Contango Announces Commencement of Surface Drilling at the Newly Acquired Johnson Tract Deposit

Rhea-AI Summary

Contango ORE, Inc. (NYSE American: CTGO) has commenced surface drilling at the Johnson Tract property in Alaska. The 2024 campaign targets 3,000 meters across 20 drill holes, focusing on in-fill drilling of the upper third of the near-vertical resource. The program, expected to last three months, includes hydrological testing, metallurgical studies, and geochemical analysis. The company aims to upgrade resources to the Indicated category and support geotechnical studies for a planned 1.6 km tunnel. Contango is also advancing permitting efforts for an access road and underground facilities, with construction potentially starting next summer.

The Johnson Tract deposit contains an Indicated Resource of 3.49 million tonnes grading 9.39 g/t gold equivalent (1,053,000 ounces AuEq) and an Inferred Resource of 0.71 Mt grading 4.76 g/t AuEq (108,000 ounces AuEq). Contango aims for a production decision by 2030 and will host an investor webinar on August 5th, 2024, to discuss the project in detail.

Positive

• Commencement of 3,000-meter surface drilling program at Johnson Tract
• Focus on upgrading resources to Indicated category
• Advancing permitting for access road and underground facilities
• Substantial existing resource: 1,053,000 ounces AuEq Indicated and 108,000 ounces AuEq Inferred
• Potential for resource expansion as deposit remains open along strike and down dip

Negative

• Significant capital expenditure required for drilling and infrastructure development
• Long timeline to potential production decision (by 2030)
• Permitting process outcomes uncertain

Insights

Mining Industry Analyst

Contango ORE's commencement of surface drilling at the Johnson Tract deposit marks a significant step in advancing this promising gold project. The 3,000-meter drilling campaign across 20 holes is strategically designed to upgrade the resource classification and gather important data for future development.

The focus on in-fill drilling in the upper third of the deposit is likely aimed at converting Inferred resources to the Indicated category, which is essential for improving the project's economic viability and attracting potential investors or partners. This approach aligns with industry best practices for de-risking and advancing mineral projects.

The concurrent hydrological testing and advanced metallurgical studies are critical components often overlooked by retail investors. These studies will provide vital information for:

• Environmental impact assessments and permitting processes
• Optimizing mineral processing and recovery methods
• Refining capital and operating cost estimates for future economic studies

The company's proactive approach to permitting, aiming to secure approvals for access road construction and underground facilities by year-end, demonstrates a well-structured project timeline. This could potentially accelerate the project's development schedule, a positive factor for investors looking at near to mid-term production potential.

However, investors should note that the current resource base, while high-grade (9.39 g/t AuEq for Indicated resources), is relatively modest in size. The success of the ongoing exploration in expanding the resource along strike and at depth will be important for the project's long-term viability and scalability.

In conclusion, while the news is positive and indicates steady progress, the true impact on Contango's valuation will depend on the results of this drilling campaign and the company's ability to efficiently advance the project towards production by their stated goal of 2030.

Financial Analyst

Contango ORE's initiation of drilling at Johnson Tract represents a pivotal moment in the company's development strategy. This move signals a transition from early-stage exploration to a more advanced phase of project development, which could have significant implications for the company's financial outlook.

Key financial considerations include:

• Capital Expenditure: The planned 1.6 km tunnel and underground facilities will require substantial investment. Investors should anticipate increased capital needs in the coming years.
• Resource Valuation: Upgrading resources to the Indicated category could positively impact the company's asset valuation, potentially enhancing its market capitalization.
• Project Timeline: The aggressive timeline targeting production by 2030 suggests a compressed development schedule, which could lead to earlier cash flows but also increased near-term financial demands.

The company's focus on metallurgical and hydrological studies is financially prudent, as it can lead to optimized processing methods and potentially lower operating costs in the future. However, these studies also represent additional upfront expenses.

Investors should closely monitor the company's cash position and burn rate. As of the last reported quarter, Contango had $17.7 million in cash and cash equivalents. The intensified exploration and development activities will likely accelerate cash utilization.

The high-grade nature of the deposit (9.39 g/t AuEq for Indicated resources) is a significant positive factor, potentially leading to robust project economics. However, the relatively modest resource size may limit economies of scale, impacting overall project financials.

In conclusion, while the news indicates positive progress, investors should be prepared for a period of increased spending and potential dilution as the company advances towards its production goals. The success of this drilling campaign and subsequent resource expansion will be critical in determining the long-term financial prospects of Contango ORE.

FAIRBANKS, Alaska--(BUSINESS WIRE)-- Contango ORE, Inc. (“Contango” or the “Company”) (NYSE American: CTGO) is pleased to announce the start of a surface drilling campaign at the Johnson Tract property. The 2024 surface exploration drilling targets 3,000 meters (~9,850 ft) across 20 drill holes and is designed to in-fill the upper one-third of the near vertical resource. In parallel with the in-fill drilling, selected holes will undergo hydrological testing and monitoring to characterize the overall surficial and deposit hydrology and water quality. In addition to assaying the core, selected drill core will undergo advanced metallurgical, geochemical, and specific gravity tests to assist in building a geometallurgical model for the deposit. Camp opened in mid-July and the drilling program is expected to last approximately three months.

Rick Van Nieuwenhuyse, CEO and President for Contango said: “We are excited to start the drills turning again at Johnson Tract. This year’s program will focus on three things: in-fill drilling to upgrade resources to the Indicated category; collection of metallurgical samples for more detailed metallurgical testing to support a geometallurgical model for the deposit; and support geotechnical and hydrologic studies in preparation for permitting an approximate 1.6 kilometer (1 mile) long tunnel to access the Johnson Tract deposit and support a detailed underground drilling program in preparation of a Feasibility Study. In addition to the drilling program, we are continuing on-going permitting efforts to support construction of an access road from the camp to the portal site as well as the laydown area for the tunnel site and underground support facilities. We expect to have permits in hand by the end of the year and be in a position to start construction of the portal access road next summer.

The Johnson Tract deposit is located two hundred kilometers (125 miles) southwest of Anchorage on private land. The deposit contains an Indicated Resource of 3.49 million tonnes (“Mt”) grading 9.39 grams per tonne (“g/t”) gold equivalent (“AuEq”) for 1,053,000 ounces AuEq and an additional Inferred Resource of 0.71 Mt grading 4.76 g/t AuEq for 108,000 ounces AuEq (see HighGold’s Technical Report titled “Updated Mineral Resource Estimate and NI 43-101 Technical Report for the Johnson Tract Project, Alaska” dated August 25, 2022). The deposit remains open along strike and down dip and there are multiple other exploration targets along a 12 kilometer (7.5 mile) mineralized corridor.

Investor Webinar

Contango will be hosting a webinar on August 5^th, 2024, at 8:00 am Alaska time (Noon EST) to take a Deep Dive into the Johnson Tract property and our plans to advance it to a production decision by 2030. Please use this link to register for the event: https://events.6ix.com/preview/johnson-tract-project-deep-dive. We look forward to seeing you there!

ABOUT CONTANGO

Contango is a NYSE American listed company that engages in exploration for gold and associated minerals in Alaska. Contango holds a 30% interest in the Peak Gold JV, which leases approximately 675,000 acres of land for exploration and development on the Manh Choh project, with the remaining 70% owned by KG Mining (Alaska), Inc., an indirect subsidiary of Kinross, operator of the Peak Gold JV. The Company also has a lease on the Johnson Tract project from the underlying owner, CIRI Native Corporation, a lease on Lucky Shot project from the underlying owner, Alaska Hardrock Inc. and through its subsidiary has 100% ownership of approximately 8,600 acres of peripheral State of Alaska mining claims. In addition, Contango also owns a 100% interest in an additional approximately 145,000 acres of State of Alaska mining claims through its wholly owned subsidiary, which gives Contango the exclusive right to explore and develop minerals on these lands. Additional information can be found on our web page at www.contangoore.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements regarding Contango that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995, based on Contango’s current expectations and includes statements regarding future results of operations, quality and nature of the asset base, the assumptions upon which estimates are based and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as “expects”, “projects”, “anticipates”, “plans”, “estimates”, “potential”, “possible”, “probable”, or “intends”, or stating that certain actions, events or results “may”, “will”, “should”, or “could” be taken, occur or be achieved). Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those, reflected in the statements. These risks include, but are not limited to: the risks of the exploration and the mining industry (for example, operational risks in exploring for and developing mineral reserves; risks and uncertainties involving geology; the speculative nature of the mining industry; the uncertainty of estimates and projections relating to future production, costs and expenses; the volatility of natural resources prices, including prices of gold and associated minerals; the existence and extent of commercially exploitable minerals in properties acquired by Contango or the Peak Gold JV; ability to realize the anticipated benefits of the Peak Gold JV; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the interpretation of exploration results and the estimation of mineral resources; the loss of key employees or consultants; health, safety and environmental risks and risks related to weather and other natural disasters); uncertainties as to the availability and cost of financing; Contango’s inability to retain or maintain its relative ownership interest in the Peak Gold JV; inability to realize expected value from acquisitions; inability of our management team to execute its plans to meet its goals; the extent of disruptions caused by an outbreak of disease, such as the COVID-19 pandemic; and the possibility that government policies may change, political developments may occur or governmental approvals may be delayed or withheld, including as a result of presidential and congressional elections in the U.S. or the inability to obtain mining permits. Additional information on these and other factors which could affect Contango’s exploration program or financial results are included in Contango’s other reports on file with the U.S. Securities and Exchange Commission. Investors are cautioned that any forward-looking statements are not guarantees of future performance and actual results or developments may differ materially from the projections in the forward-looking statements. Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Contango does not assume any obligation to update forward-looking statements should circumstances or management’s estimates or opinions change.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730358531/en/

Contango ORE, Inc.

Rick Van Nieuwenhuyse

(907) 888-4273

www.contangoore.com

Source: Contango ORE, Inc.

FAQ

What is the scope of Contango's 2024 drilling program at Johnson Tract (CTGO)?

Contango's 2024 drilling program at Johnson Tract targets 3,000 meters across 20 drill holes, focusing on in-fill drilling of the upper third of the resource, along with hydrological testing and metallurgical studies.

What is the current resource estimate for Contango's Johnson Tract deposit (CTGO)?

The Johnson Tract deposit has an Indicated Resource of 3.49 million tonnes grading 9.39 g/t gold equivalent (1,053,000 ounces AuEq) and an Inferred Resource of 0.71 Mt grading 4.76 g/t AuEq (108,000 ounces AuEq).

When does Contango (CTGO) aim to make a production decision for Johnson Tract?

Contango aims to make a production decision for the Johnson Tract project by 2030.

What infrastructure developments is Contango (CTGO) planning for Johnson Tract?

Contango is planning to construct a 1.6 km tunnel to access the Johnson Tract deposit, as well as an access road from the camp to the portal site and underground support facilities.