Contango Silver and Gold: Q1 Financials 2026

0:04 Good morning, good afternoon or good evening, depending on where in the world you're signing in from today. Great to see a packed house for today's event. I've got with me today Rick Van Nuenhuysen, CEO of Contango Silver and Gold, and Mike Clark, the company's CFO. Here's how today's going to work with the folks in the room. I've got some questions based on this morning's press release, but this is also an interactive event so please do enter your questions in the chat section on the bottom of the screen. We're going to try to stick to half an hour today, So if we can't get to your questions, I'll make sure the Contango team receives all the content as soon

0:35 as the event is over. But we will try to get to as many as we can today. The event is also being recorded and will be available for replay this afternoon Eastern time. So let's get into the meat and potatoes here. Rick, before we get into the Q1 numbers, you've been telegraphing forever that this quarter was going to likely be the lightest production quarter of what is presumably the lightest production year for Manchow under the current mine plan. Can you remind investors how the 2026 mine sequencing was designed and why Q1 was always going to look the way it was relative to what's coming in the back half of the year. Sure, Bianca, good to see you again. And we're, I think we're together here in Frankfurt for the GoldMess conference. So looking forward to that, But yeah, 2026 was always going to be the low production year and the higher cost year in general.

1:29 And it really did sequence for that. The beginning, the first half was worse than the second half. So in terms of Gold production ounces and in terms of costs, lower ounces, higher costs. We'll make up for that as the year progresses. And this was basically the transition year from mining the North pit, finishing up mining the North pit and transitioning to stripping and mining on the main pit or South pit. And so it's just this mine plan playing out as it was originally described in the Feasibility Study. Nothing really has changed except the Gold price is a hell of a lot higher than it was when we did the Feasibility Study at US$1,400 Gold. We are mining to the mine plan.

2:18 We continue to recognize that we've got a large pile of low-grade mineralized waste is how it's categorized technically. That is going on a separate stockpile. We've found a few more benches of ore in the North pit. So we've continued to mine that, which is that takes equipment away from pre-stripping on the South pit. And so all this is kind of just playing out according to the mine plan with a few slight modifications that are actually positives in the sense of finding more ore at the bottom of the North pit's not a bad thing. It's a good thing. It does delay the production on the South pit. So yeah, bottom line, I don't know if you've got another question coming at me, so I won't, I'll let you ask it and then I'll continue those details.

3:07 Perfect, well, I was gonna say that Contango's share of Q1 production came in at just over 8,000 ounces, and you're already guiding to 10,000 ounces from the second campaign alone, which kicked off yesterday. Walk us through

3:21 what changes as you move into the South Pit, both on the grade and on tonnage, and how confident you are in landing inside that 40,000 to 45,000 ounce annual range. Yeah, so I'll start there and just say, we're confident we're gonna meet that, the guidance. It's Kinross' guidance. They tend to be a conservative company and they always tend to meet guidance. Now this, the first quarter is lower than what was expected. We were shooting for 10. We only got 8 winter conditions, the belt fire, which resulted in a bunch of operational challenges, I think is how we described them in the press release. We did come up a little short of what we were originally planning, which was the 10,000. So that's a bit of a miss, but we can make up for that as we go through the rest of the 3 quarters. And so we are still planning to shoot between 40,000 and 45,000oz of Gold production.

4:21 And basically, as I described earlier, as we get into the South Pit, the deeper you get into the South Pit, the more and more higher-grade material you encounter.

4:32 And you do the pre-stripping, so early in this year, the trucks are all stripping waste material, true waste material. And then we get into the higher grade ore body as we go down the pit. So from, and always remember, there's 2 things we're doing here. We're mining and then stockpiling at Moncho, and then we're transporting, stockpiling it at Fort Knox. And then once a quarter in the middle of month of every quarter, we're processing that stockpiled ore. So there is this delay effect between what's mined and we're planning on mining higher and higher grades and actually larger tonnages of ore as the year goes on. And then of course, we're transporting that. So it's a bit like a almost like a caterpillar moves as you transition from or as you transport from the stockpile up to the stockpile of Fort Knox and then once a quarter for a month process that ore.

5:29 So You just have to kind of keep those images in mind as you're walking through

5:36 how this mine plan gets executed. So short, the bottom line is we're sticking to the plan. We continue to stockpile that low-grade mineralized waste. That's gonna come in at the end of the mine line. We never process or bump low-grade ore for high-grade ore. If you've got high-grade ore, you're always going to get that up to the mill as quickly as you can. Bottom line,

6:05 we were a little shy in Q1 from the original plan, mainly due to weather and the belt fire, but we'll make up for it in the next 3 quarters going forward. Makes sense. I like that caterpillar metaphor. That's a good way to think about it. It's a good visual. It is how the whole process moves forward. Yeah, no, it's great. I like that a lot. On the cost side, reported cash costs of 2,692 and an ASIC of $2,778 per ounce sit above your full year guidance bands. How should investors think about the relationship between Q1 unit costs and the annual ranges when the vast majority of your ounces are still ahead of you and what mechanically brings those numbers down as this year progresses?

6:54 Yeah, so it basically goes back to this mine plan and it's both tons and grade. Again, in the early part of the mine plan for this year, we're doing all that pre-stripping and so the equipment is busy moving waste, tons of waste and not tons of ore. As the year progresses, you're moving more tons of ore to the stockpiles at Moncho and at higher and higher grades as you go between the beginning of the year and the end of the year. And then of course, you're transporting that ore and you're a quarter behind every time when you're transporting the ore. So if you're, and I'm just giving examples, if you're transporting 0.15oz

7:39 per tonne, or sorry, you're mining 0.15oz per tonne, 1 quarter in the pit, it's not getting transported until the end of the next quarter and when you're processing it through the mill. So just, it's just progressive and progressive. So in like Q4, where we're solidly in the South pit or the main pit And in high-grade material, that's probably going to be around a quarter ounce per ton. You won't actually see that show up in the middle of Fort Knox until early next year, which is why 2027 is such a great year, because now you're solidly in the main part of the South Pit and you've got all the equipment focused on mining ore. That's why we're projecting 75,000oz to 80,000oz

8:27 of production and at really low cost because all your mining equipment is mining ore and not busy mining waste. So that's how the mine sequencing was planned originally in the feasibility study. And what we're busy and why we're confident, I guess, in meeting our guidance for the year, and in particular, our guidance for next year, of course, which is gonna be a banner year, so. Very good. Mike, over to you this time. The headline net loss of 14.3 million is going to draw some attention, but the bulk of it comes from a $19 million non-cash hit on the derivative block. Can you take investors through how you'd encourage them to read this quarter's P&L, particularly the bridge from your adjusted net income of $4.7 million back to the gap figure?

9:19 Yeah, good morning, Bianca. Yeah, no, thanks for the question. So yeah, so the net loss does include a big derivative loss and that derivative loss also includes a $51M recognized loss and that's all driven from early settling those 15 and a half thousand ounces of hedges. So that was a huge driver of what really, what drove that loss. But you know, there are other components to the loss that I think that listeners need to think about as we move forward. You know, we do expense all of our exploration. So, you know, during this period, we had 3.8 million, which was mainly related to the Lucky Shot exploration drill program. But looking forward for the remainder of the three-quarters, we got programs at Lucky Shot, Johnson Track and Kittasalt. So, you're going to have other expenses feeding into the loss. And then just looking, when you kind of compare what we did in this quarter versus the Q1 of 2025, the peak Gold JV had a much bigger quarter last year in the first quarter. And so you saw like a US$22M income inclusion from the peak JV last year. This year was only 12. So, as we deliver on, execute on this plan

10:23 this year, you're going to see the equity income go up each period and normalize, and especially in Q4 when we have a much better quarter. And then just back to kind of your adjusted net income, the hedge contracts are really what drives this calculation. And so we have materially reduced those during the quarter. We're down to 22,000oz now. So these adjustments are going to be muted or gone effectively by the end of the year as our intention is still to fully deliver into those and pay off the debt by the end of the year. On a related note, the balance sheet movement might be the most underappreciated story in this release. Cash went from $64.8M at year-end to $97.5M at the end of Q1, even after you wrote a $46M check in February to settle hedges.

11:16 Can you unpack what the equity raise, the JV distribution and the hedge restructuring did for the balance sheet? And where do you expect to exit the year on cash?

11:26 Yeah, well, the balance sheet is in a much better position and for a few reasons. We have more cash and we have less hedges, but if you really break it down, when we started the year to where we are at March 31st, the main driver of the increase in cash is from the Dolly Parton merger. That netted us US$36M at the time of the merger, which was right at the end of the quarter. The equity raise, we raised US$50M, but that basically went all out the door to pay for the hedge settlement. And then we have the distribution of US$9M that went in and that's helping fund operations,

12:02 also paying down debt and just corporate costs. So the main driver was the dollar bargain margin. Continuing the conversation on hedges here. You now cut the hedge book to 22,000 ounces and the debt to 13.6 million. Both of which you said will be fully cleaned up by year end. With spot Gold where it is and the second campaign processing higher grade ore, what does an unhedged debt-free contango look like from a free cashflow capacity perspective heading into 2027? Yeah, no, and 2027 is our biggest year we're expecting. Right now, 26 is a lower year, 40,000oz to 45,000oz is the Gold production. 27 is more like 75,000oz to 80,000oz production.

12:49 We've given guidance at US$3,700 Gold price. And if that's the Gold price, then we expect about US$165M to US$175M in free cash. If you use a US$5,000 gold price, that number is closer to $225 million. So, as we exit this year, which we should exit the year with cash in the bank, in a healthy position and be debt free and hedge free. And basically all that money is coming to us next year. We'll get to appreciate the whole upside in the Gold price. Rick, anything to add to that? I think that says it all. Next year, as I said, it's the banner year. After that, we go back to more of the average years after that. So, but today's gold price, we're gonna be in the 200 plus million neighborhood in terms of free cashflow. And again, hedges paid off, or hedges delivered into and debt paid off. So we're gonna have, it's a great balance sheet.

13:48 No, it sounds like it can be a very exciting year ahead. Switching gears a little bit, we were talking earlier about how the war in Iran might impact inflation. How might it impact fuel prices in Alaska specifically? Yeah, so we get this question a lot. We've been on the road, so we've been talking a lot to investors. And I think it's good just to address it because so a year ago, diesel prices in Alaska were about 25, 30% less than they are today. Now, we haven't really seen a huge impact to date in the cost of diesel fuel, but it's coming because we usually buy our fuel a year ahead of time. And so it hasn't really hit cost yet, but it will. And we're certainly seeing it when we're arranging our exploration projects and arranging helicopters and for our project that at Johnson Traff, we've got fuel and we're moving a lot of equipment around. And so we're definitely seeing the impact of the higher diesel prices at the exploration stage. And I suspect we'll see it at the mining site, at Manchur in the second half of the year and going forward. We'll see what happens in Iran And if it gets resolved and prices go back down, it might just be a bit of a flip. But just to frame what the impact will be if it stays, if that's what we're stuck with, $6 a gallon diesel prices in Alaska. That's what

15:18 it costs us today. And a year ago was 450 or less. So that's the cost of the pump. Obviously we're buying bulk, so it's a little different, but the percent increase is gonna be roughly the same. And so just walking through that, transportation is about 1 third of our costs. And so about 1 third of that cost is fuel related. So if your fuel prices are going up 10%, or sorry, 30%, that's results in about a 10% increase in the overall costs for that segment. So that's just, you know, it's a bit of a thumbs up, but I think it's fairly accurate for where we are. And we'll just have to see how things move forward. And If we're stuck with $6 a barrel, $6 a gallon fuel in Alaska, that's what we can expect as an incremental increase going forward. So not a huge impact, but not insignificant.

16:15 But of course, when you have $4,700 gold price, that more than makes up for that small increase in cash costs. Yeah, no, that definitely helps things for sure. Switching to the development pipeline, You put real capital behind LuckyShot this quarter, including the agreement to acquire the underlying lease and extinguish the 2% NSR royalty. What did the underground drill results have to do with the timing of that decision? And How does owning the project outright change the economics you'll be putting into the H1 2027 Feasibility Study? Yes. So, buying out the underlying owner was opportunistic. I think, you know, the Gold price has gone up.

17:03 He's owned the project a long time and so I think it was opportunistic for him to say, hey, you know, are you interested to buy my property and buy the Royalty? And we're like, yeah, we like what we're seeing. The drill results, they weren't part of the overall dynamic and we just didn't get great drill results and say, hey, you don't want to go sell your property. It was more the other way around. So definitely opportunistic. The drill results certainly support our position that we've got a mine project here, an exploration project that we believe can become a mine. We'll continue to actually get the drill program underground. We're taking a little bit of a break right now as we transition. We finished drilling all the drilling, doing all the drilling on the 2080 West Drift.

17:55 We get the miners in there. Remember that high-grade vein we hit, the KM vein? The first thing the miners are going to do is extend that West drift tunnel another 100m so it's above our heads and we can drill it properly because it's at right angles to the one we are supposed to be drilling, which is the lucky shot. And then meanwhile, we get the drillers back and then we'll finish up doing the underground development on the other 3 drifts underground. Then we got this summer, we'll transition to drilling the surface from the top of the mountain with surface drills and get that work done. And then we'll get back underground in the fall time and finish out all the drilling there.

18:42 So busy season of drilling, it's about $21 million program, 18 to 20,000 metres of drilling. Most of it's underground, but there's about 5,000m that we'll drill from the surface there. So lots of catalysts, lots of news flow. And we're really pleased to buy out the Royalty in particular because that will be an $80 an ounce savings basically for every ounce of Gold we mine there. So we think that adds long-term value for the shareholders. Totally makes sense. Switching gears here, Kitsault Valley has a 40,000 metre program starting in June with a new resource estimate landing by end of this quarter. For investors who came in through Dolly Varden on the Dolly Varden side of the merger and are watching this asset very closely. What does a successful 2026 field season at Kitsil look like? And how does the timeline to an initial assessment fit alongside Lucky Shot and Johnson Track?

19:43 Yeah, so obviously we're very excited to get the drills turning back at Kitsil. Every time you're drilling there, you're announcing drill results are among the top 10 drill results in the world. So that's always fun and exciting. It's going to start with the mineral resource estimate update that will be coming out by the end of June. We're working on it now. I was just talking with Dave Blair, our DB exploration and Rob. And that work is ongoing, but we're basically on schedule to get that MRE out as planned by the end of June. And that then will be used as a sort of template on, okay, where else are we going to be drilling? We expect a significant increase in the Silver resource and probably something in the neighbourhood of a 50% increase.

20:36 And then the Gold resource, mostly it's not really going to be a big increase in the total ounces because remember the Gold resource is up at homestake and it's somewhat separate. Most of that drilling was infill, so it's going to be more of an upgrading into the measured indicated category. But that will come with probably an increase in grade because you're focused on drilling those high-grade zones. The 40,000m drilling plan for this year will play off of that mineral resource update. So we want to basically plan towards getting a preliminary economic assessment or initial assessment of the SK 1300 rules.

21:23 Basically outline a mining plan for the deposits. There's 5, 6 main deposits that we have. Torbrett is the one that has the largest single silver resource in it so far and the road goes right there. So that's one of the activities we'll see is upgrading the road to the Torbett mine. Power line is not too far away, so we'll be making all those assessments from an engineering standpoint, incorporating that into an initial assessment like we have for the Johnson Track project. But that won't come until the second half of next year. But the drilling is going to focus on extending those high-grade zones at depth because we want to put it together a really good mine plan. And so I think you're going to see a lot of good drill results come out of this year. There's a couple of targets, new targets that we've identified that haven't been drilled at all. And so, we want to always have some new exciting drill results to talk about.

22:27 And so we've got some, a portion of that 40,000 meter drill program. I'm going to guess around 10,000 metres of it is going to go to new exploration targets. So always something exciting when you've got such a large and productive land package like we've got at Kitsault. So Very exciting year for results there. Well, talking about exciting, the Dolly Varden integration, ringing the bell at the New York Stock Exchange, the TSX listing last month, the Lucky Shot acquisition, the Fast 41 progress at Johnson Shact. It's a lot of corporate activity layered on top of really stellar operationally transitional quarter. From a management bandwidth standpoint, how do you and the combined team stay disciplined across all of this without taking the eye off of a man show execution?

23:17 Yeah, It's all about execution right now. We've got a good team. We we started with 10 people at at Contango and Dolly Barton had 10 people. So now we got 20. But we all know what they're doing. They're all very focused. And we were just talking the other day with mobilizing and getting the camp set up at Kitsault. We're mobilizing the same things at Johnson Track, but the team's done it before, and it's kind of wash, rinse, repeat sort of exercise. And look, we are going to continue to grow. And as we think about more of a development plan here, we're going to continue to add more people. So, yeah, we're definitely the integration is done.

24:04 You know, we've been on, Mike, Sean and I have been on the road here along with Bonnie for basically the whole month of May. And I'm looking forward to getting all the interviews wrapped up and getting back up to Alaska and getting out in the field and seeing the drill rigs turn. Well earned. And with that, actually, we're coming to the tail end of our talk today. We have a few audience questions and then I have one more question for you, Rick, to wrap things off. But let's jump to the audience questions here. One of our listeners asks, please explain a loss on derivative contracts related to the hedges in the amounts of 19 million and 45 million. I do think we went through this a little bit, but maybe for folks who are tuning in late, if you wouldn't mind, Mike.

24:52 Yes. So we valued the hedges. You've got to use this forward curve Monte Carlo simulation, but basically at the beginning of the year, you had 43,000oz of hedged Gold at about US$4,200 spot price. So, the forward curve is going to be a bit higher, but you had to value that. That was a little over US$100M. During the period, you've effectively delivered 17,000oz into the hedges, US$1,500 delivered into the naturally delivered into them and then US$15,500 cash settled. At that time, you valued those hedges being early cash settled and that at that time was about US$1,400. When that occurred, you had a realized loss on the hedges, effectively for US$51M.

25:42 And So that gets recognised during the quarter, and then you get to the end of the quarter. At the end of the quarter, we're sitting with 22,000oz of Gold remaining in the hedges. And so using, the Gold price was about US$4,400 an ounce spot, so maybe that 4 price is US$4,500 or US$4,600. So you value that on the 22,000oz, which gets you closer to that $65M, $70M on the derivative liability. So it's an odd one because you're early cash-shuttle, but normally it's not as aggressive and you don't really see that massive realized loss during the period. And so going forward, we're going to be done or lower on the hedges, you're going to see smaller swings. Makes sense.

26:28 Another question here, what is the plan for the use or recovery of a low grade pile, will it become a leach pile? Sure, no, it will not become a leach pile. This is low grade, again, technically called mineralized waste. And that's because it's not in the mine plan. That's the way you have to sort of account for it. And it will only come into the mine plan when you're done running your normal material that you've had in your Feasibility Study and you've got this big pile of low-grade rock and you'll go, what's the Gold price? Oh, Gold price is $4,700. Well, we've been using $3,700 to do the mine planning for this low-grade stockpile, waste pile.

27:16 So if the gold price is about $3,700, you're going to figure out that that's going to go to the mill at Fort Knox. So it's got to be able to afford the transportation. It's already been mined, so you've already accounted for the mining of it. I think we've already, and Mike correct me here, but I think we're starting to have that environmental sweeping fund. We're starting to fund that. So at least in part, some of those ounces will already be accounted for to get back into the pit because that's what the mine plan was. Now, We don't have to put that stuff back in the pit if they can make money. And if it pays for the transportation ride up to Fort Knox, it'll get processed. But it won't happen until the very end of the mine life. And of course, we don't know what the gold price will be at the end of the mine life. So we'll wait until we know that, but it's already been paid for. So it's, they're relatively cheap ounces.

28:07 Makes sense. Folks, this next question will be the last question of the day before I get into it. Big thank you to everyone who attended live. If you have a question, it just occurred to you, and you want to send it to the container team, feel free to send it in. We'll make sure they get it. Preemptively, thank you, Rick and Mike, for being here as always. It's such a pleasure to have you. But I want to close things off today by asking you, Rick, the magic question. What are you most excited about for the rest of 2026? 60,000m of drilling. I'm excited to see what this campaign is going to look like at LuckyShot. We will get that going here in another month or so. We get the tunnel built, we can get the rig back in there and start drilling. And 40,000m of drilling at Kit Salt. I know we're going to be in that top 10 drill results worldwide in terms of both Gold and Silver there.

28:58 So there's all the reason to be excited about that as well. It's going to be a very busy year for the company, but the team's ready. We're already starting to mobilise and get ready for the drilling at Kitsault. We're already drilling at Lucky Shot, So it should be a fun year. Meanwhile, Moncho just keeps, every quarter is gonna be a better quarter than the last quarter with this year. Again, this year is the low production year overall in the mine plan. And I forgot to say that, mentioned the belt fire at Kinross. That's now all been fixed. I have to hats off to the team at Kinross. We're working hard conditions during the winter to get that thing fixed.

29:45 It should be smooth sailing from here. But it's been a, that first quarter was a struggle, no question. And we'll meet the mine plan and get to 40,000oz, 45,000oz of Gold. And hey, we've got $4,700 Gold price. So what's not to be happy about? Great final words Rick Mike. Thank you