Contango Ore Q3 2025 Earnings Call - Record Operating Income and Strategic Growth via DSO Model

Romeo, Moderator/Interviewer: Or good evening, wherever you’re tuning in from today. I personally am joined live at the Deutsche Goldmass in Frankfurt, Germany by Contango or CEO, Rick Van Nuneiza, and CFO, Mike Clark, to discuss Contango’s q three reporting. Gentlemen, how are you?

Rick Van Nuneiza, CEO, Contango Ore: Good to see you here in Frankfurt, Romeo.

Romeo, Moderator/Interviewer: Awesome. And I wish we’re in the same room, but we’re several feet away just, because the practicalities of movie magic on webinars. But here’s how today’s gonna work just for the folks in the room. I’ve got a number of questions to go through. Just, eager to just get into these pretty, pretty great q three, reports.

And then I’m eager to take questions from the live audience. So if there is, any questions that you got during today’s event, there’s a chat button in the bottom right of your screen. Please jump in at any time. Anything I don’t get to, we’re gonna be a pretty short event today. If any questions I don’t get to, I’ll be sure to get to both Rick and Mike and the Contango team afterwards, and they’ll be able to get back to you as quickly as possible.

I wanted to jump right into the pro team as quickly as I can. Rick, obviously, looking at record operating income of 25,000,000 this quarter. While I think almost as impressively or more impressively maintaining AISC below that $16.25 target at $15.97 dollars per ounce. So two comments and a question. First, geez, that’s a lot of money.

Congratulations. And what’s kept AISC in check?

Rick Van Nuneiza, CEO, Contango Ore: Well, I think, yeah, it is a it’s a, you know, it’s a lot of money. It’s a record for us. That was, you know, our Q3 production level was above plan by about 2,000 ounces. And importantly, the AISC is coming in lower than the $16.25 that we guided to, and obviously, we got our guidance from Kinross. So I think a big reason behind that is we’re the mine plan that we outlined we’re delivering into, we’re exceeding that.

And I think that’s somewhat typical of Kinross as a big company. Like to under promise and over deliver. That’s good because that means we’re not going to get too far ahead of our skis. And I think the other thing overall that, you know, that we see that’s really helped our project specifically is the fact that the oil price is low and diesel prices have not gone up. We all know that an increasing gold price environment is telling us that inflation is still there regardless of what the government officially tells us.

We know that that’s what it is anticipating. But this is what is different about this time around is that we don’t see that going, the oil prices going up in Alaska. You know, we’ve had the same very pretty stable diesel price at the pumps for for several years now. So that’s a good thing. It’s specifically a good thing for our projects, obviously, with the transportation aspect of transporting the ore from the mine site to the mill.

It’s a significant part of our cost structure. So I think that and I think the other thing is we’ll look with Kinross is doing a great job just delivering into the plan that they’ve outlined. So when you’re kind of firing on all cylinders is the way I like to express it.

Romeo, Moderator/Interviewer: No. It makes a lot of sense. And, Mike, I I wanna get you in here for some of the dollars and cents questions. I know the cash position jumped from 20,000,000 at year end twenty twenty four to a eye popping 107,000,000 as of December 30 with the 87,000,000 distribution received from that Peak Gold JV to Dave. I’d love if you could walk us through just capital allocation proper priorities.

So you’ve paid down a bunch of debt, you’ve settled carry trade. What’s the strategic thinking behind those moves?

Mike Clark, CFO, Contango Ore: Yes. It hasn’t changed much from the last couple of periods. Our our objective all along has been to deliver to the hedges, get those paid off as quickly as possible, pay down the debt on schedule. And so to date, we’ve had we’re always about a quarter ahead on our production. So we’re always delivering about three months in advance.

And so that’s why we’re using the carry trade in a rising gold market that has saved us. I think this quarter, we saved about $2,400,000 as a result. So the strategy is working, and so we’re going to continue doing that. I think we’re delivering into December hedges right now. And the goal is we’ll basically try to get these delivered into you all by September year.

So we’re waiting for the ’26 plan for Macho, but that is currently what our target is internally.

Romeo, Moderator/Interviewer: No. Appreciate that. Mike, one thing I I noticed you added adjusted net income this period. Just for the folks in the room, and for me too, to be honest. Can you provide some insight into that?

What are what are we looking at here?

Mike Clark, CFO, Contango Ore: Yes. You can thank Rick for that last minute.

Rick Van Nuneiza, CEO, Contango Ore: Basically, we continue to report

Mike Clark, CFO, Contango Ore: very strong a very strong income statement. And you keep having these derivative hedge losses that kind of muddy the waters. And really what that is, is an unrealized loss on the derivatives, which is a function of the forward curve of the gold price. Because it went up so much in September, up to like $4,300 the derivative loss went way up. And so that had a $30,000,000 impact on our P and L, which took us from what really would be a normal reoccurring net income position to net loss.

So we put it in there so that shareholders could kind of see what the business would look like once those things are gone and what our normal business looks like. Rick, anything to add to that?

Rick Van Nuneiza, CEO, Contango Ore: Yeah. Was just gonna note in kind of I find the the accounting rules somewhat inaccurate in when they’re describing this and how they sort of force you to describe things. So it’s unrealized, meaning that if we don’t deliver that gold and that future gold, yeah, we’re in trouble. We’ve got to come up with either go buy gold in the market or whatever because it’s a contract that we have to deliver it into. That’s why it’s unrealized.

I would have preferred something like potential loss or something like that. But anyways, the accounting rules are what they are. We’re just a little company. We’re not going to change them. So what we can we’ve tried to make it at least clear to the shareholders what the reality is.

Romeo, Moderator/Interviewer: No, I appreciate that very much. I think that’s helpful context.

Mike Clark, CFO, Contango Ore: The unrealized is the the the remaining hedges that are on the books at September 30. And then for any hedges we delivered into during the quarter and recognize that loss, those are gonna be recognized losses. So you it was about $50.50 split. It’s about 50,000,000 each during the during the quarter.

Romeo, Moderator/Interviewer: Great. I do appreciate that. One thing, Rick, I wanted to ask you about, an interesting thing in the PR is the test batch blending men shows low grade oxide ore with the Fort Knox ore. It achieved a 94% recovery, it’s going to add about 1,300 ounces in Q4. To me, that looked like a pretty significant technical achievement.

So I’m looking for your perspective on what does this successful met test tell us about the potential to process additional Minshaw material that might have been uneconomic in a previous era?

Rick Van Nuneiza, CEO, Contango Ore: Well, the short answer is we don’t know yet because all we know is the net result of the test. We processed 44,000 tonnes at a rough grade of 0.1 ounces per tonne, which is three grams. So when we say low grade, it’s low grade relative to the eight grams per ton that is the average grade. So we have to sort of put that in context. But you’re right in the sense that we’re doing this test to see what that marginal ore was would be like if we just blended it with Fort Knox.

And it is oxide material, and there’s there’s a fair bit of this low grade material because you have to go back to the original mine plan, the feasibility study mine plan, and that was done at a $1,400 gold price, you know, what, three three years ago or so. So, obviously, with the gold price, well, you know, it’s down today kinda hard, but, you know, it’s still about 4,000. That’s just a different mine plan. And so testing this low grade, you know, roughly three gram material is, you know, the start of taking a look at how you know, is there another way of working on processing this low grade material, just blending it with Fort And the Fort Knox ore, which is much, much lower grade, is, you know, somewhere in the point 6.7 grams per ton. That’s the typical Fort Knox ore.

And it’s not really oxide ore at Fort Knox. It just doesn’t have any sulfide. So taking our oxidized low grade three gram material and blending it, when you’re doing that, you’re running the mill at 2,500 tons a day. That’s the when they run the mill for Fort Knox, that’s what they’re doing. Where when we run it for Montchaux on a batch basis, it’s down to 10,000 tons a day.

So it’s looking for those economies of scale. We don’t have the results for all that and the consumables and the cost, the power cost, all the details of what go into determining the milling cost. But in the next month, we should have those, and we’ll make some decisions on going forward if this is if this makes sense to process this low grade material on a blended basis versus just the batch basis. But the batches will continue. That’s on the higher grade.

We’re down in the sulfide part of the so the material we’re talking about is all sitting on the surface in stockpiles, the oxide, the low grade oxide. Does that make sense?

Romeo, Moderator/Interviewer: No. Dude, yeah. No. Absolutely. And I appreciate the learning.

I understand a lot better. And I know at Mancho, you processed 287,000 tonnes, that 0.214 ounces per tonne, 92.5% recovery in Q3. How does this compare to reserve grade expectations? And what’s your visibility into the ore body as you sequence through that mine plan?

Rick Van Nuneiza, CEO, Contango Ore: Yes. So we’ll have a detailed mine plan for But basically, the grade’s a little lower than the feasibility grade of which was close to eight grams per ton, but that’s because we’re blending it with lower grade material. Because the gold price isn’t $1,400 it’s $4,000 So, you know, we’re we’re gonna the the the tendency of that when you’re adding more low grade material in there is to lower the overall grade, but you’re making more money because the gold price is more than twice as high as what you planned for. So I think the most important thing is to stay tuned for the twenty twenty six minutee plant. Now in if we go back to the feasibility study itself, that was always going to be the the lowest gold production year for the entire mine life.

Now we’ve done a few things. We’ve purchased some additional trucks. We’re obviously blending, looking at this blending strategy. So we’ll see what the mine plan is in the next couple of weeks, and we’ll have to have another podcast or interview on the platform here to explain some of the mine. I appreciate all the help.

It was a

Romeo, Moderator/Interviewer: nice That makes sense. Appreciate that. Now I know you mentioned in the PR sustaining capital for tractor replacements and ongoing exploration drilling at Mansho contributed to the ASIC increase. Is this new baseline for sustaining costs? Or we expect those to moderate as we kind of complete the capital replacement cycle?

Rick Van Nuneiza, CEO, Contango Ore: Yes. I think this is I mean, you might want to answer this from more of an accounting perspective. But from a mining perspective, this was always part of the plan, looking at ways to optimize the transportation aspects of the project. Yeah, I don’t I think these are probably we’ll wait for the twenty sixth budget to see

Mike Clark, CFO, Contango Ore: what is next year. But I think for now, I think it’s a good benchmark to follow. And again, this will all it’ll become less at the

Rick Van Nuneiza, CEO, Contango Ore: end of the mine life. But yes, think we’re going

Mike Clark, CFO, Contango Ore: to continue to be below $1,600 this year and next year probably consistent, but then come much more in the later years of the mine life.

Rick Van Nuneiza, CEO, Contango Ore: And maybe just to add on to that, I mean, one of the things the feasibility level mine plan, we’re ramping up mining on the North Pit. And then so that means you’re starting to mine more on the main pit. So you’re getting your layback in, right? So there’s a lot of pre stripping that you’re doing to do that. So I think that’s why our all in sustaining costs are on the higher end of the average.

And then, you know, 27, 28 or 20 nine are going be lower.

Romeo, Moderator/Interviewer: Awesome. I do want to get into, Lakisha, just for quick second. So I know you’ve mobilized a drill rig for that 15,000 meter underground infill program. Looking at, as I understand, the feasibility study in twelve, eighteen months and the production decision as quickly as ’27. With production estimates of 30,000, 40,000 ounces annually using the classic contango DSO approach.

How does Lucky Shop fit into your larger portfolio? And what makes you kind of confident in this really cool but aggressive timeline? Yes. I mean, look,

Rick Van Nuneiza, CEO, Contango Ore: this isn’t the biggest mine in the world, but it is really good grade. We’ve done enough drilling that we put out a modest resource. And I know, you know, a 100,110 ounces of resource doesn’t get, you know, everybody’s attention get it right wound up. But the grade should get them wound up. It’s 14 grams per ton.

And so we’re underground. We’ve got the underground infrastructure in place. We’ve been carrying and maintaining the mine all year. So we’ve been waiting for getting this cash buildup that we have now. Now we can execute the plan that we have in place to get the drilling done.

The drill is actually on-site. Again, I don’t know if it’s actually drilling today or if it’s not today, it will be the next day or two. And the plan is to drill 15,000 meters underground. Give us about a year to get that done. These are relatively short holes, and we drill kinda what I call a fan shot from underground from a near vertical hole to about a minus ten, twenty degrees.

You’re basically just spraying the sun you know, the the vein is sitting here, and you’re just drilling into 30 meter holes on average. And, you know, so we should start having drill results by the January. You know, we’re basically using a photon assay that the lab is in Fairbanks. So we basically just put the rocks in the box and take them up to the lab and get them analyzed. So I think we’ll start releasing results in, say, January sometime, and it’ll be kind of constant all year long.

So we’ll be able to know, the market will understand that our objective here is to outline 400 to 500,000 ounces. This mine produced a quarter million ounces of very high grade, 40 gram per ton average grade. That was mined, the old style narrow vein mine that frankly wasn’t terribly safe. We’re going to be mining on a three meter average width and diluting that grade over that width. So we’re expecting a grade more like 10 to 12 on a diluted, diluted bay mine diluted basis.

We’re fully permitted. And so basically, give us a year to get the the drilling done, you know, another six months to get a feasibility level mine plan. And I call it feasibility light because, again, we’re not building a mill and a tailings facility and a power plant. It’s, it’s basically just a mine plan and a transportation plan. And the transportation plan is to haul it down to the railroad, and and then we can decide if we’re going north to Fort Knox or or if we go south to Seward.

And we’ve had interest from overseas to take this to a smelter. That might work out as good or better than taking it up to Fort Knox. So we’ve got a lot of choices. And that’s the thing. When you when you have grade, you have a lot more choices.

And, that’s the other thing I like about our DSO model is we focus on things that have grade. They’re not necessarily the the biggest gold mine in the world, but they’re going to make our shareholders money. And I think that’s the business we want to focus on being in is having mines that actually make money and can get into production quickly. And the DSO model allows us to do

Romeo, Moderator/Interviewer: Great. And I also still think we should make rocks in a box T shirts. I just think that’s a fun idea for the future every time you say it. But I want to talk about Johnson Trek really quickly because it represents potentially the highest grade asset in your portfolio based on historical drilling at least. Could you provide us on just an update on the permitting process for the underground exploration drift and the transportation infrastructure in Siri?

What’s up next basically? What are the critical path items that determine where this project

Rick Van Nuneiza, CEO, Contango Ore: is going towards? Yes. So look, mean, Johnson Track, it’s a great project. You know, we bought it a little over a year ago from with the of High Gold. We’re on the boring part of the Lausanne Curve.

This is about permitting. We’ve been working with the state state government on permitting the underground tunnel. So basically, sort of doing exactly what we got through doing with with Lucky Shot, get the underground tunnel in place. We have to permit that first, and those are permits with the state Of Alaska. They’re basically two fundamental permits, a mine and operating permit, because technically you’re a mine.

We’re still doing still doing exploration, but technically it’s a mine. And then because you have a mine, you have the potential for water discharge. You need a water discharge permit. So those two permits we expect to receive between by the per by by q one of next year. Assuming that, then we would mobilize next summer, we’d be mobilizing equipment to build the road.

It’s about a five kilometer or three mile road between the camp and the and the proposed portal site. There’s a couple of bridges to put in place. Again, these are temporary bridges because, again, it’s still exploration. And we use this water called Bailey Bridges. They just basically go across the creek, you you you get your stuff to the other side.

We’re not this is not we’re not permitted for mining a mining operation at this point for the road. That will come next. And then we want to get the equipment mobilized to start building the tunnel, and we want to winterize camp so that we can operate year round. That’s about a $20,000,000 program, and, again, we’re we’re funded to do that. And so that, you know, that’s our plan.

You’ll you know, obviously, as we when we receive the permits, we’ll be announcing that and as we start mobilizing equipment next summer. A lot of work to do on all that. And then while all that’s going on, we’re in the process of permitting with the federal government agencies, the transportation road route on the transportation easement and the port site easement, which is for us a barge landing site. We’re also in the process in a parallel fashion to permit the road and the barge landing site. So lots of work going on in the background, and we’re excited to get the drills turning to do the drilling and blasting to build the tunnel next starting next probably September is probably what we’re pushing for.

Getting the camp winterized is a very important step so that we can work year round.

Romeo, Moderator/Interviewer: Great. No, I think that’s really helpful context for that project. Now I do want to zoom out here a bit before I get to the questions from the audience. And I’m going to gas up Contango more than I usually do while we zoom out. But we transitioned the company from an explorer to a cash generating producer, GBP 107,000,000 in the treasury, at this point minimal debt and two development projects advancing.

So as you’re looking at the next five years, the potential to extend into a longer plan, what does success look like? Are focused on organic growth through Lucky Shot and Johnson Track? Or does this new financial position allow you to consider consolidation options elsewhere?

Rick Van Nuneiza, CEO, Contango Ore: Yeah. I’d say, the way I like to express it is I think we have a really solid executable five year plan, and we have the money to execute. So that’s why I say it’s executable. We have the team to do it. We know Alaska, is our backyard.

We know how to get stuff done here. And now we’re starting to think, okay, well, that’s a great five year plan. Why don’t we put a five year plan into a ten year or twenty year plan? And so to do that growth, we want to be looking at M and A. And so we’re taking a look at opportunities.

We’re not going to stray too far from home. So Alaska, BC, Yukon, that’s kind of our backyard. We know how to work there. We’ve all worked there before. So that’s where I would say we’re looking and we’ve got a half a dozen different opportunities that fit the DSO model.

They’re all going to fit this model. We like this model. We’ve demonstrated that it works. And so we did we see another half a dozen opportunities, like Johnson Track, like Lucky Shot type opportunities to continue to invest in and continue to grow the company beyond the five to seven years out with the existing resources. And don’t forget, I mean, we’re not going to forget about doing exploration at Johnson Track and Lucky Shot.

There’s we can have a five year plan at Lucky Shot, and we can have a five year plan for the next ten, fifteen years, just like the Kensington Mine has said. They’ve been operating for twenty five years, and they’ve never had more than five years of mine life ahead of them. So just that’s how an underground mine works. And so don’t we will be spending money doing exploration once the mine’s up and running. First thing is get the mines up and running.

Romeo, Moderator/Interviewer: Awesome. That’s very helpful. I was like seeing what the what what the plan is for the future. And, Mike, I’m gonna get you in on one. I promised you six months ago, one question about hedges maximum per webinar.

So here’s your one question about hedges. And that’s somebody from the chat asked, when do you expect the old hedges to be fulfilled and get to a 100% of market price?

Mike Clark, CFO, Contango Ore: Yeah. So, you know, our objective is to get these hedges paid off as early as possible. And so any any shipments that are coming out, we’re delivering a 100% into these kind of carry trades because we’re always a quarter a quarter ahead. So assuming we can have a, you know, a 50,000 ounce twenty six year of gold, the objective is to try to deliver into those hedges by September, all of them by September. So they all technically the last ones mature in mid-twenty seven, but I think we should be we have the cash to

Romeo, Moderator/Interviewer: kind of support that approach.

Mike Clark, CFO, Contango Ore: And so I think we can deliver into these and then be done with them by September, assuming the twenty sixth budget is is where we where we think we’ll be.

Rick Van Nuneiza, CEO, Contango Ore: Does that answer your question?

Romeo, Moderator/Interviewer: I reckon so. And there, that’s it for hedges. You can relax. No more hedge for the rest of this webinar. Sure.

Somebody else from the chat asked and this, I I think, is also for you, Mike. How large is the net operating loss carry forward?

Mike Clark, CFO, Contango Ore: Losses, oh, they’re they’re is they’re they’re a little more complicated in The States because there’s there’s these nonoperating losses that you can only apply 80% of against net income. But we are set up in

Rick Van Nuneiza, CEO, Contango Ore: a way where we can any costs incurred,

Mike Clark, CFO, Contango Ore: I’d say Lucky Shot, can be offset against monsoon profits. So we don’t anticipate being in a tax we’re not going to we don’t anticipate paying the taxes this year or next year. I think as we move forward on Johnson Track, the idea is to offset those costs. So my hope and my goal is that we will never actually have to pay taxes related to Montchaux. But that will involve if we want to actually achieve that, we’re going have to be continuing to spend on Lucky Shot and JT.

But right now, we don’t anticipate anything this year, and I’d be surprised if we had to pay next year. But we are starting to dwindle down on our loss positions in the state. So at some point,

Romeo, Moderator/Interviewer: we will be we’ll

Mike Clark, CFO, Contango Ore: we’ll be taxable, but that’s a that’s a good problem to have because it means we’re making money.

Rick Van Nuneiza, CEO, Contango Ore: Paying taxes is is I mean, you’re making a lot of money, so I’m good with it.

Romeo, Moderator/Interviewer: It’s champagne problem to some degree, for sure. Looking at the last question that just came in, is there going be a q three earnings presentation, somebody just asked?

Mike Clark, CFO, Contango Ore: Well, we updated the presentation on the website. There’s not going be anything else.

Rick Van Nuneiza, CEO, Contango Ore: Great. Thank you. If you take a look at the website, we just recently updated that with the Q3 results. It might be yeah. That’s just take a look at the website.

It should be on there.

Mike Clark, CFO, Contango Ore: And I think we’ll hopefully be able to give guidance in December for ’26, and at that point we’ll update it and probably have a call at that point.

Rick Van Nuneiza, CEO, Contango Ore: As always, if you have questions, you can email us at genericinfo@containerore.com. If you’ve got our addresses, I’m not to put them out there in public. If you’ve got addresses or phone numbers, just give us a call as well.

Romeo, Moderator/Interviewer: Okay. Thanks. One question from Jan in the chat. And there’s one of two things you probably meant with us, but he asked how many ounces were there in q four twenty twenty four. So I’m not sure if you recall total ounces from last 2024.

Mike Clark, CFO, Contango Ore: Well, I know how many ounces we produced in ’24. I think we produced about 42,000 ounces in six months. We did two batches in the q four. I don’t know the actual number, but I just know over the two quarters,

Rick Van Nuneiza, CEO, Contango Ore: it was 42,000 ounces. And just keep in mind, you know, we started mining almost a year before that. We opened the mine and then just and we weren’t hauling with all the trucks right away, so you’re building up a stockpile and you’re starting to haul ore. So we had a fair bit of ore built up for that first half year of production. And what I would strive now in the 60,000 ounces is more of a steady state plan.

And so we’ll again, next year, 2026 was always going to be a a low year because of the the stripping going on at the at the main main main pit. But we’ll have we’ll have the details on that 2026 mine plan here in few weeks, so stay tuned for that.

Romeo, Moderator/Interviewer: Also, I know this is meant to be a short event today, so I’ll wrap up with one real quick one. And that’s Rick. What are you most excited about coming up? What’s what’s keeping you up with excitement at this point about Contango ore?

Rick Van Nuneiza, CEO, Contango Ore: It’s it’s great to be drilling underground at Lucky Shot again. I mean, look. We we think Lucky Shot, again, it’s a small it’s not gonna be the biggest mine in the world. We’ll never tell anybody it will be, but we think it’s gonna make a lot of money. The drill is turning, and so stay tuned for the drill results.

It’s always exciting to see free gold in in a quartz vein underground. So, yeah, as a geologist, this is what it’s all about. So stay tuned.

Romeo, Moderator/Interviewer: Awesome. Appreciate it very much. And thanks, everyone. This is a big audience today. You guys don’t know how difficult it is to set up stuff at a conference, but Rick and Mike do.

And thank you for joining us very much, being able to get this done today and answer everybody’s questions. I really appreciate your time. And if anybody has any additional questions, make sure to shoot them through. But otherwise, I hope everybody has a great end of their day.

Rick Van Nuneiza, CEO, Contango Ore: Thanks, Romeo. Cheers.