does each one point, and what does it open for drilling once it's done?
I'll start off on that one.
Sure.
Yeah. The first one was the West Drift Extension. That is complete. We've put that in there. The first one closest up. What that gives us are close-in drill targets up into the KM vein. We've got the KM vein where it's close in there. It gives us short drill holes right up in there. Can we quickly expand this, put enough drill holes in there? Can we pull this into a resource quickly that is nearby and show that continuity and show how that KM vein is the importance of the KM vein. That's ongoing right now. Your first east drift, what that gives us are drill stations that we can come back and target that eastern side of Lucky Shot from the footwall. We'll drill those up and pull those out.
Again, the duplication with those other drifts coming back, we're coming up and drilling from the hanging wall side of the Lucky Shot vein system. I equate it to a course. That first underground drill program on the West Drift was basically your first quarter.
Sure.
Then we got the other three quarters, and you look what we were able to do from our previous drill results, not forward-looking too much here. Look what we were able to do in one quarter. This is what drilling can do for you in a tight vein system. We are going to duplicate that three more times. But additionally, the KM, that is like overtime. That is some great stuff pulsing through there. Once we get these completed, get the drilling going on with two drill rigs, we will be able to push the drilling. We have got the geo crew lined up. They have been working with us. They know the geology. We have seen the great work that they do. And these will focus into the model.
I previously talked about one of the pushes we are looking at is shortening that curve between drilling, modeling, obviously, the assays are on their own timeline, but back into the model. I do not want to say, in the old days, back in my day, back in Rick's day. You would have to wait for the assays to get faxed to you. Then you are going through the system. But what we have now with our models in our database management system is, hey, we are logging right into the database. So that is getting our geology right in there. Again, I have talked about it. Our project geo, Sean, and myself, while those loggers are logging, they hit F1, and it uploads. I could be here in Fairbanks and download it, and I can see exactly what they have done. Sean can look at it near real time. Assays come in, we QA/QC them.
They get uploaded. They get populated right in there. And where we are pushing now with our geologic programs are we are able to expand quickly the vein solids, our domain. For instance, we can quickly kind of see and assign, yep, I see the continuity. I can assign which ones these fit to, and those will expand our domains and our geology model. Then you bring in your assays, and through the systems that we have now, we are setting up at this time the ability to do this continuous geo-statistical analysis, and I want to say almost in situ resource modeling.
Sure.
We can see the effect of each of those drill holes, almost on a one by one. Hey, this increased here. Okay, decreased here. Oh, it expanded here. Nothing that we are going to publish because you have to do your full QA/QC and make sure everything is straight. But we have this near term dumping in that will really let us focus. What that also allows us to do is for myself, Rick, the project geo, we can see, hey, this drill spread really did not get what we were looking for on the geology.
Sure.
Hey, let's modify the next one. It gives us that tighter controls. Again, back to that discipline approach. Hey, this thing was coming in lower than we thought. We need to extend some drill holes. Or hey, we hit this a lot earlier. Hey, we can pull back a couple thousand meters and reinvest it. I'm extremely excited with the program, what we got set up. Let's get this exploration development completed. Let's get the drills in there, and we can keep pushing.
Awesome.
The east drift that Dave was referring to, that's not quite exactly the offset of the west drift that we drilled on now. But that's right underneath where they historically mined most of the-
Sure
13,000 ounces. Again, 40 grams. That was high graded, high grade mining. They selectively mined it, and they hand cobbed the ore. You can see that they hand cobbed the ore, because they put the non-ore back in place. They were there doing this. We'll take a look at ore sorting. That's definitely a new technology, a relatively new technology that can be very effective. But that's probably something we'll look at down the road. What we want to do is get this thing into production, make money. We think the 10-12 grams makes good money, and if we can improve that over time, that's great, but keep it simple.
I like it. Keep it simple. Rick, I got two for you on the KM specifically, because I know drilling started as recently as September 16th, and you've already got 10-17 holes done. Congratulations on the hustle to the team. But the whole program is 1,140 meters across 17 holes from five stations. They're short holes, under 70 meters on average, drilled tight from underground. No answers yet. I'm not going to ask for grades. People who've reached out, I'm not going to. We can't tell you that. But what's the hole design? How are you fanning them for each station? And what's the core telling you, to the best of your ability, about the KM vein so far? Just eager to discuss.
Yeah. The KM vein, of course, we ran into it on the other side of the splay of the Lucky Shot fault. These faults are-- What's important when we're drilling is the veins are important because that's where the ore is, but the faults are important because they offset the ore. As Dave Larimer was saying, that's why we really need to understand where the Lucky Shot fault was. We knew where it was underground, and we knew it offset the Coleman, but we didn't exactly know where it was. That's part of when we're drilling these things, when we extended the West Drift Extension another 100 meters, and the vein's above us, and we're fan drilling above us, and as we say, they're relatively short holes. Now there's the Lucky Shot fault, but then there's other faults that are going to be parallel to that fault.
You need sort of a stairstep. Eventually, you go from the Lucky Shot vein level to the Coleman vein level up here, but it's not one single zone. There's a series of faults that make up the Lucky Shot fault zone. That detailed drilling is something we're super-- these snapshots we're going to start to nail down. We'll see where the offsets are because we know eventually that the Coleman's significantly above the Lucky Shot level. These faults are going to offset all the veins, including the KM vein. I'd say the other thing is obviously the KM vein is a different orientation than Lucky Shot. It's at right angles to the Lucky Shot.
Sure.
It's much flatter. When these faults offset it, they're offsetting it in a different orientation than when they're offsetting with Lucky Shot.
Sure.
There's a lot of detailed geology to do. You just need to do that. That's why we do these tight space drillings so we can really understand the structural context. The overall structure here is you've got this huge Castle Mountain fault that is basically it's a continental scale system, literally. It's the edge of what used to be Alaska. It's a transform fault. It's left lateral. The northern block moves that way, and the other one moves the other way. That creates the openings that all the fluid gets sucked into.
Sure.
We are in this massive granodiorite intrusion. It is a nice rock because it is a nice big solid rock, and it cracks and breaks.
Sure.
It breaks in a regular sort of pattern, and that is what we are trying to diagnose that pattern basically. What Dave calls the arteries and the veins, and they are all related, and they have a structural relationship between them. What I like about the KM vein is it is in an expansional direction. There is a shear direction, and when you shear something, the rocks in the middle expand to have to accommodate the straining. That is what is exciting to me about the KM vein.
Oh, great. In the diagnostics detective zone for KM, I know the release says that the program, as you just talked about, is designed to test its relationship to the Lucky Shot Fault and the Lucky Shot vein system. That is a specific hypothesis. I am curious, again, from a detective exploration geology angle, what are the competing stories for how KM connects to the rest of the deposit? Is there a hole or station in this program that is going to just settle it?
I will start off by that by saying I wish it was, but Mother Nature is not that nice at the end of the day.
Sure.
You write your hypothesis, right.
Yeah.
Again, the caveat vac, you find what you are looking for, so if you are looking at everything, going through this. We do have a hypothesis based on the structure. We know what is going on there. We know the kinematics Rick just talked about. We know what is kind of normal faulting. We have kind of programmed where we think the Lucky Shot on the hang or excuse me, the KM vein on the Lucky Shot side is. Further down, that is an exploration target.
You kind of reverse that motion. If it is going to continue this, you know where it is going up as well. Then you start isolating out areas.
Sure
Or the little domain areas based on your faults, and like, that is the perfect area. It is 30 meters away. Send a drill there and hit it. Oh, I hit it. Okay, let us see how big this is. Do a step off, and you drill it. Again, this is a very disciplined approach and hands-on. Our project geo is down there every day. What did we find. What do we see back on the farm. Do we need to modify the next one. You maintain that continuity of the KM vein going forward.
The other thing I will say is, when you mentioned the KM vein on the east side of the Lucky Shot Fault, we know it is down there.
Okay. This is about timing. Do we spend dollars now to go and explore that, or do we say, "Hey, we know that is there, but we know also it is going to be offset plus 100 meters.
Mm-hmm. Sure.
That is a whole different level. That is maybe down in the water. What we like about what we are doing, focused on right now is everything we are building is above the water table. That simplifies life in an underground mine hugely. We are going to stay focused on that for right now. We are not going to forget about some of this exploration potential. The same when if something is offset a little too far left or right, if you have got to spend a bunch of money to get from a development standpoint to get over there, it just makes sense not to do it now. Stay focused on a concentrated volume, so that we are not spending a lot of dollars doing things that will not happen for 5 or 10 years.
Sure. No, that makes sense. Dave, I got one for you.
It is just, I think for just me and one geochemist in the audience named Alan. Alan, thanks for joining us today.
Yep.
Every sample at Lucky Shot goes through multi-element ICP-MS, not just the gold assay. For Alan and me, what are the trace elements telling you? The Coleman, the Lucky Shot veins, and KM, do they share the same fingerprint,
Yep
same fluids, same events? What are we looking at?
Yeah, absolutely. I love the geochem. I do consider myself a geochem super wizard myself. I do love the fingerprinting aspect and looking at trace elements. For the non-geochem wizards out there, gold, you have your primary commodity, and then all the other associated elements come with it that are developing mineralogy with it. Those kind of tell you the story, how they're formed. If you really look at interior Alaska, the intrusion-related gold belt and all this other stuff, in interior Alaska, you do get associated mineralization.
Sure.
With gold, you have a little silver, your tellurium, bismuth, arsenic, antimony. These are all the associated elements that are light geochemistry. They go in the fluids and form with it. On a big deposit scale, these trace elements are kind of quantifying the deposit. That Lucky Shot deposit, the Willow mining district as a whole, will have this nice little fingerprint. When you take this down in some of the next studies, again, we're talking fluid pathways, and fluids evolve. One of the studies we want to look at are, can you use these trace elements as vectors?
As fluids evolve, you get more tellurium versus bismuth versus your base metals, copper, and lead, and a little zinc through the system. Does that give you not only a fingerprint, but a zonation that can help guide what you don't know?
Sure.
We know where the structures are at. We know, hey, things should be trending this way. We know the fluid flow really ought to be going this direction. Do we have more geochemical knowledge that suggests that's where the ultimate source is, and we want to follow that direction based on the geochem? These are very wide, and again, we're talking multiple little pathways to all of our veins, so it's a big data set. This is why we gather all this information and put it together, and we're just now getting to the point where we've got enough data and enough confidence in the fluid flowing structure that you can start to piece together the potential zonation story. These are ongoing stuff. This is why we collect these other data. Previously, we talked about, are there other critical metals in this deposit? I would say yes.
I mean, we're looking at tellurium and all this other stuff, but again, it's a concentration. These things are very low with respect to single-digit parts per million tellurium.
Sure.
Whether or not that can be economic in the future, we'll see. But we looked at everything through that 40 elemental analysis through there as our vectoring process to kind of guide our understanding of the deposit. Ultimately, at the end of the day, it's to mine the gold, but we want to understand the system on an academic level. We want to understand what makes this tick, how it goes together, because that just leads into, do we have like ones right next to it? How do we take the knowledge that we have here in the Coleman Lucky Shot, apply that to War Baby going future, apply that to the rest of the Willow District that we have out there.
Very exciting.
One of the things we're doing is working with the University of Alaska Fairbanks.
Actually, we're meeting this week with a master's student who is going to do a master's on Lucky Shot.
Oh, cool.
There's been a few in the past in the district. There's been some structural pieces done on the district. As Dave Larimer said, we have a lot of data now, so this is something a master's student can really dig into, understand the interaction of the structural regime with the mineralization and alteration. Age dating is another important thing, and the lab at UAF, they've got great age dating capabilities. So you really understand the dynamic of this system, kind of getting into this next level of study.
Oh, fun.
It will apply to the whole district. There is a similarity of mineralization in a broad district here, the Willow District. It has produced a lot of alluvial gold. There has been a lot of scratching around historically back in the '20s and '30s. During the Depression, people did not have jobs, so they just went out and dug for gold.
Yeah.
When you think about hiking up, because there were roads out there at that time, hiking up there, getting out there, bringing all your equipment in to dig a hole in the earth, an adit, that was a lot of work.
About three months a year.
Three months a year to get there and get your food and all the rest of it. When they did work like that, they did it for a reason. There is a quartz vein there that had gold in it. Those prospectors did a hell of a good job. We have got a whole district to play in. I am excited about this master's student coming on here, and we will be meeting with this week.
Fun. I think a mining project, unlike being a patient in a hospital, really it's cool when a master's student does a project on you. If you are a patient, that is not one of the things you want. For a mining project, it is exciting. Rick, I want to go back to your first question, where we kind of zoomed out and talked about this project as a whole. Because the surface program was mostly designed to infill and upgrade the Coleman resource, but also, as Dave Larimer talked a lot today, build a better understanding of how Coleman and Lucky Shot veins are structurally related. Can you, from a zoomed-out perspective, give us some color on what we already knew versus things we learned this year?
I think basically we are just keep expanding on the We have 100,000, 110,000-ounce resource, 14 and a half gram. It is small, but it is very good grade. All the drilling we have done from the surface, and we are continuing from the underground, is just demonstrating that continuity. Our objective, we said very clearly, is to take 110,000 ounces, do more drilling, expand it, infill it, upgrade it to measured indicated, and get to 400,000-500,000 ounces of contained gold in that 10-12-gram range. The reason I am going from 14 to 10-12 is when you mine, you are going to get some breakage, overbreakage.
Sure.
That is going to reduce the grade. If you take this 14 and a half gram grade, dilute it from a mining standpoint, the minimum mining width. All this will be in the feasibility study.
Sure
We are kind of aim towards something, and then you fix it when you get all the data and all the numbers and say, "We are going to mine on these centers, and we are going to have this breakage." We have got lots of data because we have been mining, right?
Sure.
We've been mining for well over a year now. Objective, again, get the resource done, call it April, May, and then we don't have to just like. We can start work thinking about feasibility and mining techniques and all that now. We don't need a completed resource model to start that work. But get the resource out, say, April, May timeframe, and then get the feasibility study done by the end of the year. We're well-positioned now to do that. Again, we're generating cash flow from Manh Choh that's paying for this. We're doing all this without diluting shareholders. I think that's the key thing I keep coming back to in terms of the business approach we're taking here is we want to continue to grow the company, but we want to minimize dilution in the process of doing that. That's our overall objective.
All this work takes time. We wish we could do things faster, but right now we're 100% dependent on getting the assays back.
Nobody on the planet is happy about the timeline to get assays back. We just have to join the party on that one.
I have heard more complaining about assays on webinars in the last six days than ever probably before in the last five years, so you're definitely not alone. Last one from me, and I think this will also speak to W Beck's question in the chat. Lucky Shot has spent most of this year, in my opinion, of the market's opinion, as kind of a quiet third asset behind Manh Choh cash flow and then Kitsault, which obviously made a lot of noise this year. But now you've got new core shack, a camp running 24 hours, a second drill program underground, surface results like the ones we talked about today. Development wraps mid-quarter, KM assays land before year-end, and all the stuff that you talked about leading into setting next year. So two questions, I guess.
Where does Lucky Shot sit in the pecking order of the company coming out of 2026? To speak to W. Beck's question in the chat, when do you think the market's going to actually give you credit for this paid-for exploration project in Alaska you've got a good plan for?
Yeah. We've basically been building for a success. Look, we're never going to say that Lucky Shot's going to produce 300,000 ounces of gold a year.
Sure
We're going to have a 10-million-ounce resource. The potential is still there. It's a big district. We've still got lots of work to do. But the whole objective here is to get this thing into production quickly.
Sure.
8,000 ounces of gold isn't maybe a sexy sort of number in terms of what people are talking about, like on the producing 1 million ounces of gold a year. Okay. That's a big project, but
It's huge. Yeah. Fair enough.
They found that 25 years ago, and it's still not in production. It's still not even fully permitted and litigated yet.
Sure.
This is a nice, maybe it's a cute little project. But it's a cute little project that's going to generate a significant amount of cash flow for a very minimal amount of continued additional investment. We think from here. Look what we've done. We've consolidated the land. We own the land now. We own it 100%. It's ours. Patented mining claims. Surrounded by state mining claims. We have a facility we call the outpost. It's right across from Lucky Shot. Looks right over at it. We've got our core shack there. We've got our bunks there so we can
Sure
house people. We're going to have the resource update and the feasibility study done by the end of the year. This is a real project. We've been planning for success, quietly just chewing away at it. If we have the opportunity to buy out more royalties in the district, we might do that. But that's because we have, I think, really good confidence that this is actually going to be a little mine producing 40,000, 50,000 ounces of gold a year for, call it, an additional $40 million-$50 million of investment. If you produce 50,000 ounces of gold with a $2,000 margin, that's $100 million of additional free cash flow.
Yeah.
When you look at the fact we only have 33 million shares outstanding, that's a lot of cash flow per share.
Sure.
That's the metric I think shareholders should be thinking about when they want leverage to gold, is how much exposure to free cash flow am I getting to gold, per ounce of gold. That's where Lucky Shot, I think, will surprise the market. Because it's just such a robust little project. But again, when you take that 50,000 ounces of annual production over the 33 million shares we have, it's going to get a lot of cash flow.
Nice. Speaking of cash flow, I'm jumping into questions from email, a lot of which we've covered already today, but somebody wanted to know what is current or most recently announced guidance for Manh Choh production and AISC in the year of 2027.
2027, we don't have yet. We were actually just talking with Kinross yesterday, actually. We'll typically get next year's plan. That's usually the last joint venture meeting of the year, usually in early December. So sometime after that, we'll be able to give guidance for next year.
Perfect. Thank you. Barry from the chat asks, almost right at the beginning of the webinar, "Dave Larimer," he started. Use your full Christian name, Dave.
Sounds like I'm in a lot of hot. I'm in trouble. Sorry.
Dave Larimer. He just wants to know how many ounces you think Lucky Shot contains at this time.
A lot. I flirt the line. I definitely think the project's there. I'm not going to put a number on there. I think our target, we've talked our target, we've given guidance, we're targeting 400,000-500,000 ounces into the resource in this drill campaign. I'd love to give a number out there. As an economic geologist, I got a number in my back pocket, but I wouldn't be comfortable. It just wouldn't be prudent for me to say that. However, you can qualify what we're looking at. We talked about the guidance was 400,000, 500,000 ounces. That's what we're targeting, calling them Lucky Shot. You look at the larger picture of what's there. You look at the larger district, things start to add up.
Sure
Unfortunately, sorry, Barry, that is about as comfortable as I am comfortable saying right now.
I know. Your name is at the bottom of the press releases. I get it.
Yeah.
We asks.
Yeah, yeah.
He is looking forward. Wes asks, and this is probably somebody familiar with your business model for other projects, asks, "Is Lucky Shot on Native Corporation land?" I think it might be a good opportunity to just talk about the type of land and the permitting set up at Lucky Shot.
Sure. Again, Lucky Shot was in production from 1928 to 1942, producing uncertain . They patented the land. That was something that was very common back in that date. So it is federal land that has been privatized through the 1872 Mining Law. So it is private patented land. It is an irregular-- Because what they used to do is, in their mine, they put the claims on the veins, and so it is a bit of an irregular box around this patented land, and then that is surrounded by state land. State-owned land. So that is the land status, and we have mining claims on a very large block of state land. So there is no Alaska Native Corporation lands in the area.
Most importantly, there is no federal lands.
Yeah. Sure. Great. Thank you. Ellis asked, have you used AI at this point to enhance the DSO model or, have impacted it in any way at this juncture so far?
Oh, I'll go ahead and answer that. We love working with AI. To me, AI from a technical aspect has several aspects. In previous projects, we've used AI and that predictive analysis piece going forward. Looking at random forest, random kind of learning algorithms of, hey, what are we not seeing through our data sets? Again, those are big data sets. With respect to the rest of AI, your ChatGPTs and all that stuff, we haven't really totally incorporated that in there. To me right now, this is a drill fight. We want to drill. I don't want to say it's simple because geologists don't ever say that, but it's simple enough where you can see the core saying, you know where to sample, get the assay, put it into the model.
I do think as technology comes, there's some optimization potential out there with AI, especially when we start getting to engineering, resource reserve conversion. These are the things I'm looking at, trying to do some resource in the future, is how do we optimize that brain power. Additionally, looking at your geostatistics, for me, the other great aspects of AI is going to be this large computational potential. When you start looking at a resource, most of your resources are a single measurement. You hit F1, you got the best one, you do it. There's a large component of looking at conditional simulations going forward. Being able to bring in probability analysis that we're going to need AI for to get in there.
When we do the resource, I can take it to Rick Van Nieuwenhuyse, not only say, "Hey, we calculated 400,000 ounces," but I can say, "Hey, we calculated 400,000 ounces. We did this simulation 100,000 times. I can give you an 80% probability of this is what's here." To me, this is where AI needs to lead into the technology aspect of the geology in there. Not to sidestep the question, but I get kind of excited about this aspect as well, of what we can do with this. At the end of the day, this is risk management. We know what's there, we want to manage those risks and adjudicate those risks. I think AI will have a large component on the technical side, and I think potentially, looking at the operations side going forward, optimizing production going forward.
Great.
What I like about AI is it works when you have a lot of data.
Yeah.
We are at the point where we are still gathering a lot of data. The other thing that is nice is, we talk about the offset on the campaign, on the east side, so it is down there somewhere. It is just not a priority now to get drilled, but it will be. Well, again, AI is going to remember that and, if Dave and I are to get hit by a bus tomorrow, AI is going to remember that that thing is down there.
Yeah. Helpful. I know, in researching for this webinar, I was talking to Claude, and I started by saying, "I am not a geologist." It just said, "I know," period. It is growing a personality, which I do not appreciate necessarily. One question from Bert, this is for you, Rick. This has come up a couple of times over the years. I want to know if Contango is considering dividends in the future or if that is on your mind.
Yeah. Short answer is not any time in the near future. We have got a lot of dollars to spend to invest and build our resource base and into reserves and develop the mines. Our five-year plan is to grow from our current 50, 60,000 ounces of production out of Manh Choh, 60,000 ounces average. Then up to 200,000 ounces of gold and five million ounces of silver with Johnson Tract and Kitsault getting into production. Then obviously Lucky Shot as well.
Sure.
That is the focus right now, and if we can achieve that objective, that is a time when we are if you are producing 200,000 ounces of gold, five million ounces of silver, and you have got a $25-$50 margin on your silver, and a $2,000 margin on your gold ounces, that is the time to be thinking about a div or a share buyback. Both of those are options.
I appreciate it. Johnny's got an interesting question that I'll conclude with today or give everybody a chance to ask a last one while I ask it. Johnny in the chat asks, in the past, Contango has mentioned wanting to consolidate districts, like around Dolly Varden. He wants to know in broad strokes, how do you think about this happening in the next couple of years? Geography, stage of asset, timing, et cetera. How are you thinking about consolidation of districts, Rick?
I'd say we have the Dolly Varden district consolidated. There's some internal blocks. I think on the last webinar, someone asked about the priority and some of these internal blocks that are with their Crown grants and things like that inside of our Kitsault Valley holdings. We have the ground there that we prioritize. There are other prospects that are on these Crown grants within our Dolly Varden claim block. We've looked at them. They're not a high priority right now. I think they represent about 10% of different little blocks here and there. There's no big land positions within our land position that's a priority for us to acquire at this point.
Sure.
Yet, we own most of the land. We own 90% of the land at Lucky Shot. We own 10% outright. That's patented land that's owned by the tribe. Johnson Tract is patented land owned by Alaska Native Corporation. I think, bits and pieces at Kitsault over time, maybe. Again, we've got plenty to do. We still got 5 km of exploration upside between the sort of the Dolly Varden silver-rich part of the district and the Homestake part of the district that are way hard to do any more with. So we've got plenty of places to drill, keep Dave out of trouble in four districts.
Yeah. That's enough work to keep Dave off those mean streets for a couple of years. I think that's all that really matters.
Yeah.
Yeah. Forget that. You can sleep there.
Yeah.
Dave, Rick, thanks so much for getting real technical with me today. This was a really exciting release. I am glad you were able to join for some extra context. I know there were tons of people in the room. Thanks for your questions. Thanks for sitting through some of the nerdy content. I hope it was interesting. You can hit that meeting request button at the bottom of the screen if you would like to meet with the team. Please do let me know. I am eager to get you connected with them after today's event. This was Rick and Dave from Contango Silver & Gold. Thank you so much for joining us.
Yep.
Have a great morning, guys.