Cash Distribution & First 2025 Campaign Results

0:04 Good morning or good afternoon, depending on where you're logging in from today. Really do appreciate all of you joining us for a corporate update and Q&A session from Contango related to this morning's press release regarding their $24 million cash distribution. Feels good to say that number out loud. Don't get too very often. And the completion of 2025 first campaign. I'm joined today of course by company's president CEO Rick Van Nuenheise and CFO Mike Clark. Gentlemen thank you for joining me. Romeo good to see you again Mike. Hello from across the pond. Here's how today's gonna work. So I'm first gonna throw it to Rick for a quick rundown of today's news. Then I'll pose questions to both the speakers on the line today. After that, we're eager to take some questions from the audience here live in the room. This will be a bit shorter event than we're typically used to. I'll be probably ending right at the half hour, so I'll try to get to as many questions as I can. Please feel free to ask anything, but if I don't get to you today, I'll make sure that the questions get to the Contango team so they can get back to you as soon as possible. Today's event's also being recorded and will be available very shortly today on both 6.com and also our YouTube channel.

1:03 That's it for me. I'm going to throw it to Rick for a quick intro before I jump in with some questions. Yeah, so just thanks, Romeo, and just to everybody, thanks for joining us. I'm in Zurich, Switzerland for the European Gold Forum here. We've got a three-day conference and it'll be a busy 3 days. I think I've got about 38 meetings lined up. So looking forward to updating everyone. Yeah, we've got our press release this morning. As Romeo said, we've got a distribution from the Peak Gold Joint Venture of US$24M. Always good to get money into the bank. We basically delivered more tonnes to the mill at Fort Knox than planned, and so produced about $19,500 of gold for our account, for our 30% share of Moncho production.

1:59 We haven't quite sold all of that. Mike can probably give you some more details on that. But so part of that distribution was from the first half of the gold sales, but we've got more gold sales to come from this first campaign. It is the first campaign. Basically, they run for about a month. There will be 4 campaigns running this year. They're in the middle of each quarter. So February 1 obviously lasted a little longer because we again, we delivered more tons. So another campaign will be in May and then August and then November. So we're on track to produce 60,000oz of Gold. We're actually ahead of schedule, if you will, for the year and

2:49 we're guided to a $1,625 Gold price. We don't have any costs related to this first campaign as of yet, probably we'll have those in early May, But we're just kind of going with our 60,000oz of production for our share of Moncho production and at an all in sustaining cost of about $1,625. So with that, I'll say we'll open this up. Romy, other questions? I know there's probably a lot of questions out there. We've got a pretty full audience. So let's go ahead and get started. Awesome. Yeah, so I've got some, a lot of them based on investor questions that came in an email in advance. So if you don't mind, I'm just going to jump into a bunch of them right off the bat.

3:41 The first campaign of 2025 exceeded original guidance with approximately 19,500 ounces of Gold

3:47 for Contango's 30% share. Curious, and I assume other people are too, what operational improvements or new strategies contributed to this kind of outperformance? Well, so basically, it's tons in grades. So the mine plant had us delivering 275,000

4:06 tons of gold at about 0.22 ounces per ton. And we ended up delivering about 50,000 tons more, just a bit shy of 50,000 tons more than the $275,000, or the 275 ton plan. Grade was a little slightly lower than plan by like a third decimal. So not very much lower, but a little bit lower. And then recoveries were a little better than planned.

4:38 Again, just little small percent better and better level of recovery. So All in all, the plan was roughly to produce 15,000 ounces 4 times a year. And the first batch out being larger, produced more gold and we got roughly the same grade and roughly slightly better recovery. So, but basically this time is mostly about tons, delivering more tons, which is a good thing to start out the year delivering more tons than planned, especially during the winter months when you can get snow conditions, storm conditions, what have you,

5:20 that maybe reduce the amount of truckloads a day you can get up between the mine and the mill. And I think that's the basic straightforward answer. More tons. No, appreciate that. Makes sense to me. As I understand that there is still Gold unsold. Is that correct as of right now? Yeah. So I'll let Mike. Mike sells all our Gold. He makes all our money. So I'll let him answer this one. Yeah, no, so as of the day, as of Friday, we'd sold about 13,000 ounces out of the 19. I have sold some more this morning on a final shipping for the quarter, but there's still about another,

6:03 I think about 7,000 ounces that weren't included as of the date of the release. OK, cool. Yeah, good to know. Just generally in the same vein with cash cash distributions now expected to increase to 80 million dollars, which I think I'm allowed to swear in this platform is a shit ton of money. How does that stronger cash position benefit shareholders? What's, what, what'll change going forward? Well, maybe I'll answer first and let Mike again, answer more like a CFO. Basically, our first, when we've said this many times before, our first order of business is pay down the debt, deliver into the hedges. So that's definitely what we're guiding to do. And we've said we're gonna deliver about 70% of the Gold produced this year into the hedges, and 30% would then be exposed to spot price.

6:59 So, we make about US$400 an ounce on our gold delivered into the hedge price, which is at 2025. And again, our all-in sustaining guidance right now is 1625.

7:12 That hasn't changed. So the delta there is $400. So we know we don't lose money selling Gold into the hedges. I know I've said that many, many times, but I'll say it again. We make money. And obviously, in US$3,000 Gold, or as many as US$3,025 Gold, we make about a US$1,400 margin on 30% of the ounces. So yes, US$80M is a lot of money and the objective is to, obviously, US$80M is going to allow us to pay down the debt significantly this year, although that might give you the numbers of what we're projecting. And it's delivering the Gold to make the $80M of money means we're going to reduce our hedge book roughly in half. So right now we've got 86,000oz

8:09 of Gold hedged and by the end of the year, with our planned production, we'll deliver about half of that. I guess the only thing I'd add to that is the US$80M is pre-hedge. We get that cash flow from the Peak Gold JV and then we have to sell our hedges and deliver into them and also sell at spot. So the way I would look at it is you've got $80M of free cashflow coming from the JV, and then you're going to have about a $33M

8:42 realized hedge loss on deliveries. And so everything after that is kind of free cashflow from operations for the year. The only other item kind of, as Rick said, you know, the $9 million as part of this 24 million came early March, and that really related to 2024's excess cash, which is kind of added to what we, you know, we weren't projecting necessarily in our budget. And so that that's kind of given us the ability to kind of focus on

9:12 cash management and timing of paying down principal repayments in advance to save on interest and just give us a little more flexibility in what we wanna do. Make sure there's plenty of cushion and account for here. Nope, makes sense to me. One thing I noticed in the press release is it mentioned ongoing incremental improvements in both or haul and processing at Fort Knox. I'm curious if you can just share some sort of specific examples about these improvements and what they mean for campaign results going forward. Yeah, so one of the, there were 3 main areas where we reduced the effectiveness of the truck haul in terms of tons of ore being delivered to the Fort Knox mill per truckload. And they were, you know, the bridge rate restriction, that's still in place. So I think, you know, rough numbers, that was about 2 tons, 2 and a half tons of

10:05 further restriction in terms of tons of ore in the truck. The other one, or one of the other ones was moisture content of the rock. And being in the winter time, whatever water was in the stockpile at the time, at that time is still in the stockpile because it's still frozen. So that's counted as moisture content, if you will. And then the third, and that was another couple of tons of extra weight that wasn't included in the feasibility study. Because everything we're always comparing to it at that time is always back to the feasibility study plan, because that feasibility study was the plan.

10:52 And then the third thing was ice and snow buildup on the trailers. That wasn't anticipated in the feasibility study. And that was another, you know, 2, 2 and a half tons of rock, of ice and snow.

11:06 I think all of us were a bit surprised that traders picked up that much ice and snow, but that's the fact is that they do. And so there's 1 that That's probably the area that we've had the most success at incremental improvement right now, is just knocking the ice and snow off the truck before it gets on the highway. Most of the accumulation takes place on the road between the mine site and the highway. The highways are generally kept very clear. Obviously, if it's a snow storm,

11:38 if it's a bad snow storm, they don't drive the trucks. They just take break for a few hours or half a day or whatever it is until the snow storm passes and the roads are plowed. So that's, I'd say that's one of the incremental improvements that has been realized. As I said, the water content for the water already been stockpiled over the winter. It's frozen, the moisture's in there, you're not getting it out until springtime. And then the bridge weight restriction is still in place. And the good news on the bridge weight restriction is that the federal DOT and the state DOT Department of Transportation,

12:18 the federal government did approve the state transportation plan which included money now to fix the bridges. So that money has been allocated in the plan is to start fixing the bridges this year. As I understand from the press release that the DOT gave a month or so ago, the bridges won't be completely repaired until next year. We'll see an increase in the amount of, in the bridge rate restriction. But the good news is it eventually gets repaired and we'll get that weight back. Oh, that's great. I also wanted to ask, we touched on it, but I want to talk about gold recovery rates. You averaged 93.5 during the first campaign year, slightly above plan.

13:05 Curious what contributes to that rate increase so people get it. Yeah, so basically it's getting the recipe right. And the main part of the recipe

13:17 is oxide versus sulfide ore. And the sweet spot in terms of recovery is to have a 2 to 1 ratio and 2 oxide, 1 sulfide. And with the current setup of the mill, that's what they aim towards. And they've obviously dialed it in pretty well. You've got at the stockpiles at Moncho, you have high grade oxide, low grade oxide, high grade sulfide, low grade oxide. And you wanna do a blend to target a grade, and the grade is around 0.2.

14:00 And so if you dial it in right, you kind of optimize the recovery factor. Now, as we get deeper and deeper into the ore body, we'll see more and more sulfide, and there are plans to add oxygen into the mixture, which is part of the recipe, if you will, to help improve gold recoveries. And again, this is not a refractory ore. So don't want anybody to misunderstand what I'm saying that the oxygen or air sparging and oxygen just help float the bubbles and get them get it get the mixture and get the cyanide attracted to the gold. So when you think about how gold's actually recovered using cyanide, it is a bit of alchemy to make this stuff work. So therefore, it is a bit of a recipe.

14:46 Sure. I need a bit of wizardry in your life for sure. I appreciate it. I got one question for an investor that I'm just going to ask really verbatim, if you don't mind. Somebody wrote in to ask if you can address the hedge position loss and how that gets cleared up. He says he understands the hedge and why it was needed, but he's wondering if the loss is offset

15:03 by a gain as we get closer to full delivery. Yeah, so I'll answer and I'll ask Mike to, again, answer more like a CFO. So there is no loss when we deliver into a hedge. Our all-in sustaining costs, as we just talked about, are 1650, or sorry, 1625, that's our guidance for this year. Last year, our all-in sustaining costs were just over $1,200. So the Kinross guidance to us for the current year mine plan is 1625 So if it costs us 1625 and we deliver into the hedge and we receive 20 25 2025 that's a $400 game. We've not lost anything the unrealized

15:51 Lost that we that it's talked about from an accounting perspective is on the rest of the gold that you haven't delivered yet. You have a commitment to deliver that gold into the hedge. And if you don't, you've got to go buy it. And obviously, if you've got to buy it at $3,000 or $3,100 gold, it's going to cost you a lot of money. I should tell you, I think is the expression you use. Some say. So Again, we don't lose money delivering Gold into the hedges. We make less money. We make US$400, as opposed to the spot price that Mike just sold Gold at the other day, which is, or I guess this morning, is closer to US$3,100,

16:33 which is more than a US$1,400 margin. So again, we do not lose money delivering gold into the hedges. Mike, you want to? Yeah, I guess I agree with what you said, Rick. I think just looking at it from the financial statement perspective and looking at the 2024 results, we ended up with a, I think about a US$55M hedge liability on the books. And what that's comprised of is you do a kind of a mark to market on those undelivered ounces that are outstanding at the end of the year. But then if you look at the income statement, you have 2 components to that loss. You have a realised loss and then you have an unrealised loss. So, as you deliver ounces into the hedges, you're effectively moving things from an unrealized loss to a realized loss.

17:20 And so at the end of the year, we had US$20M go to realized losses, which relates to the hedge deliveries that we went into. And then there was US$35M related to all the outstanding hedges that haven't been delivered into. So as we continue to deliver this year, you're going to see a higher realized loss versus unrealized loss. Does that kind of make sense?

17:48 The only way we lose money on the hedges is if we don't deliver the Gold. As long as we're delivering Gold on plan, and right now we're delivering more Gold than planned, so that's good, But as long as we deliver the Gold to the plan and deliver into the hedges, which Mike, they total what, about 40,000oz, 45,000oz? There's about 45,000oz we'll be delivering into this year. And we've already chewed through our April hedge book and we're going to start today. We sold everything at spot. But starting on the next week's shipments and the following ones, we'll be going back to delivering into the next July hedges. So we're getting ahead of those as just part of the plan to bring these down as quickly as possible.

18:35 Awesome. Being ahead is always good. Another one, just pretty much straight from an investor. At current pace, when roughly do you expect current cash assets will exceed debt and hedge liabilities? Just roughly. That is definitely my question.

18:50 Thinking about just I don't have the I don't actually have that like kind of forecast in front of me. But I guess I would I would say, you know, based on our plan to pay down the debt by 37 and a half million bucks this year, followed by 45,000 ounces of hedges, which is effectively half of our hedge position. I would expect you would be in that position by the end of this year. But I'd have to do more work on that and get back to that person who asked that question. All good. Yeah, like I said to the folks in the room, I'll send the transcript. Curious, can you explain the or reference the 9 million in additional profits from 20 24? Why were those paid so late? Maybe again, I'll start and Mike and follow up. Basically, when you when we sold all the gold from the last campaign of 2024, which was in November, it takes about, If you run the mill for 4 weeks, it takes almost another 4 weeks to get all the gold out of the mill because it goes into the carbon circuit and it circulates around, it just takes time.

19:57 And so part of it is that the gold didn't actually get sold until 2025. And also I'd say that going into the winter months, I think the peak gold management said, OK, well, we better, you know, we've got the money in the bank. Let's keep it here until we know we don't need it. Again, operating in the wintertime, stuff happens and you might get delays. You know, if you have a lot of winter storms, you might get a few delays here and there. So I think that's the sort of the prudent management of peak gold joint ventures money to operate that way. And I'd say they, you know, by the time Mark trolled around, they said, we don't, you know, we don't need the $9 million anymore or your $9 million anymore. I got a political question. So, Mike, you want to explain that like a CFO would explain it? No, well, the only thing I would say is from their perspective, it's easier to hold back the money than come up short and have to go back to us and ask us to write them a check. And I think we prefer that too. So That's kind of just how we ended up there.

21:03 Appreciate it very much. Like I said, jumping into a politics question next, so beware before we jump into it. But I was cruising the executive orders list recently and I saw that there was 1 prioritizing permitting for critical metals related mining projects. Just curious, any of Contango's current projects suite potentially qualify for that executive order? Yeah, actually Johnson Track fits really nicely into that. In fact, gold is now included in a critical metals list, which is interesting. But aside from that, Johnson Track has a significant amount of zinc and copper and silver, all of which have traditionally been critical metals. So as you know, we're, you know, we're are in the process of permitting Johnson track.

21:53 And so, you know, having an administration that very demonstrably and very vocally is saying, hey, we support mining and we need to speed up the permitting process for critical mines that can produce critical metals. It certainly is a breath of fresh air compared to what we had under the Biden administration, where they would say we need critical metals, but then any time there was a project that was producing critical metals, they'd find some excuse to put it on the sidelines. So yeah, and you know, I mean, it's not, we're not bypassing any standards or any, you know, doing any sort of end runs here. This is most of the permitting we're doing with respect to Johnson track is state permitting, but we do have a number of federal permit agencies that will interact with the US Army Corps of Engineers.

22:51 They control and then permit everything that has to do with the wetlands. In Alaska, we have a fair bit of wetlands. And then a few other agencies as well as from the federal government as well as the state government. So again, having a federal administration that is supportive of mining, I think will just help smooth the process and actually get to the end game of actually getting your permits in an expeditious manner. Awesome. So one thing I wanted to ask about while we're on actually Johnson Tract, what's up next for that project? Are we still anticipating a PEA in the next several weeks? Generally, what can investors expect from that? Yes, a good follow-on question.

23:37 Yes, PEA is taking a little longer than we would have liked. We want to do a thorough job and so we've been spending a lot of time with our contractor to make sure we put the things in there that make a lot of sense. And, but, you know, there's a few things that engineering companies always say, oh, you should try looking at this and you should try looking at that. And We're like, well, let's get more data before we start going down that path. So short answer is by the end of this month it will be done. I think it's going to be a good, strong, robust PEA. It's a good grade deposit. I've always said this, it's one of the nicest underground mines I think you'll see with 40-metre wide stokes.

24:28 It's a very healthy ore body. It's just a thick mass of ore body and good grade. And where we're putting in the tunnel is right in the heart of the higher grade, the 20g. There's kind of a core zone here that runs about 20g per ton. That's gold equivalent. And It's a gold, silver, copper, zinc mine. Or will be a gold, silver, copper, zinc mine. So, yeah, I'm really excited to see this thing, the PEA, come out. I think, again, we'll see a project that I think is going to be similar in terms of its economics than we have, than we've seen on show. It's an underground mine on shows open pit, but they're similar size. They're similar grade.

25:22 And I think we're going to see some good economics on this thing. Great. I got one question that I haven't asked in a while, so I thought I'd look for an update on it. Any update on the pending lawsuits against the company? Short answer is not technically. I think we're, we'll expect to see some movement here. The case is scheduled in court in August. And so, you know, that's fast approaching. And I think we're just, we feel very confident that, you know, this is a bit of a nuisance lawsuit to, you know, to use my non-legal terminology. I mean, The outstanding legal question before the judge is that we're going to put the truck transfer program as a public nuisance.

26:13 I don't know how driving legal trucks with legal loads with legal drivers is any more of a public nuisance than any other driver out there. So, that's my opinion. We'll let this play out in the courts, but I'm confident we'll be in a good place here. Sure. Sounds good. I got one. Just just generally your thoughts, because every morning you wake up, you see gold at a new all time high. What what really is your thoughts on why the gold price just keeps going up and where do you think it might settle? I mean, look, central banks continue to buy. I think the other dynamic that's been happening for the last several years, they've really kind of increased the amount of gold that they've purchased. And it's not all central banks. I mean, look, it's China, Russia, India, Turkey and Iran.

27:07 So that's definitely been a big push. I think more recently we've seen the ETF, the Gold-related ETFs also purchasing Gold and for the last several years they've been net sellers of gold. So that's sort of an added momentum, if you will, to gold purchases. And I was Speaking specifically of the ones that actually buy physical gold, I forget that takes that gold off the market, not the ones that just play with paper gold. Because that's like a trillion dollar business of trading paper. Obviously what they call it, what's being referred to as the Trump trade or the Trump tariff trades, I mean, there's a lot of uncertainty out there about how all that's playing out.

28:06 So that may be sort of another added scoop of uncertainty. It's interesting that Bank of America, which is a big conservative American bank, came out with their guidance for the next year gold price of $3,500 an ounce. Goldman Sachs was a little more conservative and came out with 33. So again, this is an average gold price for, I think by the end of the year was what they said. Now at the same time, I'm starting to see articles that are like, oh, geez, gold price has gone up and up and up and up and up and up doesn't go on forever. And and, you know, they're they're predicting a crash, a reset, you know, let's things go up and then they reset to 30% down or whatever.

29:05 So you're definitely starting to see both and it's interesting today in a high gold price, a bunch of the stocks are red. Yeah, so there's definitely shorts are making bets against gold and I guess gold mining companies. You know, I'll bring back the hedge word. I hate talking about it sometimes, but the whole purpose of a head. Well, some of these guys who are talking about direction in the in the gold price. Well, you know, that would put you down somewhere south of 2000 or $1800 gold or something like that. Well, we're protected. We've protected that downside.

29:52 And again, we're not losing money selling gold at 2025. We're just not making as much money. And if the shorts are right on that, you know, or the analysts are right that the gold price is going to correct by 30-35 percent, then we're covered. There you go. In the same vein of making money, I did see on X, the artist formerly known as Twitter, from a series of robots that track insider buys that you made another big purchase of Contango shares yourself. So I got 2 questions for you there. Did the robots lie to me? They sometimes do. It's hard to tell with these AI bots that run through the sites. But if not, can you give us some details on your personal buying? No, I actually, you know, I did I did buy, I think it was 10,000 shares.

30:43 And I'm actually planning to buy some more when Mike lifts the blackout here. You know, we usually put a blackout around any press release we have out. So I think we are incredibly undervalued at 10 dollars a share. And so, yeah, I plan I bought shares and I plan to buy some more shares. Great. I got one question from the audience. I know there's a bunch, like I said, I will get this whole transcript to the team. So you will be getting back to you from the near future. But somebody asked, do you think the market's attaching negative value to Johnson Tract? Considering cash flows are robust, stock is cheap compared to those cash flows, they ended with what gives Rick? What do you think is going on? I mean, look, a company has to build for the future.

31:30 And I think with Moncho, we've demonstrated that the DSO model works. So long as you have the 3 main criteria, which is that you've got good grade, you can get things permitted and things that are on private land are a lot easier to permit than things that are on federal land, as an example. And all of our projects are on private land. So we tick all 3 projects tick that box. And then we're, from a standpoint of permitting, permitting just the mine, again, we're not building mills and tailings facilities and things like that. Permitting just the mine, if you're above the water table, it's a heck of a lot easier to permit a mine. It's just you're just not interacting with groundwater.

32:18 At Lucky Shot, the mine is above the water table. The only time we have water in the mine is when it's raining or when all the snow is melting, which is springtime. Once that is out of the system, the water and it's very good water quality. I mean that's the other part of waters. There's the amount of water and then the water quality. Lucky shot is in a granodiorite it's literally tombstone it's really good quality water. You put it into some settling ponds and any turbidity settles out and then you can release it because it's good quality. Concentract, kind of the same scenario. It's above the water table, your body's above you, And we're purposely putting the tunnel in a post mineral intrusive rock. It's a day site. It's a little different geologically than the Granite Dye, right?

33:13 But chemically and from a water quality standpoint, it's the same. It's just doesn't have any bad stuff in it. So we can just build an infiltration system and let the water run out of the mine. You know, you settle it out so you're not putting any turbidity in the even in the groundwater. So those are the things that makes things simple for a mine to be permitted and also makes it to operate. And those are the ingredients. So I think we've got 3 great projects. We're making more money than plan. So we're gonna, we're gonna plan to do something with that. Not sure exactly what that's going to be. We're going to, we want to see what our all-in sustaining costs are going to be for the first campaign. Mike will have those out to you in our Q1 release in early May.

34:04 And if we're on track, then all the numbers that we've been talking about are good numbers and backed up by good accounting methodology. And that means we'll be making about 80 million dollars of free cashflow. The price is around about $3,000 an ounce. And we'll have some extra money to do other things besides pay bankers off. We'll end the year in a good spot. Mike, do you want to add anything to that? No, no, I think that's good. Awesome. Well, we're now already 5 minutes late. I apologize, fellas, for keeping longer than I expected. I know there's some questions, a lot of them are just straight math questions that I will send directly to Mike afterwards so he can tackle them. But thank you both so much for this update and everybody for joining us in the room today. Hope you guys have a wonderful evening for you, Rick, and the rest of your day for you, Mike. Thanks. Thank you very much. Thanks so much.