Contango Announces Transition Period Results
- None.
- The company reported a significant net loss of $40.8 million for the six-month period ended December 31, 2023.
- Entering into derivative gold hedging contracts led to an unrealized loss of $23.4 million on derivative contracts in the 2023 period.
- Increased interest costs related to funds drawn down on the secured credit facility and higher general and administrative costs impacted the financial results negatively.
- Although there were reductions in exploration expenses and losses on the Peak Gold JV, the overall net loss increased primarily due to derivative contracts and increased costs.
- The company's financial performance for the six-month period was impacted by various cost increases and derivative contract losses.
Insights
The reported net loss of $40.8 million for Contango ORE is a significant figure, particularly when contrasted with the previous year's loss of $21.4 million. The almost doubling of the loss is primarily attributed to the non-cash expense from derivative contracts, which indicates a high level of volatility in the gold market. Investors should note that while this loss is non-cash and related to accounting for derivatives, it reflects the risks associated with gold price fluctuations and the company's hedging strategy. The increase in interest costs due to funds drawn on a secured credit facility also suggests a rise in the company's leverage, which could impact its financial flexibility.
Furthermore, the reduction in exploration expenses and the decrease in the loss on the Peak Gold JV are positive signs of cost management and operational efficiency. However, the increased general and administrative costs, including retention and severance payments, could be a concern if they continue to rise. The investment of $34.4 million in the Peak Gold JV and the progress on the Manh Choh project are indicative of a strategic focus on long-term production capabilities. These investments, along with the public offering that raised $30.4 million, should be considered by investors as they evaluate the company's growth potential against its current financial health.
Contango ORE's alignment of its fiscal year with that of its investment in the Peak Gold JV and peer companies is a strategic move that may facilitate better comparative analysis and peer benchmarking. This change, however, is administrative and unlikely to have a direct impact on the company's operational performance. The market's response to the transition report will depend on investor sentiment regarding the company's long-term prospects, particularly the anticipated production start in the second half of 2024 at the Manh Choh project.
The commencement of mining operations and the progress on budget and schedule are positive indicators for the project's future success. However, the escalation in costs and the potential for further volatility in gold prices could pose risks. The company's ability to manage these risks and maintain its project timeline will be important for investor confidence. The strategic partnership with Kinross Gold Corporation for the operation of the Manh Choh project adds a layer of credibility and operational expertise, which may be viewed favorably by the market.
The transition to production at the Manh Choh project is a pivotal phase for Contango ORE. The commencement of ore mining and stockpiling, along with the transportation of ore to Fort Knox for processing, are critical steps in the transition from exploration to production. The mechanical completion and commissioning activities for the project, as mentioned by the CEO, are essential for ensuring operational readiness and a smooth ramp-up to production.
Investors should be aware that the mining sector is capital-intensive and the costs associated with constructing and commissioning new projects can be significant. Contango's ability to stay on budget and on schedule is commendable, but investors should remain vigilant about the potential for unforeseen expenses or delays, which are not uncommon in the industry. The forward gold price compared to the contracted hedge price will continue to be an important factor in the company's financial performance, given the significant impact of mark-to-market derivative contracts on the current financial results.
On November 14, 2023, the Company’s board of directors approved a change in the Company’s fiscal year end from June 30th to December 31st, effective as of December 31, 2023. This decision was made to better align the Company’s reporting period with the Company’s
The Company reported a net loss of
During the six-month period ended December 31, 2023, the Company completed the following:
-
All closing conditions related to a Credit and Guaranty Agreement with ING Capital LLC and Macquarie Bank Limited for a senior secured loan facility of up to
$70 million $65 million
-
Investment of
$34.4 million
-
An underwritten public offering for gross proceeds of
$30.4 million
Rick Van Nieuwenhuyse, the Company’s President and CEO, commented, “At the Manh Choh project, construction is essentially completed, on budget and on schedule for initial production in the second half of 2024. Mining activities are well underway, including the commencement of ore mining and stockpiling. Transportation of ore to Fort Knox, where it will be processed, has commenced and will gradually increase throughout the first half of the year. Modifications to the Fort Knox mill continue to progress on schedule and on budget. Construction of the conveyors and associated buildings are planned for the first quarter of 2024, along with interior piping and mechanical installations. The commissioning and operational readiness team for Kinross is in place and preparing for pre-commissioning activities following the mechanical completion of each area. I am extremely pleased with the progress to date and will continue to provide updates on milestones as we approach commencement of production.”
ABOUT CONTANGO
Contango is a NYSE American listed company that engages in exploration for gold and associated minerals in
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, 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
View source version on businesswire.com: https://www.businesswire.com/news/home/20240314343390/en/
Contango ORE, Inc.
Rick Van Nieuwenhuyse
(907) 888-4273
www.contangoore.com
Source: Contango ORE, Inc.
FAQ
What was Contango ORE, Inc.'s net loss for the six-month period ended December 31, 2023?
What led to the increase in net loss for the 2023 period compared to 2022?
What significant financial decision did Contango ORE, Inc. make regarding its fiscal year end?
What major projects or investments did Contango ORE, Inc. complete during the six-month period ended December 31, 2023?
Who is the President and CEO of Contango ORE, Inc.?
