Automated transcript · Written by software from the replay's audio. It can mishear names and figures; the replay is the record.
27:54 IRR. So that's how we approach it, is create a robust, resilient project that works at a base case of $3,800, but then the upside that it provides for investors in a rising Gold price environment. And if all of us on this panel today are correct and we get back to those kind of $5,000 or higher levels, then there's a huge amount of upside leverage for investors. From a processing perspective, we moved from a heap leach to a CIL project. And absolutely, the Gold price environment that we're in today was a big contributor to that. Using a CIL process, we can recover Gold a lot quicker.
28:44 We get higher recoveries and they call it 90-91% range. We're able to get into the fresh material, get much higher recoveries from that fresh material. So for all of those different factors, the additional upfront capital of 350 million for a CIL, when we ran the numbers, it made sense to go that route. So that played a factor in moving to a CIL operation as well. Thank you. One thing I'll ask again, Luke and Rick, and then Brian, I'll get you in on it too, because I'm curious your perspective on it. But I'm wondering for the really specific micro impacts on both companies for the oil price. So we talked about oil price as its relationship to the gold price, but also obviously increases costs on site.
29:36 So, Rick, my question to you is, Moncho is mid-transition right now from the North Pit to the South Pit, but the higher grade campaigns do to come in. How do you protect margins through an energy shock like this? Yeah, so we actually used 100 dollar a barrel oil in their feasibility study. So we've been lower than that the entire time we've been in production. And it'll ask, do we buy fuel a year ahead? Typically, The lion's share of your fuels that we're using now was bought last season. That will transition, it'll be higher costs going forward. Now, fortunately, we've got higher grades going forward as well. So any mining operation needs diesel.
30:25 Run the trucks. We're going to use more diesel because of the transport aspect of the DSO model, the direct shipping ore model of mining ore, not paying for all that processing at site, but then transporting it to a much larger existing mill at Fort Knox. We're still using the Feasibility Study. We haven't really changed the mine plan from the Feasibility Study. We're stockpiling mineralised waste. We know the price of Gold is higher than the $1,400 we used in the Feasibility Study. All that marginal material is called mineralised waste. Technically, it would have to go back in the pit and be covered by water, go back in the North Pit and be covered by water so that it wouldn't oxidize.
31:23 But now it's ore. It's a lower grade ore, obviously, but it'll be the last stuff that will end up going through the Millet for NOx. We get a double improvement with the higher prices of Gold because There's more gold to process, but also we don't have to pay to put it back in the bottom of the pit. That lowers our environmental costs and closure costs. So that'll be an overall benefit. And As I said, we assumed $100 barrel oil in the feasibility study. So right now, not much has changed for us and for the economics of the project.
32:11 That's fortunate. Luke, I'll throw it to you. Like we've talked about, obviously, oil spiking and it goes into mining costs, especially for open pit operations. How are you thinking about CapEx and OpEx inflation in Enchi? And let's say we're all wrong and gold stuck at 4,000 for a while. Does that still leave developers like you guys with plenty of margin to work with? Specifically for our pre-feasibility study, which we put out last month, we got quotes from 3 different contractors. Those quotes came through primarily in Q1 of this year. Our mining cost comes in at $3.24 a tonne, processing around $12.50 a tonne. Those quotes from a mining contractor perspective were all within 8% of each other, so Very defendable quotes that came from independent mining contractors.
33:09 Then specifically, our project, if you look at the study that we've produced, we're using natural gas to run the mills. In-country, Ghana has got a big offshore oil and gas industry. There's a company called Genser that actually has almost 500km of natural gas pipelines running through the country. So our study contemplates tapping in to one of those natural gas pipelines and feeding the operations with that natural gas. So obviously not having to use diesel or heavy oil to run our operation helps in an environment where we're seeing oil spiking.
34:02 But then on the mining side, obviously we did get a number of independent quotes come through. The other thing we looked at is the last time we saw an energy spike similar to what we're seeing today was when the Ukraine war started with Russia. You know, that lasted for about 6 to 9 months. And then we really saw the oil price come back and normalize. We're seeing now another spike with the war in the Middle East, but our expectation is that it will revert back and normalize over time. So as we move towards construction production, we're also expecting to be in a more normalized oil price environment.
34:48 In terms of your question around margins, at a $4,000 gold price globally, we're seeing some of the best margins ever for gold companies. So There is a lot of cushion within the Gold price and the average all-in sustaining cost globally for an increase in oil prices. Typically, you'll look at anywhere from 15% to 25% of operating costs will be tied to oil. There's lots of margin in there today. Specifically for our project, if you look at the life of mine, we're just below $2,300 all in sustaining costs. We've got about $1,700 of margin if we're looking at a $4,000 Gold price. If you look at our first 3-years of production, we're below $2,000, so over $2,000 of margin.
35:48 In today's gold price environment, globally, there is room for the energy spike that we're seeing today. Yeah. And 2000 bucks, certainly nothing to sneeze at. Brian, I'll get you in on this, just to kind of close the loop before I get into silver. But how are you thinking about companies right now in terms of the CapEx and OpEx of their operations with the increasing oil price? What makes you give a company a second look at how they're dealing with that. Oh, you're on mute, sorry. Oh, Brian, you're on mute here. I'll request unmute there for a minute. Sorry about that rookie mistake. I'll build or follow up on what Luke said. You know, the last time we saw a significant increase in oil prices over a longer term, while the gold price was rising was right after the 2008 global financial crisis.
36:47 Gold from its trough to its peak went from about $700 to about $1,900 in $3,900 if I remember correctly. So it nearly tripled in price, but That was one of the first times, if not the first time we'd ever seen that the mining stocks really didn't leverage the movement in gold because the oil price went up to $140 a barrel. And the mining companies that weren't making money at $700 and were barely making money at $1,900 really couldn't absorb that kind of increase in energy prices and oil prices. This time is different. You know, we have, again, huge margins. I mean, the gold price is between $4,000 and $5,000. The price of oil has gone up about 15, 20% and the gold price going back from those old days and really in this market has gone up over 100%.
37:43 So yeah, it has an impact, But these margins are still amazing. They're still the best we've ever seen in the history of modern mining. So, yeah. And when I look at a company, I actually, these days, I'm encouraged If their ASIC is going up, if their OPEX is going up, not so much your OPEX, but really their ASIC, because I want them to put as much gold through the mill as possible. You know, this ASIC should be rising in this kind of a market. They should take all of that. You know, they really need to know. We disparage mining companies in a high and a low gold price environment for high grading their minds in this kind of an environment. They're low grading their minds and really they should be.
38:31 They should be making as much gold as they can at these prices for their shareholders. So you know I think it's encouraging that they've been better stewards of shareholder capital in this cycle so far. And therefore you know a lot of that money a lot of that ASIC that's they're throwing back into the toward coal production is not being wasted. It's much more efficient. Eventually they're going to start spending money like drunken sailors because you know human nature. And we all hope for that day to come very soon. All of us whose portfolios filled to the brim of junior mining companies. But right now, it's a great thing if they just grow as much ore through the mill as they possibly can.
39:19 Interesting perspective. I like it. I want to talk about Silver because we've most stuck to Gold today, which makes sense. But Rick, I know in talking to your team, sometimes describe Silver as the drama queen, which I appreciate. It traded in the high 50s this week, down hard from the peak, but people forget, still up roughly 50% over the course of a year. You've got 65Moz of it at Kitsil Valley with the Resource Update due relatively short order and a PEA targeted for next year. What does Silver at these levels versus Silver at January levels mean for how aggressively you push the project? Or is it same in either environment? Yeah, I think it's actually the same in either environment. We just get more value when investors are excited about Silver and thinking it's going to the moon, which Silver investors have a habit of doing. And that's why I refer to it as the drama queen, because it's just it doesn't know whether it's a precious metal or a base metal.
40:19 And in fact, it is both. So I think the drama queen description is pretty apt. But in terms of our Kitsault project, we've got a plan to basically a 4 or 5 year plan to get that into production as a DSO opportunity. It's high grade, so it fits the model, it's on the water, it's easy to move things around, move a transport ore to a central mill, which we're in the process of identifying and planning. We'll have the resource update based on the Dolly Barton historic information, not this year's drilling, but the past drilling. That should be out here in a few weeks. We were trying to get it done by the end of the month, but I think the timeline is going to slip a little bit with our QP being busy on other stuff, but we'll get it done.
41:14 I think we're going to be approaching 100Moz of Silver. And then certainly with this year's program, we've got a 40,000m drill program. The guys are drilling 500m a day out there with 5 rigs, each going about 100m a day. I was actually just down there and we're probably going to get 50,000m of drilling out of this year's program. We're going to continue to expand the resource beyond 100Moz of Silver. This is 300-400g Silver. Plus, you've got some base metals, Lead and Zinc with it, some Copper here and there. Plus you've got homestake with 1 million ounces plus some Gold. It's an ore body. These are the grade of homestakes in the 6-7g per ton gold range plus some silver and then, you know, Kitsal and Torbritt, Kitsal, they're all in the, you know, 300-400 gram range. So I think you can make silver metal for about $25 an ounce.
42:20 So if we're getting a low price of 50 something, I'm a pretty happy camper because if you're producing 5 million ounces of silver, which is where we envision startup, and Again, we're going to have over 100 million. So we can start it at 5 million ounces and then build that up to 10 million ounces of silver production. And I think achieving a $25 production price is realistic. You just have a hell of a margin. And the Silver spikes to $100, $200 because of the demand side, which is going into batteries and solar panels. China just announced another new big push, energy push in solar panels.
43:12 That's that demand side of silver. It's base metal attributes. The electrification of the world is taking place. You can argue about whether, what the pace, what pace it can actually achieve that. But There's no question we're heading there. All the AI stuff, everything electronic needs silver. It's the best conductor. I think it also needs gold because gold's almost as good a conductor, but it doesn't corrode with bacteria like silver does and copper does. Gold's a noble metal and nothing, not even the bacteria seem to like it. People do forget we're all Monsa Musa. We all have a bit of gold in our pocket at all times.
44:01 All the time. Certainly all the time. Brian, I'll throw you 1 from the chat. This is generally a question I get a lot. I'll throw it to you slightly different than it was worded in the chat. But how seriously do you take the silver gold ratio personally as an investor? Is it a number that you keep track of? Is it 1 that you work towards? How do you think about that ratio generally? Yeah, I keep track of it. But I don't think it's a good timing indicator. I think it argues for relative valuation, when you should broadly maybe shift if you're kind of a trader slash investor where you maybe switch gold to silver and vice versa. A falling ratio is, you know, denotes a bullish gold bull market. Gold drives the bus. It creates the bull markets or everything else.
44:50 But, you know, silver is interesting that for decades, I mean, many, many years, in every bull market, it's always leveraged gold in a long-term gold bull market. And that's the simple reason. You don't have to analyze it much further than that to understand why silver is very likely to leverage gold in this market. But right now, things are different because of that industrial demand. I've dismissed the industrial demand for silver for decades As being really insignificant because if it was only industrial demand for silver, then the price would be much lower You know for years 5 dollars an ounce or something like that and that it was monetary demand that monetary cachet in history that gave it that premium.
45:37 And industrial demand was actually dampened by the fact that monetary demand kept silver prices relatively high. Now we've gotten to the point where the applications, the industrial applications for silver are about, if they haven't already, take all of newly mined silver off of the market. So you're removing, you're not necessarily driving the price but You're removing supply from that monetary demand. So that creates a dynamic. The other thing that happened over the past year and in that run that we saw in the silver price was that silver has gotten into applications where it's irreplaceable where it's critical. So for the first time in my history in this and my career in this market, industry had to bid against monetary demand to get the silver it needed.
46:27 And it had to bid to bid and would bid whatever was necessary to get that silver supply until we get above prices around 125 or $130 an ounce for silver. It doesn't really affect say solar panel demand. So it's really interesting right now. And in that, I think the industrial component of silver, rather than being just a stick that the traders would occasionally use to beat over the silver over the head with when we saw an economic slowdown. Now, it's become a really significant, if not the most significant, bullish component or factor for silver. No, that's helpful. Luke, I want to get you in on jurisdiction, because we get a lot of questions about it over email. So in the chats mentioning it, From where I sit, in my opinion, you're in the safest, best jurisdiction for mining in Africa. In a world of sanctions, supply chain weaponization, resource nationalism, how much premium do you think the market is paying for safe jurisdiction right now? And in your opinion, should it be paying more?
47:35 Yeah, I think, I mean, one way to simply look at it is where are the major companies operating, where are the major companies buying assets? And when you look globally, obviously North America, Australia are 2 go-to jurisdictions for companies to be operating and buying assets, and rightfully so, long history, very good rule of law, mining code, all of those aspects in place. When you look at Africa specifically, And I'd encourage anyone to listen to go and look at the various groups out there who monitor security, who monitor free and fair elections. And you'll see that Ghana always pops up in the top 3 across Africa.
48:30 When we then look at what the majors are doing in Ghana, I think that speaks for itself in terms of what a solid jurisdiction it is. You've got Newmont, who's just invested another billion dollars into Ghana. Ghana now represents about 15, 15% of their global production. So for the biggest gold company on the planet to have that kind of exposure and have made that kind of capital investment speaks for itself in terms of what a great jurisdiction it is, but also how well minerally endowed it is as well. You've then got the likes of Anglo, Goldfield, Zijin, 3 of the other top 10 largest gold producers who've made significant investments into the country and have major operations there. You've then got a host of mid-tiers operating there. So Ghana, it's Africa's largest gold producer. It's the 6th largest Gold producer globally.
49:33 It's got 4 of the top 10 largest Gold producers on the planet. For all of those reasons, that's why we refer to it as a Tier 1 jurisdiction to be operating in. As a result, you see a lot of M&A in the country and companies will put a premium on that jurisdiction relative to others within Africa and globally. Great. I'll throw it to Rick. Do you think you're getting the credit owed for being in projects in Alaska and now 1 in British Columbia? Actually, I don't think any of the mining companies are getting credit for the cash flows they're generating. A lot of people talk about jurisdictional risk, but you've got Beric moving to Pakistan in not a great location within Pakistan, bordering Iran and Afghanistan, working in Pakistan, just doesn't seem like the best jurisdiction to work in, but yet they're spending a lot of money there.
50:44 I mean, look, gold occurs where it is. And so you have Different scale miners go there and they get discounted, maybe if they're working in Mali or if they're working in Sudan. But as Luke demonstrates, Ghana is a great jurisdiction. It's been a great jurisdiction for a long time. I really don't think any of the gold miners, regardless of jurisdiction, are getting the valuations that they really deserve with most of them operating at a $2,000 margin. When I first started in the mining business, in the gold mining business in the 80s, and the gold price after it spiked up to over 800, it was in that sort of 3 to $400 range for a long time.
51:33 And the gold business was very happy and gold investors were very happy with a $50 margin. I mean, what the heck? Our average cost is about $1,700 for the life of mine. We're higher this year, we're going to be lower next year because of that pre-stripping that you talked about transitioning from north to south pit. But geez, you know, a $2,000 margin and we're in the doldrums. And it's a bit surprising. And all I know is, you know, when the majors are keep stacking up cash, as Brian said, at some point, investors are going to say, OK, stop with the dividend and stop with the share buyback and grow.
52:30 Because we want more exposure to gold. And we haven't seen that yet, but we will see that. Yeah, there's a time to act like smog on a mountain of gold. There's a time to be less conservative. It depends. Brian, I'll get you in on how you think about jurisdiction right now. And has that changed in recent era of instability? Or have you always thought about jurisdiction the same way? Yeah, there's a few no go places in the world. I think everybody recognizes where they may be. But generally speaking, I think the market doesn't care right now. I mean, it doesn't care, as Rick just said, when companies are making over $2,000 an ounce, doesn't care when they're pulling up cash and gold, like you just mentioned, like a dragon sitting on top of a hoard of gold.
53:20 So they just don't care. So the jurisdiction doesn't even factor into the situation. If the numbers on the on the quarterly, if the numbers in the bank accounts don't matter, I don't think they're looking that deeply to really care about the jurisdiction. You know, one of the, and I hope I'm not getting ahead of you here, but one of the comments in the chat is about, you know, when is Wall Street going to care? When is it going to look at gold and miners and silver and the like and, you know, respectably? And I think it's the difference here is that it's starting to look at gold as a more respectable asset because central banks of all things have been buying it for a couple of years. So that's helped from the respectability standpoint.
54:08 But gold isn't cool to Wall Street, you know, to the traders. So I don't know that we'll ever bridge that gap. If you look on CNBC and you look at those price bugs that turn around with the various prices, you'll see the price of Bitcoin come up about 20 or 30 times more frequently than gold, which is I think its closest analog in the investment sector. And even sometimes Bitcoin comes up more than the Dow. So, you know, that's got that cool factor. It's also where a lot of the advertising and money is coming from. You know, And the guy that's putting up the data on the screen, he owns Bitcoin and a lot of it. So he's putting it up there on the top.
54:55 So yeah, I don't think gold will ever be cool and accepted like that. I think it's getting more and more attention because the money is being made and when we start to see these majors buy up to juniors, I think mainstream and Wall Street are going to start going down the food chain a bit and trying to realize some of those gains that are going to be coming as well. So, yeah, jurisdiction, I think it's a checkbox that Wall Street isn't even checking right now. Yeah, no, fair enough. Now I know Conscious we only have 5 minutes left and I wanna give everybody an opportunity to talk about their projects, what they got going on. But I also want to put everybody to a number because I love scaring people right at the end of a webinar. So I do want to end with the question everybody wants answered in the chat, on email.
55:41 I'll start with you, Luke, if you don't mind. So you can be in the hot spot first. Where do you think metals finish in 2026? So Gold, and if you'd like to speak to Silver, you can. And then why should people take a look at Nucor Gold right now? I think for all the reasons we discussed today, we'll continue to see Gold consolidate higher. And I would expect it to close the year between $4,800 and $5,000. For us at Nucor and our Enchi project, we did put out a PFS last month that used a base case of $3,800. We stress tested it to that base case level and our project provides phenomenal returns if we get into that $4,800 to $5,000 range. At 5,000, you see almost a doubling of the NPV relative to the base case of 3,800.
56:39 At 5,000, you've got an after-tax NPV of 960 million. That compares to a market cap today of roughly US$70M. Back to some of the comments about the markets overlooking companies and overlooking the producers right down to the juniors like us, And that disconnect between the fundamental value of the project and where we're being priced in the market today, I think creates a real exciting opportunity for shareholders. Plus, we're in the midst of an 80,000m drill program. There's a fundamental underpinning of value that I've just talked about. But then beyond that, we've got an additional roughly 35,000m of drill results that'll come out between now and roughly Q1 of next year.
57:34 And we can wake up tomorrow and find out we've had a nice big wide intercept. And that could be, you know, that could add to the overall project value as well. So exploration upside fundamentally underpinned by a very robust project. Awesome. Brian, I know you have to leave right at the hour, so I'll actually throw it to you next for a price prediction, but also please let people know why they should come to your excellent investor conference in November. Yeah. And for the price prediction, I'd hate to answer your question with another rhetorical question, but how stupid do you think I am? I've been in this business long enough. But that's a given time for the market to realize that there won't be Fed rate hikes. You know, that's going to come probably September, October-ish before the market realizes that and we get back on the train upward, I would say maybe 4,600, 4,800 by the end of the year.
58:30 As to why people need to come to the New Orleans Investment Conference, it has by far the best lineup of speakers in the industry. I encourage people to go to neworleansconference.com, look at our speakers. We have a money-back guarantee. We're so confident in the value of our conference. If you're not satisfied for any reason, just ask us or tell us, and we'll give you your registration feedback. We have a lineup that features people like Grant Williams, Doug Casey, and what's probably his final public appearance, according to him. Daniel DeMartino Booth, Michael Green, Brent Johnson, Dominic Frisby, Peter Bookvarge, Jim Iorio, Peter Schiff, Tavi Costa, George Gammon, Frank Joustred, on and on and on. The best lineup, again, you'll see anywhere at the crucial time in the markets.
59:19 So, you know, I really urge people to go to New Orleans conference.com and check it out. Thank you, Brian. And yeah, my personal review is pardon my French, you'll see a lot of graphs that scare the shit out of you. And it'll make you make financial decisions. So I do recommend it. Rick, I'll let you close it off with, if you dare, a price prediction, but also why people should look at Contango Silver and Gold right now. Well, they should definitely go to New Orleans. Not only is the conference a great conference, but New Orleans is just one hell of a fun city to hang out in for a few days. I think we're going to see Gold in the Doldrums here for probably through September or so. But I think it does pick up and I won't be surprised to see it in the upside of the mid $4,000s by the end of the year.
1:00:06 And then I think moving higher next year specifically. In terms of why invest in Contango, We have a set of assets, Canada, United States, Alaska, Canada, Alaska, British Columbia. They're high-grade. We're currently producing about 60,000oz of Gold. We're more like a Royalty company right now because Kinross is the manager and operator of a Montreux mine. They do all the work. We just get 60,000oz of unhedged Gold now. That's another point where we're no longer hedged so we're going to be exposed to that upside in the Gold price. We have a growth profile with our existing portfolio from 60,000oz to 200,000oz of Gold and starting at 5Moz of Silver that we think we can probably grow to 10Moz of Silver.
1:01:01 We can self-fund that with our cashflow from Moncho. As an investor, the thing that should concern you most is delusion, especially exposure to a junior mining company or junior wannabe mining company. That path to production and cash flow is a tough path. One of the things we've done differently is we're doing it with cash flow from our operating mine and we just watched Ken Ross do all the work. So it's been working out well for us. Yeah. And so I think, you know, Gold in the mid $4,000s before the end of the year. Awesome. Appreciate it very much. I know there were several hundred of you in the room.
1:01:47 Really appreciate your time sticking with us throughout the event. Rick, Luke, and Brian, you had to jump right at the hour. Thank you so much. I'm glad we've solved all the problems now. Nobody should have any questions remaining about where our precious metals go from here. But I hope you both have a wonderful end of your day and everybody in the room. When the room closes, you can continue to request meetings with these teams or with Brian who's not here. And I'll be sure to get those meeting requests and questions through. But I hope everybody has a wonderful end of their day. ♪♪ Bye.
