"Contango Offers the Most Leverage to Gold on a Per-Share Basis" explains CEO Rick Van Nieuwenhuyse

0:00You are listening to Mining Stock Education. We only have 33 million shares outstanding. A challenge you to find another junior producing company that only has 33 million shares outstanding. If you want leverage to gold on a push air bases, I don't think anybody really comes close to contango with only 33 million shares outstanding. No price moves or the silver price moves. You get the best leverage on a push air bases with contango. I'm Bill Powers. It's Mining Stock Education. Thank you for tuning in. Today's show is a sponsor update with contango, silver and gold. Trades on the big board in New York and in Toronto under CTGO. Just by way of reminder, it's a merger between contango or in Dalivard and silver. And CEO and director, Rick Van Neuenhaus joins me again to talk through the projects. Like you mentioned to me off air, this is now an execution story. Your targeting growth from about 60,000 gold equivalent ounces to about 200,000 ounces per

1:05year production plus 5 million ounces of silver production annually. That's your five year plan. Let's start with your producing flagship, the Mancho JV that you have with Kinross. Can you please provide an update on this project? Sure. Good to see you again, Bill. Yeah, we said this year was really an execution year starting with putting the companies together and putting the teams together. And I think we've delivered on that. But starting with Mancho and the production there, we always guided that this was going to be the low production year for the overall mine life. And because of the transition from North Pit to the main pit or South Pit, that's now substantially completed. There's still doing more stripping on the North, sorry, on the main pit. So we'll see, you know, overall this year higher than average cost and lower than average production. So we're guiding between 40, 45,000 ounces of gold.

2:06That's our 30% share. And then our all in sustaining costs have been higher than average. On average, we're looking at 1600. We're well above that for the first half of the year in the, I think, 26, $1,700 range. But that'll come down as we get that pre-stripping out of the way, send a bunch of the equipment home. This is all contract mining with the key with is the main contractor. So the second half of the year, we're in the middle of the third campaign for the year. This well underway will probably be processing months or throughout the month of September and probably a little bit into October. And we're, again, we're guiding towards a total of 40, 45,000 ounces of production. So we'll be reporting on that of course with our Q3 results. But I think the big thing at, really big change at Moncho is as we're getting into that,

3:12you know, heavy sulfide, higher grade sulfide ore in the main pit, that had an oxygen plant to help sparge, rather than just sparge the CIL tanks with air. They're sparging them with oxygen, which just helps the reaction take place quicker and more efficiently with the sanitation of the gold in the ore. And so that's that oxygen plants completed and has been tested and is performing to plan. So that's all good news for that higher grade sulfide ore in the South Pit as we particularly as we get into next year, where we're guiding towards 75,000 ounces of gold production and lower cash costs because, again, higher grades. And we've substantially taken care of most of that pre-strip. Your reserve report for Mancho is your production results matching what you anticipated with

4:14your reserve reports going into the production? Yeah, I think in terms of ounces produced, yes. And the ore body itself. Yeah, I was going to say the ore body itself, and this is not untypical. We see more tons at lower grade. And we're not talking a huge differential here, but in terms of when you do the detail drilling, the in pit drilling versus the model, we're seeing a slightly lower grade and more tons, but the same number of ounces. And so that's not untypical and certainly in a high grade deposit because you tend to want to restrict that high grade in your modeling. And so when we're seeing that more detailed drilling, in pit drilling, that net result is same number of ounces, but spread over a little more tons. Are there any indicators that there's expansion potential beyond your existing life of mine?

5:19Well, we certainly, in North Pit, we mine two levels deeper than plan. So there was more ore in the pit than the model predicted. And again, we did that detailed in pit drilling, drilling, the drilling blast pattern. We mine two more levels of ore in the North Pit. So I think we're going to see the same thing in the main pit and a little bit around the edges, that sort of thing. And that was something that also, when you have sort of unplanned extra ounces, that you bump, you tend to push the other end down the road, right? This is like a train when you have ounces, you have to, particularly when we talk about this DSO model, we have to remember that when you mine a ton of ore, it's going to be, you know, six weeks before it sees the beginning part of the transportation plan up to the stock pile at Fort Knox. And so there's that delay there. And so, yeah, we certainly have seen some more ounces around deeper and around the edges.

6:24And then of course, we're doing about $5 million of exploration work on the rest of the property. And so, you know, we're hopeful that that will yield some positive results as well. You mentioned DSO, just for those that don't know, that's direct ship ore, where Contango basically mines it, puts it in a truck, and sends it to Kinross's Fort Knox mill in order to be processed. Yeah, that's a little different approach than, you know, the typical bilge-roan mill and tailings facility at site. And of course, was the reason we were able to get things into production quickly. And for relatively small amount of capital, because it took advantage of that existing mill and tailings facility and power plant that's at Fort Knox and has been operating for 30 years. So, it was definitely a real advantage. And of course, we've adopted that as sort of our modus operandi, if you will, with our other projects, which we'll talk about here shortly, but lucky shot Johnson Track

7:26and Kitsal all fit that model of being high grade enough to be able to forward that transportation cost to an existing already permitted mill. So you actually are proving the DSO model works, but I noticed this over the last 18 months that, especially in a global market, it's becoming more trendy for companies that are development staged to take a large bulk sample, send it off, tell the market, we're going to get cash from this, and then just throw it out as we're looking to do DSO or direct ship ore. So my question to that regard is, because your business model is built around multiple potential DSO projects, what makes a contender versus a pretender in terms of what makes a DSO actually potentially feasible? It really is about grade and delivering grade, not just a bulk sample, but a mind plan. And so at, for example, at Lucky Shot, we've been busy for going on a year here, putting

8:27underground tunnels in place to carry out the exploration effort, underground drilling effort to do the detailed drilling to come up with a mind plan. So we've also done some surface work this year. We had a summer program between June and August to drill about 6,000 to shyest at 6,000 meters there from the surface. And then now we're back underground. I think the drill actually starts turning tomorrow back underground while we've been doing more tunneling, working, getting those underground exploration tunnels ready for the drill. So yeah, it's putting together a mind plan that can consistently deliver, again, not just a bulk sample, but a five to 10 year mind plan of delivering ore in the neighborhood for in the case of Lucky Shot. We're planning on something that's going to deliver ore grades of 10 to 12 grams per ton. So that's the objective.

9:28We've outlined at Lucky Shot a small resource. It's about 110,000 ounces, 14 grams. That's our resource grade. And we've got a total of about 20,000 meters of drilling, most of it underground, that will complete this set between now and February of 2027. And with that, we're planning and outlining a resource of 400 to 500,000 ounces of gold. And then we'll subset that into a 250,000 ounce. And these are approximate numbers. But something in the neighborhood of 250,000 ounces of reserves, that again meets that 10 to 12 gram, mindable grade criteria. And that's a grade that's more than an adequate to be able to transport to, say, a mill at Fort Knox, just like we've done with Moncho and process the ore there. The other thing about Lucky Shot is it's fully permitted.

10:32So I think that's another criteria that one has to look at when you're evaluating opportunities. And particularly these DSO opportunities is the mind plan fully permitted. And that's the case with Lucky Shot. So once we define the resource and then complete the feasibility study, which I refer to as feasibility light because it is basically just a mind plan and a transportation plan. And then a tolling arrangement with, say, a Fort Knox or, and we're looking at Fort Knox, but we're also looking at two other opportunities that are alternatives. And obviously the feasibility study will tell us which is the best plan. Lucky Shot you own 100% right? 100% and we purchased one of the large royalties on the property. So that's a nice package there. We've got all the land we need from a development standpoint. We bought the underlying owner out who had a mill building and a truck shop and a bunkhouse.

11:39So we're pretty well set up to start mining. Your next project and your pipeline is the Johnson Tract. This is part of the Fast 41 program in the US. So as you talk about Johnson Tract, could you let me know is the Fast 41 program that's supposed to speed up and coordinate all the agencies so that you can get your permits a little quicker? Is that working as marketed? It is. And I have to say, there's been a lot of talk about permitting reform, which we certainly need to happen. But the Fast 41 program, and this is something that started under the Obama administration. So it's not a, it wasn't started by the Trump administration. The Trump administration is using it to advance critical metals more quickly. And the Johnson Tract fits that mold. We've, you know, we're looking at coppers, ink, golden silver, all, all critical metals. And so we, we started the program. I guess we've been in about close to a year. We'll get ready to, we're basically in the data collection portion of the program.

12:44And what, what Fast 41 does in a, in a very transparent manner puts all the, all the reports and documents that we're supposed to put together. And that the agencies are supposed to review in preparation for initiating the permitting process. That's all on the dashboard. So people can go and see, okay, whether this, there's this, this study that needs to be done. And, and then it holds the, the agencies, holds our feet to the fire too, but it holds the agency seat to the fire. If we submit the document, then they have, you know, 30 or 60 days or kind of the typical timelines to review documents and, and say that they're complete or if they're not complete, tell us why they're not complete. And then there's another period. So it just keeps that process moving as it was intended. I mean, these are, this is all rich and written in statute and regulations. It just, we just haven't been following it. Agencies haven't been following it. And so this, yeah, this is, puts it all out there and, and put, makes people responsible for getting their jobs on ourselves included.

13:45So I, and the, I think that my caution is that it's, it's up to the executive branch to use it or not. And so that's why we still need permitting reform. But I think, you know, in a nutshell, if, I think permitting reform could just be, just do it for fast 41 is actually doing. But we need that in law from Congress, not just at the whim of the executive. Yeah, that's a great point. And then in Johnson Tracked production in three years, if I'm recalling correctly, that's your approximate timeline. We're looking at about 20, 30, 31 for, you know, actually getting production, you know, producing metal. Our process here, this year, we finished the road between camp and the portal site. We'll begin next year building the tunnel to do the feasibility level drilling and analysis that we would need to do basically exactly what we're doing at Lucky Shot this year. We'll be doing it Johnson Tracked in the next two years.

14:48And of course, during that time, where we're gathering all the information to support a feasibility study, we're permitting. The road down to the coast and the barge landing facility to transport the ore to an existing mill. And so that's the portion of the program that's under fast 41. We're expecting our permits. And again, this is on the dashboard. So you can go see this. It says by May of 2028, we'll have our permits in hand to begin construction of the road in the barge landing facility. So that's the plan. And then it would be roughly a year to get the road and barge landing facility done and a year to get the development work done to support the mining part of the process. So technically we're mining, but we're not necessarily producing until we actually, direct ship the ore to a processing facility. And of course, that's the other thing we're working on with respect to Johnson Tracked

15:51is identifying and securing a mill to process the ore. This is a sulfide ore. It'll produce copper, lead and zinc concentrates. Good quality concentrates and as well as a precious metal concentrate. And so we're looking at acquiring a mill that can support processing that ore. And that's where the dub tail is really with with the Kitsol project, which is located in the northern British Columbia. It also is a sulfide deposit and it will produce the same copper, lead and zinc precious metal concentrates. So we see synergies between Kitsol and Johnson Tracked to be able to process them at the same facility. So we're in discussions now, active discussions now to acquire a mill and process both Johnson Tracked and Kitsol at that location. Are there any internal discussions within your company looking at what it would cost to

16:52buy the land and permit a mill and build it yourself relative to acquiring one? Sure answer is yes. That is one of the options that we're looking at. And there are a few opportunities where there's an existing already permitted mill site that might fit the bill. Okay, obviously you can share with the public at this point any further anything further. We're under you know CA and confidentiality and that but when you know we're working on it, we're working on a number of different options. And you know we're you know want to make these decisions quickly as well to do diligence required and so we'll complete that process. And yeah, I'm hopeful that we can get something done this year or early next year. Since we talked a lot about permitting with Johnson Tracked, is the situation in Alaska and the United States in regards to permitting? Is it affected by some of the negative headlines that I've seen out of like Northern BC or

17:56even the Yukon with Victoria Gold's Eagle mine, their tailings dam collapse? Does any of that affect permitting in Alaska? I mean, I look, I mean the regulators look at what went wrong sort of things and they want to make sure you know that they're covering, making sure they're doing their due diligence in terms of specific projects. But in fact, that's actually what makes our projects and our approach, this direct shipping or approach work so well from a regulatory standpoint is that we're not building a tailings facility and that's the thing that's the most controversial. So if you have a tailings facility that's already permitted and has already been you know demonstrated to operate correctly, then you know that actually makes their job a lot easier. And of course, you know, the Eagle situation, it wasn't a tailings facility, it was a heap wage that failed and so you know every, you have to be kind of specific about you know

18:57when you're at the regulator, they want to be looking at the things that you know, here's what right here's what right wrong. So but that is one of the simple things about our approach is what we're permitting at lucky shot and at Johnson track and at Kitsolk are basically quarry operations. It's an underground or an open pit, you know, in the case of Mont show, it's an open pit, but lucky shot Johnson track and Kitsol, we all be envision those three as underground mines. And so from a regulatory standpoint, it's not too complicated at lucky shot. A regulator is going to want to understand what you can do with the water. You're going to have water. Is it acid generating? And if you're in case of lucky shot are our host rock for the mineralization as a grant of direct. So it has no mineralization in it. There's very low sulfide in the ore itself, same with Johnson track or underground development work is 100% in a non acid generating volcanic rock to day site porphyry.

20:03So it's nice and it's a nice rock to drill and blast. It has no mineralization in it. So from the water quality standpoint, that's the those are the kind of if you develop it that way, you make the regulators job a lot easier. Now, we could have developed it and put the underground workings in the mineralized sulfide orbide that'd be closer to where we're where the ore body is, but you you you create a lot more permitting headaches with water with regards to water quality. So a lot of it's just how you approach a project and sometimes you you spend a little more up money up front to get something done that has a little less environmental impact long term. And that's something as part of calculus now in today's world that wasn't part of the calculus you know, 50 years ago. And as you've mentioned previously, even on this show, you are kind of circumventing the valley of death that occurs in that second trough in the LaSonne curve where companies never actually rise out into production. You're circumventing that with this DSO model.

21:06Yeah, if you can get things permitted quickly because because you have a simple project to permit, you know, as you're not issuing a lot of permits, you're basically developing a quarry site that has, you know, if you make sure the water quality is good and you're you're you're generally in pretty good shape. You're not generating acid with anything that you're mining. If you're you're taking the the rock that is potentially acid generating the sulfide or you're taking it somewhere else to process. So, you know, from that site's perspective and from the regulatory standpoint, it makes it relatively straightforward. But, yeah, the, I mean, the problem with, you know, trying to permit all those things, a tailing facility, a mill facility, and a power plant to run all that is required. One requires a lot of permits, which remains requires a lot of baseline information. And that takes time to collect. And then while you're doing all that and permitting that, typically, you know, we've seen it

22:06takes five to 10 years to to do that, typically, to permit a full on project with all those components. And then, you know, in the time it takes, if you, if it takes between five and 10 years to do that, you know, what's happened to the market, what's happened to the metal prices, you have to redo your fees, update your feasibility study. That's what makes it tough. That's what makes the, the La Sancurve that second, you know, Valley of Death as, as it's been referred to, that's what makes it difficult. It's just, it's a hard, hard slog. Kitsal Valley, which we are referencing. This is in Northern BC, as you said. This is a project of projects. It's a silver dominant. So when you're forecasting in five years, five million ounces of silver annually, potential production, it's coming out of Kitsal Valley, right? Yeah. Yeah. Just geologically, our other deposits just don't have a lot of silver. And that's why we, we had our eye on Kitsalts and we were, we're very pleased with getting

23:07the transaction done and, and putting the teams together. We had planned to drill 40,000 meters of drilling, mostly infill drilling at Kitsal this year. And we got 50,000. And that's just because the team, you know, came together and we just got more efficiencies out of the program. So, yeah, we'll have over 50,000 meters of new drilling. Now we're completing a mineral resource estimate based on all the previous drilling before this year's drilling. It's taken a little longer than planned because mainly because of software and making old software and new software speak to each other. I won't get into the details, but it's definitely is taking a little longer than we had planned. So we'll get that out here in the next couple of weeks and it'll, it'll demonstrate the, mostly the improvement of taking in further sources and, and, and improving them to, from a quality standpoint, up to measured indicated.

24:09And then of course, we'll get that out in the next few weeks, but then we'll, you know, when we get all the assays back from this year's 50,000 meter of drilling, we'll incorporate that. And that's, you know, it's both infill and continued expansion. So, you know, we're going to, you know, we're going to put together a pretty healthy silver resource here. And that's the thing that is unique about kits all this. It's, it's mostly silver. Now there's probably, you know, 10% value in, in the base metals. And there's two main parts of the, of the district that are developed, but developed right now. And that's around the Dollyvard and the Old Dollyvard and mine. There's a number of other silver lead zinc deposits. And, you know, there's silver centric lead zinc deposits. Wolf and Dollyvard and kitsal, kitsal, torbid. Those are, that's, those are the silver dominant part of the system. And then up to the north and the home stake and home stake silver.

25:10There's more gold up there. So that's, that's more of a 50, 50 relationship between gold and silver. So we've done a lot of drilling at both projects. We've identified some new targets that are, that will be reporting on when we start releasing results here in the next couple of weeks. So it'll be a lot of, so over the next three, four months here from all the drilling that we've completed at, at Lucky Shot and Kitsault. And in, of course, on Johnson Track, we, we've completed that road. So, you know, we're, we've demonstrated that we're, you know, building things now. We're not just, you know, drilling holes. We're, we've got a whole crew to, that are building roads and we're, you know, we're underground tunneling. So we're, you know, we're, we're definitely making that transition from explorer to, to developer to producer. Could you go over the balance sheet before you go, Rick? Where do you set you? You remove the hedges, but I think you turned some of that into debt, right? So where does that sit?

26:11Yes, we're sitting at around $47 million of debt. And next year's our, you know, our banner, big banner year of production at Moncho. We're using $3,700 gold price to do our, our planning with. So we're, you know, we're being on the conservative end of the, of the spectrum, I think. Certainly at a $4,000 gold price will be, you know, in excess of $160 million of free cash flow next year. And obviously if the gold price goes up, we'll, we'll make more money. So I think we're going to probably end the year in the neighborhood of $50 million after doing our, our, all of our programs this year and we've spent close to 90 with, between the, the, well, the four projects, but Moncho is making money and the others are spending it. And so basically with that cash, you expect to earn next year that free cash flow, you're going to put that in in the order first to Lucky Shot, then to Johnson Track and then Kitsal

27:14Valley. Is that your order of prioritization of how you spend that money? Uh, it's, it's, uh, yeah, short answer is yes. Um, I guess paying off the debt will, will be debt free by the end of next year. Um, that's, that's a priority for us. Uh, we want to be, we want to be hedge free. We got hedge free and now we want to be debt free. Um, and we'll, we'll accomplish that next year. We'll, uh, we'll get a feasibility study done, uh, second, early in the second half of next year, um, uh, is what our plan is for Lucky Shot. Uh, we'll be underground drilling, uh, drilling and blasting for, uh, at the Johnson Track project, creating the tunnels so that we can then the following year do the, uh, do the drilling. Um, and then at Kitsal, um, we'll probably have, uh, we had five drill rigs, turning this year, we're probably only have about two next year. Uh, but we want to, we're going to turn our attention to, uh, to building, uh, or since upgrading the existing road that, and that is at, uh, Kitsal, the ghost from the shoreline,

28:20uh, from the tidewater up to the torgbrit mine. Uh, that roads established. We just want to reestablish it hasn't been used in probably, you know, almost 50 years. So, uh, but the fact is that it's there and, uh, there's some permanently we need to do to, uh, uh, to upgrade it, uh, and we're working on that now. So that would be part of next year's plan for Kitsal. So as before you go, the last question will be regarding how to value your company right now. And my last interview was Sean, your president, um, it was reference next year's forecasted, uh, cash flow relative to your market cap. And there was some feedback that say, said, perhaps we shouldn't value, contango or on a price to earnings ratio. That's not the best way to look at the company. Uh, would you agree with that or how should investors look at your company in terms of valuation? Uh, I think we kind of fit more of a, uh, we're a development stage company with, you know, when, when our month show operation from our perspective is we're more like a royalty company. We've, Ken Ross does all the work and, and we get a dividend check, uh, once a quarter from, uh,

29:24from the operation and, and today they've been spot on. We've, we've guided, you know, how much cash flow we're going to generate. And, and we've, we've met that every year. So, um, that's how I would view it. I'd say we're, you know, it's kind of like, I think Lucky Shot could be viewed as its own little junior company. And what, what, what valuation would that have if you, if you didn't need to, you know, finance it. And that's, that's the thing about our model is we're generating cash flow with Mont show. And we can finance the advancement of Lucky Shot at Johnson Track in Kitsol. You know, Johnson Track has a initial assessment, which is the same as a preliminary economic assessment in Canadian chargan. Um, at $4,000 goal, it's over $600 million in PV. So what's that worth in the junior company that's self-funded? You know, that's how I sort of think about this and same with Kitsol. Um, Kitsol said, you know, we have, uh, the, the MRE that's going to be updated, but the MRE that exists

30:28today is 65 million ounces silver. Well, it's going to grow with all the drilling we've done. And we haven't diluted the shareholders as a result of that. We only have 33 million shares outstanding. You know, I, I, I challenge you to find another junior producing company that only has 33 million shares outstanding. And most of them, uh, that are in that category have three or four or 500 million shares outstanding. So, you know, if you want leverage to gold on a per share basis, I don't think, uh, anybody really comes close to, uh, to contango with our, with only 33 million shares outstanding. So gold price moves or the silver price moves, you get the best leverage on a per share basis with contango. Contango or is a show sponsor. As I said at the outset, the website to learn more is contango or calm, which I will link in the show notes. And the ticker simple is very simple CTG, oh, either in Toronto or New York on the big boards. Rick, thank you for this update. Well, great. And just the clarification, it is contango silver and gold.

31:32But you're right. The website is contango or we, it was too big of a challenge to try to change it. Frankly. Okay. So websites contango or calm, the company is contango silver and gold. Thank you for joining me. Take care, Bill. Thank you for listening to Mining Stock Education. Please subscribe and share this show with like-minded investors, connect with us at Mining Stock Education.com and sign up for our email list to stay in touch. Much success to you as you learn about, invest in and profit from Mining Stocks. The mining business is one that generates gigantic wealth. You know, a good drill hole that converts, it might cost 50 or $100,000 and it might discover something worth a couple billion. There is no sector that I know of that has offered up as many predictable circumstances, where there was the possibility, certainly not the certainty, but the possibility of 10-for-one returns as there is in small cap and micro cap mining stocks.

32:38Concomitant with that, if you don't do the work or even if you do do the work and don't discipline yourself on the cell side, there are very few places in the world where you can lose as much money as quickly as in mining stocks too. I just started to study up on mining stocks and I just became fascinated because this is such a tiny sector and it's so volatile that either you could really, you could do really, really well or you could pretty much get blown out of the water really quickly. The mining sector is a very risky sector. It could take your money very, very quickly. Don't fall in love with stocks and don't be overly confident and just do your work as best you can, do your very best. Don't fall in love and don't get too overly confident because that's a recipe for disaster. I've met professional retail investors that have made a tremendous amount of money on the junior mining space. Some of them aren't credited and they just spend their days researching, talking to people, being on the phone, being pouring through financial documents, but it requires commitment. This podcast is for informational purposes only and is not to be considered personal legal or investment advice or a recommendation to buy or sell securities or any other product.

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