Contango Announces S-K 1300 Technical Report Summary with Robust Economics and One Year Payback for its Johnson Tract Project
- Strong economics with Post-Tax NPV5 of $225M and IRR of 30.2%
- Quick payback period of 1.3 years
- Low AISC of $860 per gold equivalent ounce
- High-grade resource with 7.58 g/t gold equivalent
- Significant production of 102,258 GEO annually
- Potential for resource expansion through underground drilling
- Strong government support and potential fast-track permitting
- High initial capital requirement of $213.6 million
- Relatively short mine life of 7 years
- Resource includes speculative Inferred category material
- Additional permitting and studies still required
Insights
Contango's Johnson Tract shows strong economics with $224.5M NPV, 30.2% IRR, quick payback, and competitive $860/oz AISC using DSO approach.
Contango's Technical Report Summary for its Johnson Tract polymetallic project demonstrates compelling economics at current gold prices. The post-tax NPV5 of $224.5 million with a 30.2% IRR and 1.3-year payback period represents strong potential returns for a mid-tier mining project. The sensitivity analysis is particularly noteworthy - at $3,000/oz gold, NPV5 increases to $398.2 million with a 45% IRR.
The direct ship ore (DSO) approach mirrors the successful Manh Choh mine, reducing upfront capital requirements by avoiding construction of on-site processing facilities. This strategy helps explain the modest initial capital expenditure of $213.6 million, which is relatively low for an underground operation of this scale.
The all-in sustaining cost (AISC) of $860 per gold equivalent ounce is competitive and would generate healthy margins at current gold prices. This cost structure positions Johnson Tract in the lower half of the global cost curve for gold producers. The average grade of 7.58 g/t gold equivalent is substantially above industry averages, contributing to the favorable economics.
The resource estimate of 598,000 ounces of gold in the Indicated category provides a solid foundation, though the seven-year mine life is relatively short. However, management's expectation of resource expansion through additional underground drilling is reasonable given that polymetallic deposits often extend beyond initial boundaries.
While the Initial Assessment is preliminary in nature, the project's economics appear robust even under conservative assumptions. The polymetallic nature of the deposit provides valuable revenue diversification, with zinc contributing significantly to the project's value alongside gold and copper.
Johnson Tract's one-year payback period and favorable economics in various gold price scenarios present significant value creation potential for Contango.
The Johnson Tract Initial Assessment demonstrates uncommonly robust economics for a development-stage mining project. The quick payback period of 1.3 years (discounted) significantly reduces capital recovery risk compared to typical mining projects that often require 3-5 years to recoup initial investment. This accelerated capital return profile substantially improves the project's risk-adjusted value proposition.
Examining the capital intensity metrics reveals Johnson Tract's efficiency - with $213.6 million initial capital to produce an average of 90,692 payable gold equivalent ounces annually, the project requires approximately $2,350 per annual ounce of production capacity. This compares favorably to industry averages for underground operations that typically range from $2,500-4,000 per annual ounce.
The project's polymetallic nature provides important economic resilience against single-commodity price volatility. While gold represents the primary value driver at $1,014 million in potential revenue, the $274.2 million from zinc and $120.2 million from copper create significant by-product credits that strengthen the overall economics.
The sensitivity analysis demonstrating NPV5 of $181 million at $2,000 gold suggests the project maintains positive economics even at lower gold prices. Conversely, the substantial upside of $398.2 million NPV5 at $3,000 gold provides asymmetric return potential if gold prices rise.
While the current seven-year mine life represents a potential limitation, the high-grade nature of the deposit (5.33 g/t gold in Indicated resources) combined with 5.21% zinc and 0.56% copper creates substantial economic value from a relatively modest-sized operation. The company's staged development approach, focusing first on permitting the underground access tunnel, represents a prudent capital allocation strategy that limits early expenditures while advancing the project.
Rick Van Nieuwenhuyse, the Company's President and Chief Executive Officer said: "We are very pleased to release the results of our Initial Assessment for our Johnson Tract Project. Assuming a price of
We look forward to investigating potential upsides to improve the economics and extend the mine life, which includes additional underground drilling to expand the resource to extend the known orebody down dip and along strike. Another upside that we plan to evaluate is the use of ore sorting to upgrade run of mine ore grades at site by using sensor-based sorters (for example: Optical, XRT, Laser, X-Ray) to separate waste material from higher grade ore. This would result in two improvements - fewer tonnes to transport and higher head grade feed to the mill, resulting in improved economics.
We are currently focused on permitting the underground tunnel to access the million-ounce resource and conduct a detailed underground in-fill drill program. We will also conduct metallurgical, geotechnical and hydrology studies necessary to complete a feasibility study, which will include a detailed mining and transportation plan, as well as select a specific site for processing the ore along with any modifications necessary. In addition, we will need to conduct detailed environmental baseline work along the Road and Port Easements that have already been granted to Cook Inlet Regional Inc. ("CIRI") by the Federal government earlier this year. We expect the permitting for the proposed tunnel and adjacent laydown site with the
Part of Contango's management team just spent a week in
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1 AISC includes all direct and indirect operating cash costs related directly to the physical activities of producing gold, copper, zinc, lead and silver including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, sustaining capital and reclamation costs. Excluded from AISC are initial capital costs in the amount of |
IA HIGHLIGHTS:
- Pre-Tax net present value discounted at
5% ("NPV5") of USD$359.0 million - Pre-Tax Internal Rate of Return ("IRR") of
37.4% - Post-Tax NPV5 of USD
$224.5 million 30.2% - 7-year LOM
- LOM annual average production of 102,258 GEO at 7.58 g/t
- Initial Capital costs of
$213.6 million $36 million - Sustaining Capital costs of USD
$61.3 million $12.3 million - AISC estimated at
$860 - Discounted payback period of 1.3 years
BACKGROUND:
- As a
U.S. domestic and domiciled company, Contango is required to report its mineral resources in accordance with Subpart 1300 of Regulation S-K ("S-K 1300"). - S-K 1300 was adopted by the Securities and Exchange Commission (the "SEC") to modernize mineral property disclosure requirements for mining registrants and to align
U.S. disclosure requirements for mineral properties with current industry and global regulatory standards. - The mineral resource estimate set forth in this TRS for the Johnson Tract Project has not previously been reported under the S-K 1300 format. The TRS was prepared in accordance with S-K 1300 and will be filed on or before May 12, 2025 with the SEC through EDGAR on Form 8-K.
IA SUMMARY
The IA is preliminary in nature and includes Indicated and Inferred resources that are considered too speculative to apply the economic considerations that would enable them to be categorized as mineral reserves. There is no certainty the estimates presented in the IA will be realized. This economic analysis is based on a Resource Estimate for the deposit listed in Table 3.
TABLE 1: KEY ECONOMIC PARAMETERS (Base Case -
ITEM | Description | Unit | Value |
Finance | |||
NPV (Pre-Tax) | US$ (m) | 359.0 | |
IRR (Pre-Tax) | % | 37.4 % | |
NPV (Post-Tax) | US$ (m) | 224.5 | |
IRR (Post-Tax) | % | 30.2 % | |
Non-Discounted Payback Period | yr | 1.1 | |
Discounted Payback Period | yr | 1.3 | |
Economics Summary | |||
Revenue (NSR less Royalties) | US$ (m) | 1,296.7 | |
Operating Costs | US$ (m) | 484.8 | |
Initial Capital Costs | US$ (m) | 213.6 | |
Sustaining Capital Costs | US$ (m) | 61.3 | |
Payable Metal Value | |||
Copper | US$ (m) | 120.2 | |
Zinc | US$ (m) | 274.2 | |
Lead | US$ (m) | 36.6 | |
Gold | US$ (m) | 1,014.0 | |
Silver | US$ (m) | 5.1 | |
Initial Capital | |||
Project Team | US$ (m) | 5.0 | |
Development - Lateral + Ramp | US$ (m) | 19.5 | |
Development - Vertical | US$ (m) | 0.6 | |
Mobile Equipment | US$ (m) | 18.9 | |
Surface Infrastructure | US$ (m) | 91.5 | |
Underground Infrastructure | US$ (m) | 13.3 | |
Capitalized Operating | US$ (m) | 28.8 | |
Contingency | US$ (m) | 36.0 | |
Initial Capital Total | US$ (m) | 213.6 | |
Sustaining Capital | |||
Project Team | US$ (m) | 0.0 | |
Development - Lateral + Ramp | US$ (m) | 8.9 | |
Development - Vertical | US$ (m) | 0.4 | |
Mobile Equipment | US$ (m) | 2.5 | |
Surface Infrastructure | US$ (m) | 1.2 | |
Underground Infrastructure | US$ (m) | 6.0 | |
Closure | US$ (m) | 30.0 | |
Capitalized Operating | US$ (m) | 0.0 | |
Contingency | US$ (m) | 12.3 | |
Sustaining Capital Total | US$ (m) | 61.3 | |
Operating | |||
Mining | US$ (m) | 213.4 | |
Mill | US$ (m) | 102.9 | |
Transport to Dock | US$ (m) | 11.6 | |
Surface Transportation (Barge) | US$ (m) | 85.0 | |
Surface Transportation (Truck to Mill) | US$ (m) | 18.8 | |
G&A | US$ (m) | 53.1 | |
Operating Total | US$ (m) | 484.8 | |
Ore Production | |||
Ore Milled | mt | 2.7 | |
Payable Metal | |||
Copper | mlb | 32.2 | |
Zinc | mlb | 279.3 | |
Lead | mlb | 41.8 | |
Gold | moz | 0.5 | |
Silver | moz | 0.5 | |
Metrics | |||
Mine Cost per Tonne Feed | US$/tonne | 85.97 | |
Cash Cost per Tonne Feed | US$/tonne | 191.25 | |
All–In-Sustaining Costs2 | US$/ GEO | 860.00 | |
Average Annual GEO Produced | Au Eq Oz / Yr | 102,258 | |
Average Annual GEO Payable | Au Eq Oz / Yr | 90,692 | |
Mining Method | |||
LHOS Mining Cost per Tonne Feed | US$/tonne | 85.24 | |
C&F Mining Cost per Tonne Feed | US$/tonne | 90.89 |
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2 AISC includes all direct and indirect operating cash costs related directly to the physical activities of producing gold, copper, zinc, lead and silver including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, sustaining capital and reclamation costs. Excluded from AISC are initial capital costs in the amount of |
TABLE 2: GOLD PRICE SENSITIVITY ANALYSIS
Sensitivity | ||||
Post-Tax NPV5 (US$ m) |
TABLE 3: RESOURCE ESTIMATE
Category | Tonnes | Au | Ag | Cu | Pb | Zn | AuEq | |||||||
Indicated | 3,489 | 5.33 | 6.0 | 0.56 | 0.67 | 5.21 | 9.39 | |||||||
Inferred | 706 | 1.36 | 9.1 | 0.59 | 0.30 | 4.18 | 4.76 | |||||||
Contained Metal | ||||||||||||||
Category | Au | Ag | Cu | Pb | Zn | AuEq | ||||||||
Indicated | 598 | 673 | 43.1 | 51.5 | 400.8 | 1,053 | ||||||||
Inferred | 31 | 207 | 9.2 | 4.7 | 65.1 | 108 | ||||||||
Notes | |
1. | Includes all drill holes completed at Johnson Tract Deposit, with drilling completed between 1982 and most recently as October 2021 |
2. | Assumed metal prices are |
3. | Gold Equivalent (AuEq) is based on assumed metal prices and payable metal recoveries of |
4. | AuEq equals = Au g/t + Ag g/t × 0.01 + Cu% × 1.27 + Pb% × 0.31 + Zn% × 0.59 |
5. | An average bulk density value of 2.84 used as determined by conventional analytical methods for assay samples |
6. | Capping applied to assays to restrict the impact of high-grade outliers |
7. | Preliminary underground constraints were applied, including the elimination of isolated or scattered blocks above cut-off grade to define the "reasonable prospects of eventual economic extraction" for the Mineral Resource Estimate |
8. | Mineral resources as reported are undiluted |
9. | Mineral resource tonnages have been rounded to reflect the precision of the estimate |
10. | Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability |
QUALIFIED PERSON DISCLOSURE:
This report dated May 6, 2025 was prepared as an Initial Assessment Technical Report Summary, in accordance with the Securities and Exchange Commission (SEC) S-K regulations (Title 17, Part 229, Item 601 and Subpart 1300 until 1305) for Contango by SRK Consulting (
In accordance with the SEC S-K regulations, SRK Consulting (
In accordance with the SEC S-K regulations, James Gray, P.Geo, Advantage Geoservices has authored Section 11 (Mineral Resource Estimates) of the TRS report as the Qualified Person under item 1302 of Regulation S-K, and has reviewed the inclusion of its summary of the report in this news release. International Metallurgical and Environmental, Inc. has authored Section 10 (Mineral Processing and Metallurgical Testing) of the TRS report as the Qualified Person under item 1302 of Regulation S-K, and has reviewed the inclusions of its summary of the report in this news release.
CONFERENCE CALL AND WEBCAST
Contango will host a conference call and webcast to discuss this release on May 8, 2025, at 1pm EST / 10am PST. Participants may join the webcast using the following call-in details: Contango Announces S-K 1300 Technical Report Summary with Robust Economics
ABOUT CONTANGO
Contango is a NYSE American listed company that engages in exploration for gold and associated minerals in
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements regarding Contango that are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995, based on Contango's current expectations and includes statements regarding future results of operations, quality and nature of the asset base, the assumptions upon which estimates are based and other expectations, beliefs, plans, objectives, assumptions, strategies or statements about future events or performance (often, but not always, using words such as "expects", "projects", "anticipates", "plans", "estimates", "potential", "possible", "probable", or "intends", or stating that certain actions, events or results "may", "will", "should", or "could" be taken, occur or be achieved). Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those reflected in the statements. These risks include, but are not limited to: the risks of the exploration and the mining industry (for example, operational risks in exploring for and developing mineral reserves; risks and uncertainties involving geology; the speculative nature of the mining industry; the uncertainty of estimates and projections relating to future production, costs and expenses; the volatility of natural resources prices, including prices of gold and associated minerals; the existence and extent of commercially exploitable minerals in properties acquired by Contango or the Peak Gold JV; ability to realize the anticipated benefits of the Peak Gold JV; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; the interpretation of exploration results and the estimation of mineral resources; the loss of key employees or consultants; health, safety and environmental risks and risks related to weather and other natural disasters); uncertainties as to the availability and cost of financing; Contango's inability to retain or maintain its relative ownership interest in the Peak Gold JV; inability to realize expected value from acquisitions; inability of our management team to execute its plans to meet its goals; the extent of disruptions caused by an outbreak of disease, such as the COVID-19 pandemic; and the possibility that government policies may change, political developments may occur or governmental approvals may be delayed or withheld, including as a result of presidential and congressional elections in the
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SOURCE Contango Ore
FAQ
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