CTGO

Into the room, I will say good morning, good afternoon, or good evening, depending on where in the world you're signing in from. I've got with me today Rick Van Nieuwenhuyse, CEO of Contango Ore, and Mike Clark, the company's CFO, to discuss both 2025 year-end earnings and guidance for 2026, 2027, among other things. Keep a broad list of topics today. Here's how today's gonna work for those of you in the room. I see at least, geez, looks like 40 who have never been in the 6ix Webinar before. This next part is mostly for you. I'll say that, I've got some questions for the gentleman, just to get us started. The chat is interactive. There's a button on the middle bottom of your screen.

If you pop that up, you should be able to ask questions any time during today's event. We'll try to get to as many as we can. We are trying to stick to about half an hour today. The recording, we believe, will be available about 4:00 P.M. Eastern time. It'll pop right in your inbox. It will also be available on 6ix's YouTube channel at that time. Enough of the boring stuff out of me. I wanna get right into the good stuff. Mike, that means I will start with you. So you are on mute before you start. The cash distributions from the Peak Gold JV came in at $102 million for 2025.

I'd love if you could walk us through how that flows down to Contango's balance sheet and what the unrestricted cash position looks like today, versus where you started the year. You are on mute, though, Mike. Sorry.

Good morning, everyone. Thanks for the question. The way that we account for the Peak Gold JV is equity accounting, because we own 30% of it. What you see happening is we recognize 30% of the net income of the joint venture, which for 2025 was $88.6 million. You see that go into our statement of operations with a corresponding increase to the investment in the PJV on the balance sheet. The $102 million distributions actually is a direct increase to our cash with a corresponding reduction to the investment of Peak Gold.

What you would've seen at the beginning of the year was a balance of $60 million in that investment on the balance sheet, and that's been reduced to $47 million at the end of the year, which is the difference between the 102 and the 88. To answer your second question, it's the cash increase from $20 million to start the year to $65 million at the end of the year. That was primarily driven by the equity raise we did in September. That's really what drove that. The profits from Manh Choh effectively funded our pay down of the debt for $37.5 million, and the realized hedge losses of $63 million, which was coincidentally about $100 million. Those funds more or less took care of paying down our debt.

Great. No, I appreciate that very much. Rick, I got one question about AISC. That came in at about $16 /oz sold in 2025, which is, I believe, almost right on guidance, like almost exactly on guidance. Now the 2026 number jumps to that $2,200-$2,300 range. What drives the increase, and how much of that is just the math on lower ounces versus cost inflation? Just what are we looking at there?

Yeah. Obviously, yeah, we're pleased to be slightly under guidance. I think guidance was $1,625, so I think good, you know, good job there. In terms of next year, or I should say this year, 2026, guidance has always been higher because of the mine plan. The mine plan is there's more stripping. We're switching from the north pit to the south pit. Because of that, a lot of the fleet sort of mine fleet is distracted. They're doing a bunch of pre-stripping. That results when you're stripping waste, that's a higher all-in sustaining cost on a you know across the board basis.

That's the main driver of the increased cost is, you're doing a lot of pre-stripping, in 2026. That's why you see the cost go down in 2027, because now you're just mining ore, and in fact, a bunch of the fleet's gonna go away. That's just the, you know, sort of the sequencing of the mine plan. That's the big driver. Now, a couple of things, in terms of continued guidance going forward. If that's based on the mine plan, and we're, you know, executing the mine plan, you know, plus or minus, you know, where it was originally in terms of grade and things like that, grades and tons, ounces delivered.

where we are starting to see inflation, in particular, wage, more wage-related inflation. It's relatively small, but we're certainly-

Sure.

Seeing that. I think that's in general what the gold price still tells you, right? Gold price is going up. It's usually an indicator. The other thing, obviously, the recent developments related to the Iran War and the closing of the Strait of Hormuz, that's probably inflation, potential inflation to come.

Sure.

You know, in rough numbers, a third of our costs are related to transporting the ore from Manh Choh to Fort Knox. If we see higher diesel prices as a result of a, you know, a $200 spike in oil costs, which some people are talking about, if that happens, obviously our costs are gonna go up. That's more of a cautionary thing. We don't have anything now, and obviously we buy fuel in advance, in Alaska, particularly and for this project, particularly. A lot of it is locked in. I don't have any sort of specific numbers at this point. I noticed, I just got back from traveling, and I was seeing in the lower 48 a lot of really high costs for gas and diesel.

Sure.

Haven't seen that here, interestingly enough. Again, I think we buy a lot and it gets barged up and it gets stored, so we have a lot of storage capacity in Alaska. But I think it is something that we certainly expect to happen if the Iran situation continues.

Sure. Again, it makes sense. Appreciate it. Mike, on another quick accounting question. I know you raised $50 million in September and another $50 million in February, but the credit facility already down to under $15 million. How should investors think about the capital structure from here, especially going into 2027 when distributions could be, you know, north of $165 million?

Yeah. The debt's around just under $15 million right now. It's scheduled to be down to $10 million at the end of this year. The hedges are scheduled to be down from. We'll pay down another, deliver another 11,000 this year, with 15 in the remainder of this year. Our objective still is to early deliver into those and potentially early pay off that debt. Either you're gonna see the debt and hedges all kind of extinguished by the end of this year or in early 2027. Now, how that kind of ties through to our cash is, you know, we have what 65 to start the year. We got exploration and development expenditures at Lucky Shot and Johnson Tract. You're gonna see us spend, you know, around $40 million on those projects.

What you should see is with the Manh Choh profits, with the expenditures on those projects, our cash should stay relatively flat for this year. You should see year around, say, $60 million. Going into 2027 and 2028, you're gonna be debt free, hedge free, and generating a significant amount of free cash flow from Manh Choh. You know, and we'll continue to put money into the Lucky Shot and Johnson Tract and Kitsault, but you should still see us be able to fund all those planned expenditures while the cash is continuing to grow by a significant amount over the next couple of years. Anything to add to that?

Yeah, I'm just gonna add, obviously once the merger is completed, which is coming up here very shortly, Dolly Varden comes with a significant amount of cash. So, you know, Mike's $60 million number is actually gonna grow significantly over $100 million with the Dolly Varden merger. We'll let all that kind of come out in the wash when we come out with new financials in, well, for Q2, I guess.

Sounds good.

You are.

Okay. Coming in with cash always sounds nice to me. It's like, there you go. I got one question that just came up, reading the PR. The transition from the North Pit to the South Pit creates this kind of four-month lag between mining and then getting credited. I wonder if you could just explain the mechanics for folks who might not be familiar with how Fort Knox does batch processing arrangements. Just give us some color on how that works.

Yeah. Just, you know, the batch processing, basically, it's the middle month of every quarter. That's sort of the target plan. You know, it can vary a week or two on either side of that, just depending on conditions, weather conditions and, you know, when everything's ready. It is a little confusing when you look at things that are mined at Manh Choh and stockpiled at Manh Choh. That's the 225,000 oz of gold that's mined and stockpiled at Manh Choh. It's not processed yet. If you took 30% of that, you get 63,500. You're like, "What's going on here?" Because you're saying you're gonna produce, you know, between 40 and 45. That's the confusion.

You take that ore, and four months later it gets transported and batch processed and sold, and Mike gets a check for it. That takes four months. That's the difference between what's processed and paid for and sold versus what was mined in a particular quarter or a particular year at Manh Choh. If you're looking at, you know, why is one number only 30% of the total of mined is 225, it's actually a big year for mining ounces.

Sure.

They don't get processed till four months later, which is obviously 2027 is the benefactor of that, which is part of why 2027 is such a banner year. As we mentioned, we're doing a fair bit of pre-stripping on the South Pit while we're finishing up mining on the North Pit. It's one of those good news, bad news things. The good news is there's more ore in the North Pit that we're finding at the bottom of the pit. You know, and that's not uncommon. You know, it's a venture, too, so it's not like it's not doubling the size or anything. But it is more. That delays moving all that equipment over to the South Pit, because once you're done with the North Pit, we're filling it back up, right?

Right.

That was part of the mine plan. That's part of that sequencing that we're talking about. The bottom line mined at Manh Choh is the ounces that are sitting on a pad at Manh Choh is different. There's a four-month lag between the ounces that are processed and sold and Mike getting a check in, like I say, about roughly four months later.

Awesome. No, appreciate that. Just the mechanics of it, I think it's helpful for people to get an understanding of. Speaking of 2027, which I think we all know to expect to be a pretty sexy year at this point. Mike, I'll ask you. Gold production guidance for 2027 is 75,000-80,000 oz at cash costs of $1,200-$1,300. So obviously at today's spot prices, it's pretty wild margin. What are the assumptions baked into that number, just so folks understand?

Yeah. Yeah. It's basically based on what's in the feasibility study and what's in the mine plan, you know, with some updates for actual costs and the tons and grade that we're mining in front of us. But really what's really driving that is, you know, what Rick talked about is, you know, that huge amount of pre-strip done in 2026. You're getting all the benefits in 2027. Additionally to that, you know, that grade is much higher in 2027 and you're processing a lot more tons. So all those things drive to a much lower cash cost and all sustaining costs. I think the remaining life of mine AISC is about $1,700 when you look at all the remaining years of the mine.

You just have one, you know, 2026 is a higher year, and 2027 and 2028 are much lower, but it all averages out. So yeah. Does that answer your question?

I think so. Yeah. No, appreciate it. I wanna move over to Lucky Shot, though, for a second. So Rick, I'll throw this to you. I know you're targeting 400,000-500,000 measured and indicated ounces to support a feasibility study with a production decision, I think in 2027 is what you're targeting. So I got two questions for you, which is, one, what are you seeing with early drill results? What are they telling you so far? And what does the classic Contango DSO approach actually look like in practice at Lucky Shot?

Yeah. Because Lucky Shot's a fully permitted mine site, and, you know, it's, it technically is an operating mine, even though we're not, you know, producing gold, we're doing all the things that you would if you were mining from a mining standpoint, from a permitting standpoint, particularly. We're, we've got a roughly 18,000-meter drill program under way now. We're in the next month or so, we'll finish up the drilling in the West Drift, and then we'll bring the miners in and continue putting underground development in. That'll give us a bit of a breather to do some other work. We're particularly excited about the Cam Vein, which we, I think we talked about on the last webinar. You know, that's a new discovery.

It's a vein at right angles to the one, the Lucky Shot vein that we've been drilling, and it's very high grade. I mean, it's averaging a couple ounces per ton. We're gonna put together a specific plan to continue to explore that. It's because it's at right angles, it's at a sort of an awkward angle to drill from the infrastructure we have in place. We're going to some extent extending the drift to get underneath the vein, 'cause it's basically dipping back towards us.

Sure.

It's offset by the Lucky Shot Fault, which of course we put the West Drift in over to the Lucky Shot Fault because we know the Lucky Shot Fault offsets the whole Lucky Shot vein system over to the Coleman. Somewhere around 150 meters is what we're estimating. That means the, you know, the hangwall side on the, on the Lucky Shot Fault for the Cam Vein is quite a ways below it. We gotta drill that, and we wanna get the infrastructure underneath on the, on the footwall side of the Lucky Shot vein, to get that going. Those are the sort of the modifying, you know, adjusting the program as we're moving along here.

Sure.

Obviously, you know, we're targeting 10-15 grams for the Lucky Shot vein, and if we're hitting, you know, 50, 60 grams in the Cam Vein, well, guess which one I wanna drill first? I mean, it's not-

Sure.

It's not too hard. We do need to get the extra infrastructure in place to do that. Once we bring the miners back, that's certainly one of the top priorities that we'll do. Just overall, the exploration program will take most of the year here. That might actually go into a little bit into 2027. Then, once we have all that information and data, we'll roll that into a feasibility level mine plan and transportation plan. We'll decide where the ore is going. You know, is it going up to Fort Knox? Is it going over to Asia? Is it going to a tolling operation in BC?

Mm-hmm.

British Columbia. Those are all options that we're looking at. You know, that it'll be a feasibility light. I kind of refer to it as feasibility light because we're not building a mill and a handling facility. It really is basically just a mining plan.

Sure.

A transportation plan. Transportation's, you know, pretty simple. Put rocks in a box. Just decide where they're going. That's it. That's what we like about the DSO model. It is simple. Simple's good.

Sure.

That being said, our program this year will cost about $25 million, and so far we're tracking pretty well on our drilling costs. We'll get the miners back and we'll see how the costs are going there. I feel pretty comfortable about that budget. Once we have all the data and complete a feasibility study and lay out the infrastructure necessary to start mining, we think that's another $25 million to be spent in 2027, which should then get us in place to produce gold in 2028.

Awesome. Jumping around to Johnson Tract. I'm gonna hit you on every project here, so get ready for that. I know it just landed on the FAST-41 dashboard in January. For anybody unfamiliar with that program, I know there's a lot of Canadians in the room. What does that mean for the permitting timeline, and what's happening on the ground at Johnson Tract this year?

Yeah. FAST-41, and I'll always point out it doesn't mean fast as in quick. It actually stands for Fixing America's Surface Transportation Act. It was an act of Congress recognizing that permitting roads and any infrastructure was taking far too long. That was the purpose of the permitting council in coming up with the FAST-41 program. Basically, a permitting council is a coordinating agency amongst the federal agencies that are involved in your project from a permitting standpoint. For us, that means the U.S. Army Corps of Engineers. They are the lead federal agency.

That's because they're the ones that have to issue sort of the dredging permits of the project, which is a 404 permit, to build the road connecting the mine site to the coast, the port site. Then the other thing is a port authorization. That's a combination of U.S. Army Corps of Engineers, the U.S. Coast Guard, NOAA, and National Marine Fisheries Service, and then there's state permits involved as well. Now, the states are participating in the process.

Mm-hmm.

The state permits aren't actually listed on the FAST-41 dashboard. The dashboard, what's referred to as a FAST-41 dashboard, is a website that has all the projects that are covered under the program. You can go there. You can track the process of delivery of the information to the agencies, review, and then when a document's determined to be complete is the terminology, then it goes on the dashboard. We submit projects or plans. They get reviewed and authorized by a variety of agencies. Again, ours are U.S. Army Corps of Engineers, the Park Service, because we're doing the road building and the port will be on, I mean, part on Park Service land.

NOAA, NMFS, National Marine Fisheries, and then Fish and Wildlife are involved, Coast Guard. What we like about the process is it's transparent. It's all out there for everybody to understand what's being reviewed, what plans are being reviewed and what the timeline is. This is the important thing from our standpoint is you work with all the agencies, you're agreeing on a timeline to get your permits, your final permits from the federal agencies, and that is on the dashboard. It's March 2028. There's actually a date, I think, on there, but the only one I remember is March. Then you work backwards from there.

Yeah, everybody has a job to do and an expectation that it gets done so that the next thing that needs to happen, the work can be get done to get out in the field, the work can be reviewed properly and organized and kept on task. That's the important thing from our standpoint. We should get our permits by March 2028.

Great. No, appreciate that. Now one last project. I'll say assuming the merger with Dolly Varden goes through, which I know you and Mike can't say so, but I will say probably looks pretty good. I'd love if you could outline the exploration plans of Kitsault this year.

Yeah. First thing on the agenda is an updated mineral resource estimate and by the end of Q2 of this year. That base incorporates about 200,000 meters of drilling that Dolly Varden has done over the last three, four years. It's a substantial mineral resource update. From there, we'll outline what our exploration plans for this year. We know we're gonna spend about what? About $25 million in expenditures. That'll be about 50,000 m of drilling. Now, where that 50,000 meters is going to be, I don't know exactly, but I'll take a bit of a guess or wild guidance and say, you know, a third to three quarters of it is gonna be infill drilling.

'Cause what we wanna do is do a preliminary economic assessment under Canadian parlance or an initial assessment under U.S. parlance to, you know, say, "Here's the plan." Lay out a plan for developing the Kitsault assets. There's five deposits.

Mm-hmm.

You know, between Corbet and Dolly Varden, and then going up both, Homestake Silver and Homestake Ridge. We wanna, you know, lay out an overall development plan for that. A good part of the drilling is gonna be directed at infill expansion. You know, there's obviously some high grade holes that we, you know, add another two or three holes on, we can continue to expand the known resource. As long as we're not getting too deep, you know, we kinda wanna stay focused on developing a 10-year plan for the assets. I'd say, you know, a quarter to a third of the drilling would be for greenfield exploration, upside new targets.

There's a multitude of new targets to evaluate on a very large land position. It's the southern triangle of the Golden Triangle. It's good hunting ground.

There you go. That's certainly lots to explore, so that's exciting. Now I know I'm gonna kinda give a wrap up question before I get into all the stuff that came in over email and the chat, which is pretty active. I'll get to you guys in a second. I'll say, with the vote, I believe tomorrow on the merger, and expected to close towards late March, once you're operating as Contango Silver & Gold, which I believe is the new name, how does the combined portfolio change the way you think about capital allocation across all the projects?

Mike, you wanna start on this one, and I'll give you. You talk about it from a financial standpoint.

Yeah.

Maybe the money we don't have.

It doesn't change much for us 'cause we already have our plans with Lucky Shot and Johnson Tract. We know we're more or less fully funded to deliver on those plans. Kitsault's just kind of the fourth leg of the chair, I guess, coming into the company. I think there's a little more work for us to do on, you know, the MRE and the drilling this year to kinda decide what our plans will be for 2027 to 2028. You know, I still think there's plenty of cash available to fund that internally. You know, we'll need to do more work to get there. I don't think much changes. You know, we're gonna close this merger at the end of March.

We're gonna have over $100 million in the bank. We'll have 33 million shares outstanding. We're nearly debt free and hedge free. We're gonna be in a good position to work on all these assets and, you know, be done with these hedges and the debt. Rick, is there anything you wanna add to that?

Yeah. I was just gonna just emphasize that, you know, we still wanna stay focused on getting out from underneath the hedges. I think we're a long ways there. You know, I think if we deliver in this current batch and the next batch, we'll be sitting in a really good position for the future. You know, the market right now, and I think the war in Iran has the market a little bit freaked out. Naturally people go to the dollar when there's uncertainty going around the world, and that's certainly what we have right now. Gold is priced in U.S. dollars, and so strength in the dollar weakens gold.

It's a little frustrating to see the equities all get punished as much as they have, but it's sort of a risk off environment, so just gotta muscle through. You know, the assets are still there. The gold and the silver's in the ground. As a former associate of mine once said, "It's not steam, so it's not going away.

There you go. Well, I appreciate it because I had a what the four letter word is going on with the markets question that we can now skip because I think that gives some color to people in the audience. Now there's one. Four people asked this question. I don't think you can answer it, but I'm a good soldier, so I'm gonna ask it anyway. Rick, that is people are looking for an update on acquisition of a permitted mill.

Yeah. Stay tuned. We're working on a number of opportunities, and we are going to be patient. We're not trying to rush into anything here. We think there are a couple of good opportunities, two or three different opportunities we're taking a look at. Just stay tuned. We're definitely working on it.

Perfect. I had one. There's a couple people asking just the question generally, and I think this is for folks unclear on how mining works. People note that you mine a lot more than you actually produce at Manh Choh. Just some confusion there. Love if you could give some color to what those numbers mean and why that looks like that to investors watching.

I'm gonna guess it's this difference between how much is mined in a year versus how much is processed in the year and the four-month lag that we talked about.

Sure.

I had, like I said, some inbound emails this morning asking that. I think pretty much that same question, you know. Looking at the guidance, you're gonna produce 225 oz of gold. That was what the question was. Well, why isn't that, you know, 130% of that 62,500 oz? I said, "Well, yeah, but it's mined. It's not produced. It's actually mined and sitting on a pad." There, where we have this, you have to build the pad up, and then while you're building the pad up, you're transporting it and building another pad up at Fort Knox.

The, you know, by the time it actually gets processed in the middle quarter, middle month of every quarter, Mike getting paid for it. It gets processed, gets produced into doré bars at Fort Knox. Those go to the refinery. They produce four-nines gold, and they sell that four-nines gold. Mike eventually gets a check. That's that four months. All those things have to happen. That's that four-month lag period.

There's nothing I like more than days when Mike gets a check. Those are the better days. I'm jumping into questions from the chat today. One we've kind of already gone over, but I'd love just a quick recap. I think it's helpful. David says he's a Dolly Varden shareholder. He's looking forward to the merger. What's the update? What's the timeline from here? I guess the best way to answer that.

Mike, do you have that one too?

Sure. Yeah, no. The vote for both of us is tomorrow morning at 10:00 A.M. Pacific. We expect that to be successful. The BC courts need to approve it on March twenty-sixth, and that's when it'll close. You will see Q1 consolidated between the two entities. You know, we'll plan to give more guidance in April on plans moving forward. Just need to get there first. Don't wanna.

Sure.

Yeah, as I don't know what else I can add to that. Yeah, everything's looking great, so.

I'll just say we will press release the results of the vote and when the court approves. We'll make sure shareholders know all these steps are actually they've happened and when the timing's right.

You'll see news tomorrow, after market.

Great. Stay tuned, folks in the chat. Jan has a question, one of those impossible questions, but I'm still interested to hear your perspective on it. Jan, any expectations on a re-rating of the stock anytime soon?

I mean, there is a couple of different triggers here that I would think would help re-rate the stock because, as you know, we just talked about. You have had a you know $200 decrease in the gold price and which is you know de minimis in terms of percentage, and yet the equities are all up you know 10%+. It is a risk-off environment. War is a risk-off environment. I mean, that is all you can say. It is you know or we are not you know the $5,000 gold price is. We are gonna make a lot of money at $5,000 gold. If you just do quick math, it is not hard to figure out.

This is a very, very profitable company, and we've got lots of ounce, lots more ounces of gold that are being developed. We've got the cash to develop them, and the cash flow to continue to advance them. I, you know, yeah, short answer, I think there's a hell of a re-rate story here, on a number of different fronts. The fact that, I don't think we get a lot of value. I think we're being valued fundamentally on our cash flow from Manh Choh.

Sure.

Which will dramatically increase when we stop delivering in the hedges, when the hedges are gone. That's imminent. I think there's a lot of value that we can add that we should be able to capture with as we advance Lucky Shot, and I think there's a lot of cash we can or a lot of value we can add as we continue to advance Johnson Tract and Kitsault. Look, I mean, we're gonna continue to you know put out these banger holes that are always among the top 10 intersections worldwide. You know, we're not gonna stop doing any of these things, and we have the money to do them all. Yeah, I think a re-rate's in the cards, and I think the merger should start to You know, obviously we're gonna do a lot of marketing on what this combined company is and how strong it is as a producer, developer and explorer.

Awesome.

We've got four big districts to continue this effort. You know, I think we're all pretty excited about what we can accomplish here.

Awesome. A lot more to come. I know we've hit the half an hour mark. There's two more quick questions. I'm just gonna throw those. One, Rick, I'll throw to you, and then one I think is for you, Mike, to close us off. Rick, a contact from the chat asks, what's the plan for the life of mine at Manh Choh? Are Kinross and Contango planning to add a few years to it? Where does that stand right now?

Yeah, short answer is, yeah, we'd love to add a few years. We're spending about $5 million on exploration this year. I'll say that's, you know, near mine exploration. It's not looking at new stuff way far away. I'd say, there's good potential for that, for, you know, extending the mine life a year or two. One thing I'll point out is, we said this before, that the feasibility study was done at $1,400 gold. You know, Kinross are pretty sharp operators. They know the gold price is $5,000. We're sticking to the mine plan. We're mining to the mine plan in terms of grade and, you know, grade, tonnage and ounces delivered to the mill.

Mm-hmm.

We're not throwing the other stuff away.

Sure.

It's in a great big stockpile. You know, when you get done with the mine plan, the feasibility level mine plan, we'll take a look at how much of that material should you know pays for going to you know being processed at the Fort Knox Mill at a $5,000 gold price. Obviously, it's not something you wanna plan on and tell and give guidance on now because we don't know in three years if we'll have $5,000 gold. In three years, probably before that, in you know say two, three years here, we'll have that, we'll make that decision. It's like doing a feasibility study all over again on this mineralized waste material. It's categorized as waste, but we know it's got a lot of gold in it.

It's low grade, you know, so we gotta, you know, we're not stockpiling high grade. We get high grade out to the Fort Knox Mill as quick as we can.

Sure.

I see that's an upside and then, you know, just the new exploration, finding more ore around the edges, things like that. Yeah.

All right. Just to answer, sorry, two other questions that just came in at the same time. What is the current, according to the current feasibility of Manh Choh mine life? When will you start looking at the rest of that material?

The mine life goes to 2029. I would say it's probably, you know, second half of 2028 when you start really putting some numbers to paper.

Awesome. Think that answers both those last questions that came in. Mike, last one for you from Subhash. Are you preparing the 2027 budget consolidating numbers from Dolly Varden already? Is that how you're thinking about preparation of 2027?

Yeah, I have a 2026 and a 2027. There's a little bit more refining to do, but we do have the numbers. You know, that's gonna be a project over the next couple weeks. We got high level numbers. We just need to get more into the details and make sure we're not missing something and we're getting rid of some of the redundancies. Yes, we have a budget. I just don't know what we're gonna spend in 2027. I know what we're gonna spend in 2026.

Sure.

I just don't know where, but it doesn't really matter, because it's flow through. Into 2027, you know, we'll put a placeholder for some work. You know, we just don't have that yet, and we probably won't have that until the end of the year for Dolly Varden. I know more or less what we're gonna spend at Lucky Shot, Johnson Tract, and what's gonna come in from Manh Choh for the next three years.

Awesome.

Yeah. Key driver for 2027 for Kitsault is gonna be that PEA or the initial assessment that we're gonna get done.

Okay. There is one question that came in just at the end that I'll sneak in, but we'll call it the last question for today. Wesley says he's heard Kinross has problems with their Fort Knox Mill foundation. He wants to know, does this have the potential to impair processing of Manh Choh ore?

I haven't heard of any mill problem, foundation mill problems or anything like that. I mean, that mill's been operating for 30 years, so those are things that usually show up early in a

Sure.

Early in a plan. You know, they did have the belt fire, conveyor belt fire. There was a workaround for Manh Choh ore with just using rented crushers, because our ore is pretty simple to work with. Yeah, I don't. I'm not aware of any foundational issues.

Awesome. I'll close it there then. Rick, Mike, thanks so much for letting me really even go on five minutes over, which is good for us actually, so that's not terrible. Thank you so much. I know boats tomorrow, so everybody stay tuned for more news from Contango as we go forward. Gentlemen, thanks so much. For everybody in the audience, thanks so much for joining us.

Thank you.

Thank you.

Cheers, everyone.

Good evening, wherever you're tuning in from today. I personally am joined live at Deutsche Goldmesse in Frankfurt, Germany by Contango CEO, Rick Van Nieuwenhuyse; and CFO, Mike Clark, to discuss Contango's Q3 reporting. Gentlemen, how are you?

Good to see you here in Frankfurt, Romeo.

Awesome. And I wish we're in the same room, but we're several feet away just because of the practicalities of movie magic on webinars. But here's how today is going to work just for the folks in the room. I've got a number of questions to go through, just eager to get into these pretty great Q3 reports. And then I'm eager to take questions from the live audience. So if there is any questions that you got during today's event, there is chat button in the bottom right of your screen. Please jump in at any time. Anything I don't get to, we're going to be a pretty short event today. But any questions I don't get to, I'll be sure to get to both Rick and Mike and the Contango team afterwards, and they'll be able to get back to you as quickly as possible.

I wanted to jump right into the protein as quickly as I can. Rick, obviously, looking at record operating income of $25 million this quarter, while I think almost as impressively or more impressively maintaining AISC below that $1,625 target at $1,597 per ounce. So 2 comment and a question. First, that's a lot of money. Congratulations. And what's kept ASIC in check?

Well, I think, yes, it's a lot of money. It's a record for us. That was our Q3 production level was above plan by about 2,000 ounces. And importantly, the AISC is coming in lower than the 1,625 that we guided to. And obviously, we got our guidance from Kinross. So I think a big reason behind that is we're -- the mine plan that we outlined, we're delivering into or exceeding that. And I think that's somewhat typical of Kinross as a big company. They like to underpromise and overdeliver. That's good because that means we're not going to get too far ahead of our skis. And I think the other thing overall that we see that's really helped our project specifically is the fact that the oil price is low and diesel prices have not gone up. We all know that an increasing gold price environment is telling us that inflation is still there regardless of what the government officially tells us. We know that's what it is anticipating. But this -- what is different about this time around is that we don't see that going -- the oil prices going up in Alaska. We've had the same pretty stable diesel price at the pumps for several years now. So that's a good thing. It's specifically a good thing for our projects, obviously, with the transportation aspect of transporting the ore from the mine site to the mill, it's a significant part of our cost structure. So I think that -- and I think the other thing is, look, Kinross is doing a great job just delivering into the plan that they've outlined. So when you're kind of firing on all cylinders is the way I like to express it.

No, makes a lot of sense. And Mike, I want to get you in here for some of the dollars and cents questions. I know the cash position jumped from $20 million at year-end 2024 to an eye-popping $107 million as of September 30, with $87 million distribution received from that Peak Gold JV to date. I hope you could walk us through just capital allocation priorities. So now you've paid down a bunch of debt, you settled carry trade. What's the strategic thinking behind those moves?

Yes, it hasn't changed much from the last couple of periods. Our objective all along has been to deliver into the hedges, get those paid off as quickly as possible, pay down the debt on schedule. And so to date, we've had -- we're always about a quarter ahead on our production. So we're always delivering about 3 months in advance. And so that's why we're using the carry trade in a rising gold market, that has saved us. I think this quarter, we saved about $2.4 million as a result. So the strategy is working. And so we're going to continue doing that. I think we're delivering the December hedges right now. And the goal is we'll basically try to get these delivered into you all by September of next year. So we're waiting for the '26 plan for Manh Choh, but that is currently what our target is internally.

No, I appreciate that. And Mike, one thing I noticed you added adjusted net income this period. Just for folks in the room and for me, too, to be honest, can you provide some insight into that? What are we looking at here?

Yes. You can thank Rick for that last minute. Basically, we continue to report a very strong income statement, and you keep having these derivative hedge losses that kind of muddy the waters. And really what that is, is an unrealized loss on the derivatives, which is a function of the forward curve of the gold price. And because it went up so much in September up to like $4,300, the derivative loss went way up. And so that had a $30 million impact on our P&L, which took us from what really would be a normal reoccurring net income position to a net loss. So we put it in there so that shareholders could kind of see what the business would look like once those things are gone and what our normal business looks like. Rick, anything to add to that?

Yes, I'll just add kind of I find the accounting rules somewhat inaccurate when they're describing this and how they sort of force describe things. So it's unrealized, meaning that if we don't deliver that gold and future gold, yes, we're in trouble. We've got to come up with either go buy gold in the market or whatever because it's a contract that we have to deliver into. That's why it's unrealized. I would have preferred something like potential loss or something like that. But anyways, the accounting rules are what they are. We're just a little company, we're not going to change them. So we can -- we try to make it at least clear to the shareholders what the reality is...

No, I appreciate that very much. I think that's....

The unrealized is the remaining hedges that are on the books at September 30. And then for any hedges we delivered into during the quarter and recognize that loss, those are going to be recognized losses. So it was about 50-50 split, about $50 million each during the quarter.

Great. No, I do appreciate that. One thing, Rick, I wanted to ask you about, one interesting thing in the PR is the test batch blending Manh Choh's low-grade oxide ore with the Fort Knox ore achieved 94% recovery, and it's going to add about 1,300 ounces in Q4. To me, that looked like a pretty significant technical achievement. So I'm looking for your perspective on what does this successful met test tell us about the potential to process additional Manh Choh material that might have been uneconomic in a previous era.

Well, the short answer is we don't know yet because all we know is the net result of the test. We processed 44,000 tonnes at a rough grade of 0.1 ounces per tonne, which is 3 grams. So when we say low grade, it's low grade relative to the 8 grams per tonne that is the average grade. So we have to sort of put that in context. But you're right in the sense that we're doing this test to see what that marginal ore would be like if we just blended it with Fort Knox. And it is oxide material. And there's a fair bit of this low-grade material because you have to go back to the original mine plan, the feasibility study mine plan, and that was done at a $1,400 gold price, what, 3 years ago or so. So obviously, with the gold price, it's down today kind of hard, but it's still above $4,000. That's just a different mine plan. And so testing this low-grade roughly 3-gram material is the start of taking a look at how -- is there another way of working on processing this low-grade material, just blending it with Fort Knox. And so the Fort Knox ore, which is much, much lower grade, is somewhere in the 0.6, 0.7 grams per tonne. That's the typical Fort Knox ore. And it's not really oxide ore Fort Knox. It just doesn't have any sulfide. So taking our oxidized low-grade 3-gram material and blending it, when you're doing that, you're running the mill at 2,500 tonnes a day. That's when they run the mill for Fort Knox, that's what you're doing. When we run it for Manh Choh on a batch basis, it's down at 10,000 tonnes a day. So it's looking for those economies of scale. We don't have the results for all that and the consumables and the cost, the power costs, all the details of what go into determining your milling cost. But in the next month, we should have those and we'll make some decisions on going forward if this is -- this makes sense to process this low-grade material on a blended basis versus just a batch basis. But the batches will continue. That's on higher grade and -- we're down in the sulfide part of the... So the material we're talking about is all sitting on the surface in stockpiles, the oxide, the low-grade oxide. Does that make sense?

Yes. No, absolutely. And I appreciate that. I understand a little better. And I know at Manh Choh, you processed 287,000 tonnes that 0.214 ounces per tonne, 92.5% recovery in Q3. How does this compare to reserve grade expectations? And what's your visibility into the ore body to sequence through that mine plan?

Yes. So we'll have a detailed mine plan for 2026 here probably in another few weeks. Once we've had our budget meeting and we've approved the budget and that mine plan, we'll certainly put that out to the public. So I think stay tuned for that. But basically, the grades a little lower than the feasibility grade, which was close to 8 grams per tonne, but that's because we're blending it with lower grade material because the gold price isn't $1,400, it's $4,000. So we're going to -- the tendency of that when you're adding more low-grade material in there is to lower the overall grade, but you're making more money because the gold price is more than twice as high as what you plan for. So I think the most important thing is to stay tuned for the 2026 mine plan. Now in -- if we go back to the feasibility study itself, that was always going to be the lowest gold production year for the entire mine life. Now we've done a few things. We've purchased some additional trucks where we have -- we're obviously blending -- looking at this blending strategy. So we'll see what the mine plan is in the next couple of weeks, and we'll have to have another podcast interview on the platform here to explain...

No makes sense. Appreciate that. Now I know you mentioned in the PR sustaining capital for tractor replacements and ongoing exploration drilling at Manh Choh contributed to the AISC increase. Is this new baseline for sustaining costs? Or would you expect those to moderate as we kind of complete the capital replacement cycle?

Yes. I think this is -- I mean, you might want to answer this from an accounting perspective. But from a mining perspective, this was always part of the plan, looking at ways to optimize the transportation aspects of the project.

Yes. I don't -- I think these are probably -- we'll wait for the '26 budget to see what is next year. But I think for now, I think it's a good benchmark to follow. And again, this is always -- it will become less at the end of the mine life. But yes, I think we're going to continue to be below $1,600 AISC this year and next year, probably consistent, but then come much lower in the later years of the mine life.

Maybe just to add on to that. I mean, one of the things in the feasibility level mine plan, we're wrapping up mining on the North pit. And then so that means you're starting to mine more on the main pit. So you're getting your layback in, right? So there's a lot of pre-stripping that you're doing to do that. So I think that's why our all-in sustaining costs are on the higher end of the average. And then '27, '28 are grade going to be lower.

Awesome. I do want to get into Lucky Shot just for a quick second because I know you've mobilized the drill rig for that 15,000-meter underground infill program, looking at, as I understand, the feasibility study in 12, 18 months and a production decision as quickly as '27. With production estimates of 30,000, 40,000 ounces annually using the classic Contango DSO approach, how does Lucky Shot fit into your larger portfolio? And what makes you kind of confident in this really cool, but aggressive time line?

Yes. I mean look, this isn't the biggest mine in the world, but it is really good grade. We've done enough drilling. We put out a modest resource. And I know 100,000, 110,000 ounces of resource doesn't get -- everybody [indiscernible] can get wound up. But the grade should get them wound up it's 14 grams per tonne. And so we're underground. We've got the underground infrastructure in place. We've been carrying and maintaining the mine all year. So we've been waiting for getting this cash buildup that we have. Now we can execute the plan that we have in place to get the drilling done. The drill is actually on site. I don't know if it's actually drilling today, but if it's not today, it will be in the next day or 2. And the plan is to drill 15,000 meters underground. Give us about a year to get that done. These are relatively short holes, and we drill kind of what I call a fan shot from underground from a near vertical hole to about a minus 10, 20 degrees. You're basically just spraying the -- the vein is sitting here and you're just drilling into it. 30-meter holes on average. And so we should start having drill results by the middle of January. We're basically using a photon assay. The lab is in Fairbanks. So we basically just put the rocks in the box and hang, take them up to the lab and get them analyzed. So I think we'll start releasing results in, say, middle of January sometime. And it will be kind of constant all year long. So we'll be able to know and the market understand that our objective here is outline 400,000 to 500,000 ounces. This mine produced 0.25 million ounces of very high-grade 40-gram per tonne average grade. That was mined the old style narrow vein mine that, frankly, wasn't terribly safe. We're going to be mining on a 3-meter average width and diluting that grade over that width. So we're expecting a grade more like 10 to 12 on a mine diluted basis. We're fully permitted. And so basically, give us a year to get the drilling done, another 6 months to get a feasibility level mine plan. And I call it feasibility light because, again, we're not building a mill on a tailings facility and a power plant. It's basically just a mine plan and a transportation plan and the transportation plan is to haul it down to the railroad and then we can decide if we're going north to Fort Knox or if we go south to [ Steward, ] and we've had interest from overseas to take this to a smelter. That might work out as good or better than taking it up to Fort Knox. So we've got a lot of choices. And that's the thing when you have grade, you have a lot more choices. And the other thing I like about our DSO model is we focus on things that have grade. They're not necessarily the biggest gold mine in the world, but they're going to make our shareholders money. And I think that's the business we want to focus on being in is having mines that actually make money and can get into production quickly. And the DSO model allows us to do that.

Great. And I also still think we should make rocks in a box T-shirts. I just think that's a fun idea for the future every time you say it. But I want to talk about Johnson Tract really quickly because it represents potentially the highest grade asset in your portfolio based on historical drilling at least. Can you provide us just an update on the permitting process for that underground exploration drift and the transportation infrastructure CIRI. What's up next basically? What are the critical path items that determine where this project is going towards...

Yes. So look, I mean, Johnson Tract, it's a great project. We bought it a little over a year ago with the acquisition of HighGold. We're on the boring part of the Lassonde Curve. This is about permitting. We've been working with the state government on permitting the underground tunnel. So basically sort of being exactly what we got through doing with Lucky Shot, get the underground tunnel in place. We have to permit that first, and those are permits with the state of Alaska. They're basically 2 fundamental permits, a mine operating permit because technically, you're a mine. We're still doing exploration, but technically, it's a mine. And then because you have a mine, you have a potential of water discharge, you need a water discharge permit. So those 2 permits, we expect to receive between -- by Q1 of next year. Assuming that, then we would mobilize next summer, we'd be mobilizing the equipment. to build the road. It's about a 5-kilometer or 3-mile road between the camp and the proposed portal site. There's a couple of bridges to put in place. Again, these are temporary bridges because, again, still exploration. And we use this water called Bailey bridges. They just basically go across the creek and you get your stuff to the other side. We're not -- this is not -- we're not permitted for mining operation at this point for the road. That will come next. And then we want to get the equipment mobilized to start building the tunnel, and we want to winterize camp, so that we can operate year-round. That's about a $20 million program. And again, we're funded to do that. And so that's our plan. You'll -- obviously, as we -- when we receive the permits, we'll be announcing that and as we start mobilizing equipment next summer. A lot of work to do on all that. And then while all that's going on, we're in the process of permitting with the federal government agencies, the transportation road route on the transportation easement and the port site easement, which is for us a barge landing site. We're also in the process in a parallel fashion to permit the road and the barge landing site. So lots of work going on in the background, and we're excited to get the drills turning to do the drilling and blasting to build the tunnel next -- starting next -- probably September is probably what we're pushing for. And getting the camp is a very important step so that we can work around.

Great. No, I think that's really helpful context for that project. Now I do want to zoom out here a bit before I get to the questions from the audience. I'm going to gas up Contango more than I usually do while we zoom out. But we transitioned the company from an explorer to a cash-generating producer, $107 million in the treasury at this point, minimal debt and 2 development projects advancing. So as you're looking at the next 5 years with the potential to extend into a longer plan, what does success look like? Are you focused on organic growth through Lucky Shot and Johnson Tract? Or does this new financial position allow you to consider consolidation options elsewhere?

Yes. I'd say the way I'd like to express it is I think we have a really solid executable 5-year plan, and we have the money to execute. So that's why I say it's executable. We have the team to do it. We know Alaska, this is our backyard. We know how to get stuff done here. And -- now we're starting to think, okay, well, that's a great 5-year plan. Why don't we put a 5-year plan into a 10-year or 20-year plan. And so -- and to do that growth, we want to be looking at M&A. And so we're taking a look at opportunities. We're not going to stray too far from home. So Alaska, BC, Yukon, that's kind of our backyard. We know how to work there. We've all worked there before. So that's where I would say we're looking, and we've got half a dozen different opportunities that fit the DSO model. They're all going to fit this model. We like this model. This is -- we've demonstrated that it works. And so we see another half a dozen opportunities like Johnson Tract, like Lucky Shot type opportunities to continue to invest in and continue to grow the company beyond the 5 to 7 years out with the existing resources. And don't want to forget -- I mean, we're not going to forget about doing exploration at Johnson Tract and Lucky Shock. There's -- we can have a 5-year plan at Lucky Shot, and we can have a 5-year plan for the next 10, 15 years, just like the Kensington mine has said, they've been operating for 25 years, and they've never had more than 5 years of mine life ahead of them. So just that's how an underground mine works. And so don't -- we will be spending money doing exploration once the mine is up and running. First thing is get the mines up and running.

Awesome. That's very helpful. I was like seeing what the plan is for the future. And Mike, I'm going to get you in on one. I promised you 6 months ago, one question about hedges maximum per webinar. So here's your one question about hedges. And that's somebody from the chat asks, when do you expect the old hedges to be fulfilled and get to 100% of market price?

Yes. So our objective is to get these hedges paid off as early as possible. And so any shipments that are coming out, we're delivering 100% into these kind of carry trades because we're always a quarter ahead. So assuming we can have a 50,000 ounce '26 year of gold, the objective is to try to deliver into those hedges by September -- all of them by September. So they all technically -- the last ones mature in mid-'27, but I think we should be have the cash to kind of support that approach. And so I think we can deliver into these and then be done with them by September, assuming the '26 budget is where we think it will be. Does that answer your question?

I reconciled. And there, that's it for hedges. You can relax no more hedge for the rest of this webinar. Somebody else from the chat as -- and this, I think, is also for you, Mike. How large is the net operating loss carry forward?

Losses, there is -- they're a little more complicated in the states because there's these nonoperating losses that you can only apply 80% of against net income. But we are set up in a way where we can -- any costs incurred as a Lucky Shot can be offset against Manh Choh profit. So no, we don't anticipate being in a -- we're not going to -- we don't anticipate paying taxes this year or next year. I think -- and as we move forward on Johnson Tract, the idea is to offset those costs. So my hope and my goal is that we will never actually have to pay taxes related to Manh Choh. But that will -- if we want to actually achieve that, we're going to have to be continuing to spend on Lucky Shot and JT. But right now, we don't anticipate anything this year, and I'd be surprised if we had to pay next year, but we are starting to dwindle down on our loss positions in the states. So at some point, we will be -- we will be taxable, but that's a good problem to have because it means we're making money.

Paying taxes is -- I mean you're making a lot of money. So I'm good with it.

It's a champagne problem to some degree, for sure. Looking at the last question that just came in, is there going to be a Q3 earnings presentation as somebody just asked.

We updated the presentation on the website. There's not going to be anything else.

You take a look at the website, we just recently updated that with the Q3 results. It might be -- yes, that's -- just take a look at the website, it should be on there.

And I think we'll hopefully be able to give guidance in December for '26. And at that point, we'll update it and probably have a call at that point.

As always, if you have questions, you can e-mail us at the generic [email protected]. If you've got our addresses, I'm going to put them out there in public. But if you've got addresses or phone numbers, just give us a call.

One question from Jan in the chat. And there's 1 or 2 things he probably met with us, but he asked how many ounces were there in Q4 2024. So I'm not sure if you recall total ounces from 2024.

Well, I know how many ounces we produced in '24. I think we produced about 42,000 ounces in 6 months. We did 2 batches in the Q4. I don't know the actual number, but I just know over the 2 quarters, it was 42,000 ounces.

And just keep in mind, we started mining almost a year before that because we opened the mine and then we weren't hauling with all the trucks right away. So you're building up a stockpiling, you're starting to haul ore. So we had a fair bit of ore built up for that first half year of production. And what I would describe now in the 60,000 ounces is more of a steady state plan. And so we -- again, next year, 2026 was always going to be a low year because of the stripping going on at the main pit. But we'll have the details on that 2026 mine plan here in a few weeks. So stay tuned for that.

I know this is meant to be a short event today, so I'll wrap up with one real quick one. And that's Rick, what are you most excited about coming up? What's keeping up with excitement at this point about Contango Ore?

It's great to be drilling underground Lucky Shot again. I mean, look, we think Lucky Shot, again, it's a small -- it's not going to be the biggest mine in the world. We'll never tell anybody it will be, but we think it's going to make a lot of money. The drill is turning. And so stay tuned for the drill results. It's always exciting to see free gold in the quartz chain underground. So yes, as a geologist, this is what it's all about. So stay tuned.

Awesome. Appreciate it very much. And thanks, everyone. This is a big audience today. You guys don't know how difficult it is to set up stuff at a conference, but Rick and Mike do, and thank you for joining us very much being able to get this done today and answer everybody's questions. I really appreciate your time. And if anybody has any additional questions, make sure to shoot them through. But otherwise, I hope everybody has a great end of the day.

Thanks, Romeo.

Cheers.

[Audio Gap] depending on where in the world you're signing in from. I saw today we got all the way from Alaska to Australia. So I'm happy to say the sun never sets on this webinar, which is always nice. I've got with me today, Rick Van Nieuwenhuyse, CEO of Contango Ore; and the company's CFO, Mike Clark. Gentlemen, how are you today?

Good morning, Romeo. How are you going?

Good. Good. So here's how today is going to work for everybody that's in the room. First, I'm going to throw it to Rick just to recap their recent news. Then I've got some questions that I'm going to ask both the executives, but then I'm going to throw it to the live audience today for questions that you have. So this is an interactive event. That chat button in the bottom of your screen, you can use it at any point during today's event to ask Rick and Mike any questions that you might have. I'll try to get to as many as possible. If for whatever reason I don't get to your question, I'll make sure the Contango team gets to it, and they'll get back to you as soon as possible. The only other piece of the housekeeping is that today's event is being recorded, and the replay will be available late this afternoon Eastern Time. It should come right in your inbox, but also be available on 6ix' YouTube channel. So I will throw it to start off to get the protein of today's event with Rick.

Romeo, thanks, and thanks, everybody, for joining us for a review of our Q2 financials. It was a great quarter. Operating earnings were $23 million, net income of about $16 million. I'm really proud of our cash costs, seeing those being well under guidance. Cash costs for the quarter were $1,416; for the year, $1,375. Our all-in sustaining costs, $1,548 for the quarter and $1,462 year-to-date. We'll talk about JT. We're focused on permitting there. This is a Johnson Tract project. That's going well. Very, very pleased with the progress we're making there. Lucky Shot is still on hold, but we are looking at getting a drill program going there. We can -- we'll talk more about that with some of the Q&A, I think. And again, as we're kind of on a steady path here, focus paying down debt, delivering the hedges. And today, actually our third campaign of processing ore at the Fort Knox mill starts. There's about 250,000 tonnes, 0.25 million tonnes on the pad at Fort Knox, and it grades about 0.023 -- 0.23 ounces per ton, which is about 7 grams. So just with that sort of overview, happy to just jump into the question from you.

Awesome. Well, I got a bunch, so bear with me while I grill you guys for a little bit. I do want to start with the numbers that kind of jumped right off the page for me. So obviously, you went from $3.1 million operating loss in Q2 of last year to $23 million operating income this quarter. Always nice to see. Most mining companies I talk to don't see money, so it's always nice to see that. In addition, the company had a net loss in Q2 of last year of $18.5 million, now net income of $15.9 million. So beyond, obviously, increased gold production, what initiatives are contributing here? What's making that big change?

Well, as you say, it's not common to see a junior company and even a junior producing company making more money than its spending. And so it's definitely a sea change in terms of how -- I think how we're viewed by the market. We were -- I was actually wearing a shirt the other day, it was from our -- when the groundbreaking ceremony from August 29, 2023. So we've been mining now at Manh Choh for 2 years, close to and been in production. We started production, of course, in July of last year. So we're kind of up on step in terms of if you drive a boat, the ultimate way to get a boat operating smoothly is to get up on step. And that's kind of the way I feel the project is now. The mining has been very smooth and on plan, on schedule, on budget. The ore transport has gone, I think, better than planned in terms of not as many shutdown days due to weather and things like that. The lawsuite's gone away. So the last part -- piece of the puzzle is running the ore through the mill, and they just continue to make nice improvements, and we're averaging 92%, 93% recovery, which is very respectable. We're maintaining that mix of oxide sulfide ore 2:1 ratio, and that keeps the recoveries in the plus 90%, which is, again, very respectable. That means you're pouring gold and you're making money and nice to see the all-in sustaining costs coming in well under guidance. And that's -- obviously, the lower the all-in sustaining costs are the higher the margin on the realized price of gold. So Mike, maybe you want to maybe comment from your perspective?

Yes. No, that was a good explanation. I think just -- yes, on the income from operations, they weren't in production in the first half of 2024, whereas we were in production here. So that's purely driven by production. I think the net income has increased for 2 reasons. Last year, we were in a continually increasing gold price environment. So you kind of always had these unrealized losses on your hedges, so your derivative contracts, which kept increasing our losses during the period. In addition, we also -- and that stabilized during this quarter. So you didn't really see that happen. We just kind of recognize the recognized portion from delivering the hedges. So no real unrealized portion. In addition to that, we did have a $6.4 million gain on our Onyx shares that we recognized in the quarter. So those 5 million shares we acquired as part of the HighGold acquisition. So those kind of hit the net income this quarter.

Great. While I'm on with you, Mike, actually, I know earnings per share jumped from a loss of $1.90 to a profit of $1.24 per diluted share. And it looks like $3,274 per ounce realized spot price versus that blended carry trade of $2,441. So I'm curious if you can just like looking for some color on your pricing strategy and how that contributed to the bottom line this quarter.

Yes. Well, the hedging strategy, for the most part, is just delivering to the hedges. And so if you deliver effectively about 70% of our gold goes into the hedges, 30% goes into -- we sell at spot price during the year. And so when you look at the average gold price during the quarter, let's just say it was $3,300 and our hedge price is $2,000, you kind of end up with a blended price of about $2,450. The carry trade we brought in this year, which just helps us manage our cash flows so that when we receive our deliveries of gold from the Peak Gold JV, we can turn around and sell it at spot price -- at 100% of the spot price, pay the Peak Gold for that gold, which comes at a slight discount, which is why you see about $1 million gain on metal sales each quarter. That's a slight gain we make. So we sell that gold at spot price, the banks effectively fund that difference between the $3,300 and the $2,000. And then when the hedge delivery date comes up in the next quarter, we then can deliver into the -- we basically settle that hedge right then. So it allows us to conserve our cash. In Q1, we made -- there was a rising gold price, we actually saved a couple of million dollars by doing that carry trade. I think in this quarter, it cost us a couple of hundred thousand dollars. But it basically ensures we take no risk on the gold price moving in either direction where it limits any exposure because what we don't want to have is the gold price, we sell it at, say, $3,000 and that when we have to deliver or settle that hedge, it's at $3,500. We're at $500 an ounce, and that could put us in a really tricky position. So this just manages risk and that slight difference gives us about $1 million gain per quarter.

Okay. Makes sense. I want to get into operational details real quick. So Rick, I'll throw it to you. I know this third campaign is processing 250,000 tons at 0.23 ounces per ton, which for the metric folks in the audience, 7 grams per ton grade. So I'm curious, how does this compare to your Q2 performance of 255,000 tons at 0.22? And what's driving that grade consistency at Manh Choh? Where does that come from?

Yes. So -- and it really is -- I think I mentioned it earlier, this -- the mill likes to run with this 2/3, 1/3 ratio of oxide to sulfide. And oxide ores are easier to process. They just consume less consumables and things like that. So as you add -- as you get deeper in the ore body, you're adding more and more sulfide. But we've got a big low-grade stockpile that we can -- of oxide that we can kind of keep feeding in there. So that's what's kind of driving the grade. Now we are in the process, and I'm using the Royal we here, Kinross again, is a manager and it's their mill. But they're in the process of adding an oxygen sparging circuit to the cyanide leach tanks. And what oxygen is just kind of -- it acts as a bit of a catalyst to help the reactions go. The sulfide ore is a very good performing sulfide ore in terms of extracting the gold from the cyanide solution. It's not the least bit refractory. But sulfides do consume more consumables. And so the oxygen just helps get that going. And so they're putting an oxygen sparging system in place, which I think should be up and running by the end of the year, and I think ready to sort of put into the performance. As we get deeper in the ore body and we have more and more sulfide, at some point we're not going to maintain that 2:1 ratio and -- as you deplete the oxide. So that's kind of operationally what's going on. And so there's a bit of capital, obviously, to put the oxygen system in place and some of that is showing up in the capital expenditures. And then the other part of the operational thing is these trucks have -- the trucks hauling the ore have over 1 million miles on them now. So we have to start replacing them. And it's amazing after a year -- a couple of years of mining operation, you're starting to replace your trucks. But those are things that show up in the all- in sustaining costs because they're capital that are spent on operations. So I don't know, Mike, if you have anything to add to that.

No, that's how I would explain it.

Perfect. I want to get into cash flow and capital allocation for a second. So I know generating $36.9 million in operating cash flow for the first half versus $6.9 million last year. But with $30 million in Q2 distributions from Peak Gold, $54 million year-to-date, how are you guys balancing debt reduction? I know you paid down $29 million so far. But what's the plan on debt reduction versus reinvestment in growth projects? Just looking to get your head on that.

I'll let Mike go first, and I might throw in after.

Yes. Well, my focus is ensuring I can always meet those delivery dates so that the debt comes every quarter, hedge deliveries every quarter. So my -- the focus right now is we make -- we have sufficient capital to ensure that we can make all those payments through the maturity with -- currently for 2025, there's some extra cash we had this year, and our focus has been on the permitting at JT. So with what we're anticipating, which I expect we'll probably do slightly better, we're going to bring our debt down from where it currently is at about $23 million today. We'll finish the year around $15 million of debt with ING and Macquarie. And then our hedge position is currently at -- as of today is just under 63,000 ounces, and we should bring that down by another 20,000 ounces to about 43,000 by the end of the year. So that's the main focus of the proceeds we have, which is where the majority of cash goes, but we do keep a little bit aside for other projects. And I'll pass it to Rick.

Yes. I'll just kind of comment from an operational standpoint. We do want to advance our other projects. I think we've said very consistently that the next stage for JT is getting the permit to go underground. And that's -- there's not really anything to do. We want to spend exploration dollars on early stage, relatively early-stage projects to add more ounces. We know we have a high-quality deposit that makes a lot of money that has very high NPV at today's gold price. There's -- it's just not prudent to start or restart exploring the Ellis Zone or a number of the other or any of these other targets that are out there. We know we've got a very prospective piece of ground at JT. So next stage, get the permits. That's going very smoothly. We have a good working relationship with the state of Alaska. These permits, the underground mining permit, is at the state of Alaska. Technically, it's sort of 2 main permits we need from the Department of Environmental Conservation, and that's a water discharge permit and then the mine operating work. Technically, it's a mine. We're not producing anything, but you're still filling a big hole in the ground, a long hole in the ground. So that's the focus at JT. And look, at Lucky Shot, we do want to get a program going and get back underground and start drilling again, but I don't want to do it in sort of fits and spurts. And so that's why we keep saying that the focus is on delivering the hedges, reducing the debt. And when we see sort of a clear window of being able to start and then not stop going at JT -- sorry, at Lucky Shot that's kind of what we're looking for. So be patient, it's not steam. The gold is not going anywhere. Gold price keeps going up. So we're -- once we get underground and get to it at Lucky Shot, we can advance things pretty quickly. So I'm not really too worried about the overall time line there.

Great. I got 2 quick questions on -- while we're on the topic of Johnson Tract and Lucky Shot. For Johnson Tract, thanks for going through the upcoming milestones. I think that's great. What tonnage potential are you targeting at Johnson Tract?

So we -- the initial assessment we did, which is, again, the term S-K 1300 uses same as the 43-101 in Canadian Lingo, targeted a 1,500 ton a day operation, which is -- it's a -- JT, I mean it's a good grade deposit, but it's also just a nice geometry of the deposit from a mining standpoint. It's a pain in the butt to drill because it's -- you got the mountain that's going straight up and the ore deposit that's going straight down. So your drill holes get long and the dip is such that you have to drill parallel to the mountain surface, that's not a good thing to do. So that's -- from an exploration standpoint, it's not the greatest geometry, but from a mining standpoint, once you're underground, it's a great geometry because it's a big fat ore body and it's near vertical. So you have -- from an underground mining perspective, relatively -- you've got good long-hole stopes that you can develop. And all of our infrastructure is in unmineralized material, what we call the dacite porphyry. It has like 0 sulfides in it. And so it's great rock to put all your underground development in because the water stays clean. The big fault that separates the mineralized from the unmineralized is an aquitard or aquiclude. So the water -- mineralized water that is tainted stays on one side and you just keep the water separate. You put a curtain up if you need to and you can develop the ore body from an environmental standpoint very cleanly and not have a lot of concerns about water contamination. Mother nature is doing that on her own right now. That's how we find these deposits. They're metal anomalies, which means there's metal going into the creeks. We just don't want to touch it because once we touch it, it's our water.

Fair enough. Fair enough. I got one question about Lucky Shot as well. I noticed you mentioned a royalty acquisition of an existing 0.5% NSR for 250,000. Just what does this mean for me and the folks in the room?

Yes. So as we work towards transitioning Lucky Shot from an exploration project to a mine, and that's getting the drilling done. But obviously, we see that as all moving forward when we get the right time and that will be let's get the hedges out of the way and things like that. This is -- if we can buy a royalty for a good value, that means we don't have to pay it to -- when we're in production, we don't have to pay that royalty to somebody. So it's pretty valuable to have that, and we'll basically just extinguish it because we'll own it. So there's no sense in paying it to ourselves. That's just paperwork. Mike's got plenty of that. So don't read it as we're becoming a royalty company sort of thing. That's not the intent. it's just if we can buy out the underlying royalty owners and pay them a good value, good value for them because they get the money upfront. They don't have to worry about any of the ongoing risk, the operational risk and what have you. That just makes sense to us.

Great. While we're on Mike's paperwork, actually, I do have a question for you. I'll talk about carry trade mechanics. So I know you reduced your hedge book from 74,800 to 62,900 ounces or somewhere around there. Curious, what's your philosophy on the optimal hedge ratio as production progresses?

Well, the optimal hedge ratio doesn't really change. It all mirrors what was in the original feasibility study, and that's how the lender structured it. And unfortunate for us is it got structured in a way that it does things in quarterly -- on a quarterly basis, but we don't deliver gold on a quarterly basis. We deliver it on a weekly basis, if anything. Some weeks are bigger while we're in the middle of a campaign, whereas some are smaller, but there's a delivery every week. So the objective I try to do to, again, limit risk, ensure that I have enough gold by the time that delivery is due is when a campaign starts, you kind of have some -- you have a couple of weeks when it starts where you're waiting for that first big shipment. But when that first shipment comes, we deliver 100% of that gold into the carry trade and that carry trade will finish -- we will fill that next hedge delivery up within the first 3 shipments usually. And then for the final 2 shipments, I'll just sell those at 100% of spot price with no carry trade. So we're always ahead of the hedge delivery. And in a rising market, it works well, obviously. But if the gold price kind of starts to dip, there's a small hit. But this just ensures we're never going to be short delivering that gold and forced to buy it in the open market at a month later when gold price could swing again. So that's kind of my approach, right or wrong, I guess, but it's worked so far.

And the objective is to deliver the hedges and have full exposure to the upside or downside. I mean, obviously, what we don't want to do as a junior company is try to play or game the market on guessing where gold is going. That's just not the role of a junior mining company. And equity owners of Contango shouldn't want us to make bets, I mean go to Vegas...

Yes. When we have a stronger balance sheet, Romeo, we would take a more sophisticated approach to this. But while we're at these levels and managing the lenders, it's all about just removing the risk and trying not to take any big swings for the fences at the cost of being wrong.

Yes. No, I appreciate your take on that. Rick, I'm hoping -- and I know there's a lot of questions in the chat, I'll get to them just in a second. I want to zoom out for a second. With $58.2 million in Q2 gold revenue, you've emerged as a mid-tier gold producer. And I'm curious how you see Contango in that class compared to other mid-tier gold producers, especially with rate cuts supporting -- or potential rate cuts supporting higher gold prices. Where do you see Contango fitting in with the club?

Well, we're a junior company. I'm not sure we're mid-tier yet. I would actually describe us as a junior producer. But we're -- again, we're making more money than we're spending. And that's unique. If you look at most other junior producers, that's not the case. And that's delivering into our hedges. And so once we get free of the hedges, this is a rocket ship. So that's -- and that's where we're aiming to. We're going to do that prudently. And again, we're not going to -- as Mike just said, we're not going to swing from the fences and make any big bets here. But we do believe in the gold price. If you don't, you shouldn't be in the gold business. And we're hedged because the banks made us to hedge, it wasn't part of the strategy. And so -- and that's just the way it works for a junior company. I think in terms of where do we fit in the gold space, I can't think of another junior company producing and making money selling gold that only has 12 million shares outstanding. So we're definitely a bit of a unique beast. Our model is unique. We see a few other want to be copycats out there saying they're going to do a DSO thing. And I think it's a great model. So hats off and if they can make it work, that's great. We've made it work. So we know it works. And it's really all about the assets. I mean the assets have those 3 criteria that we talked about. They got to have grade. They got to be close to infrastructure, so you don't have a huge amount of capital to get it done. And they've got to be relatively simple projects from a permitting standpoint, so you can get them done quickly. Obviously, because of that, then the capital is not as high as if you were going to build your own mill and all that. When I look back at Manh Choh and we had a study that said basically, it was going to cost $500 million to build our own mill and develop the project there. And the market just doesn't support that. It just -- it's just too small a deposit, even as high quality as it. It's high quality, but it's just -- it's too small for the market to say, well, we're willing to risk $500 million of ours, whether it's debt or equity, to let a junior startup make a try to get this into production. There's more belief if you have a 5 million or 10 million ounce deposit, that will eventually work because frankly, if it doesn't, one of the intermediates or majors will come along and fix it after it's got down to the trash heap.

That is usually how they operate.

And I mean the market is littered with junior want to be start-ups that said we're going to develop our 10 million ounce gold deposit and they don't, maybe Newmont or Barrick does eventually or somebody else. But yes, we don't want to be one of those. So we're going to stay prudent. And we like our low share count. We've been told several times we should just roll it forward 10:1 or something like that and be happy with a $2 stock. And no, my objective is I'd like to have a 3-digit stock price someday.

And somebody in the chat actually agrees with you. They posted near the beginning of the hour they see the stock at $100, So to say they're printing money, the model is brilliant. So somebody in the chat agrees with you. Curious, as we jump just before I get to those chat questions, when are you going to provide guidance on the 2026 production at Manh Choh? And just generally, what's -- what are the upcoming catalysts for Contango?

Yes. So guidance on '26, typically, the plan and budget is approved in November time frame. So we won't really see anything definitive other than the general life of mine kind of guidance that we also give out. But -- and I think it's -- we're going to stick to the plan. And this is Kinross. Kinross, they don't swing for the fences either. They're going to keep it on the straight and narrow. Look, I mean, the mining is going smoothly, the hauling is going smoothly and the mills dialed in. So steady as they go. Fort Knox has never looked better as an operation from Kinross' perspective on their financial disclosures. So if they're happy, we're happy.

Here we go. Perfect. Let me get into some of the questions in the chat. So Tate Sullivan right at the beginning of the hour asked how long will Campaign 3 last and potential timing of the check from the JV?

So campaign is roughly 3 weeks. And Mike, you probably ought to comment on when...

Yes. I would expect that distribution should come in late September is my best guess. It's usually kind of right near the end of the campaign when they're 89% done.

Great. CW Donahue from the chat asks, for Johnson Tract, is there still a Beluga whale lawsuit issue? Where is the status of that?

Yes. So the Center for Biodiversity and Cook Inletkeepers filed a lawsuit against the U.S. Army Corps of Engineers for granting our 404 permit last year. And so it's -- basically, it's in federal court. We have one federal judge in Alaska. We're supposed to have 3. Congress hasn't appointed any of Trump's federal judge appointees. That's a DC, I can't say that on the air, but that's DC's -- that's a swamp issue. And so she has 550 -- our lone federal judge has 550 cases. to hear. So basically, yes, the lawsuit is filed, and we've weighed in and joined the lawsuit, and that's the status of it. So that's -- I don't really know -- I can't really comment much more than that.

Perfect. One question from the chat, and I'll throw on a little bit in addition to myself, asked what allowed -- I know we already touched on it, but just for clarity, what allowed the ASIC for second quarter to be lower than expected? And my addition, how are you tracking generally towards the sub-$1,625 target?

Do you want me to start this one, Rick?

Yes. Go ahead, Mike.

Yes. So well, as you know, in Alaska, the weather gets much nicer in the summer. So at the beginning of the year, you didn't have much exploration going on, and we just hadn't planned to be purchasing many of the trucks at that time. So Q1 was very low. Q2 came in lower than, I guess, internal guidance, even though we kind of delivered on purchasing these trucks during the quarter and the exploration. So it obviously increased -- from Q1 to Q2, it went up. And we expect Q3 to be consistent with Q2. It could actually be a little bit less just due to how much time we'll be doing our third campaign during the quarter because if we're not doing our campaign, that means Fort Knox is doing theirs. And the least amount of time we spend in a quarter on our campaign, it really impacts our processing costs and our admin costs that we have there. So I expect the cost to be consistent because we still have exploration. We still have truck purchases happening during this quarter. So I think you're going to see -- I expect you're going to see ASIC kind of stay consistent, but I do think we will come under hopefully, by the -- below the $1,625 just based on how we're tracking. Fourth quarter will be slightly -- should be slightly higher just due to the size of that planned campaign. So you might see it creep up a little bit in Q4, but we do definitely hope and plan to come in below the $1,625. Rick, anything to add?

Yes. No, I think -- yes, I mean, in general, we get more, like I say, weather days both in terms of truck transportation traffic. And in the wintertime, obviously, you get the blowing snow and things like that, that slow things down, get super cold, that slows things down. And then you can -- if it's really cold and there's ice in the stockpile, that slows the mill down. So those are kind of the sensitive points, and they all occur in the wintertime, which is not too surprising. Summertime is kind of a breeze, but we do have these capital expenditures that you do tend to do in the summertime, which is exploration and buying and -- putting orders in for trucks and things like that.

The other item I'll add is this is always a function of your ounces sold during the year. And so far, we are tracking kind of slightly ahead of our guided production of 60,000 ounces for the year. So for every ounce more than what we guided, that's going to bring down your cost because it's a fixed cost-driven operation. So all those factors, when you put them together, that's why we kind of expect we'll come in under, but we'll see how we get at the end of Q3.

Kinross again, they're going to have guidance that they're going to meet or beat.

Great. That steady, reliable good news. I don't get a lot of this in the mining industry. SK from the chat had 3 questions, so I'll throw them to you one at a time. Are there plans to monetize the Onyx shares?

Short answer is yes. It's more about timing. We like what they're doing. And so we're -- we'll be patient. And obviously, we have a good working relationship with Onyx and the people at Onyx. So we're not going to torpedo on it at all.

And the only thing I'd add to that is some of those shares are still under escrow from when they were originally issued to HighGold. And then we're also in kind of a lockup on what we can do with them. So they're -- it's not as easy as just saying we're going to sell them, but we're obviously going to consider what options are out there and just watch closely.

Great. He also asks as we go into conference season, what's the message for 2026? What will you be telling folks at the conferences in September, October?

Basically, a lot of it is going to focus on drilling underground at JT -- sorry, at Lucky Shot and getting underground started at JT. We're already -- we're working on the road. We've been doing some grubbing and things -- just getting things ready to get underway in earnest next year. So obviously, the continuing -- steady as she goes in terms of delivering the hedges and reducing the debt and freeing up cash flow to advance or aggressively advance our other 2 projects. I mean both projects, what we envision for Lucky Shot is a mine -- a resource in the 400,000 or 500,000 ounce range with -- once the drilling is completed and a mine plan that can deliver on start-up 30,000 to 40,000 ounces at really good margins because again, the grades -- on a mine diluted grade, it's going to be above 10 grams. So -- and we've got the rail there. I just had a conversation with the Head of Alaska Railroad earlier this week. They're eager to look at transporting our ore in boxes. Again, from a mining standpoint and a transportation standpoint, very simple plan. We're not -- take advantage of the railroad, it's 1/3 of the cost of trucking. So every mile or kilometer we can put on a rail car is less than -- we've got -- we're still evaluating where Lucky Shot ore would go, a number of options there. And then meanwhile, get started on getting the underground progressed at JT. Again, rough numbers, it's about a year to get the underground. It's 1.5 kilometers of underground to get built to get set up to do the drilling. And the other thing about Johnson Tract, it's already with a roughly 1 million ounce gold equivalent resource there at 9.5 grams. That's a great deposit. It's open at depth, and we just can't drill at depth because of the geometry. So once we get underground, we can drill it at depth, and we can see is it 1.5 million ounces? Is it 2 million ounces? It's more than 1 million ounces. So we know it's open. So I'm very excited about getting underground, getting the exploration work underway.

Great. That's a good story for Beaver Creek and Denver. They also asked, is there any thought been given to getting into ETFs like the GDXJ?

Mike, do you want to take that or I guess, to be determined, I mean I'm not frankly surprised we're not on it. I guess that would be my response. We're part of the Russell 2000. That's -- it's a much bigger index. So I shouldn't say bigger, broader. It's not gold specific, obviously. Probably something we got to take a look at it because I'm a bit surprised we're not in it.

Sure. Yes, they said the same thing in the comments, it makes no sense that producing junior miner isn't in the largest passive ETF, so something interesting. Somebody with a very colorful username asks, could we expect the same earnings for the next few quarters if gold stays in this range all year?

I guess I could start. I think Q3 will be consistent with Q2. I think Q4 might drop off a little bit, but Q4 will basically summarize the whole year and keep us -- we plan to have that kind of in line with our guidance that we had for the year. But I think Q3 for sure, if not better.

Great. And I will ask you guys one last question, which should give everybody in the chat a chance to ask their last questions before we wrap. Just curious, what are you most excited for, for the rest of the year? Rick, I'll start with you.

I'd say -- it's just -- I hate to say steady as she goes, but it's kind of -- it is kind of that. And what I really would like to figure out is to get underground at Johnson Tract and get -- sorry, get underground at Lucky Shot and get the drill started because drilling is exciting. And it's a great deposit, and it's very simple. We like simple. So the sooner we can get underground and start drilling -- once we're underground, we can keep going. So -- but I don't want to make -- as I said before, I don't want to start and then have to stop because we've -- the hedges are -- gold price has gone down, and we're scrambling for money and stuff like that. It just we want to make sure we've got kind of a clear path here and I said it's not steam, so it's not going anywhere. And we've got -- it still fits our 5-year plan.

Great. Mike, what keeps you buzzed for the rest of the year?

It's a pretty boring answer, but I guess my response is just to kind of continue to like steady as she goes, deliver these ounces -- delivering these hedges and pay the debt down, but to actually see our balance sheet delever and come down and bring the liabilities down. Like that's kind of what excites me, which is kind of a boring answer [indiscernible] answer, but that's kind of -- I think by the end of this year, it's going to be a very impressive balance sheet with strong earnings.

Awesome. One last question from the chat, and I know you might be bored of this question because I've asked you, I think, on 6 webinars in the last year. But are there plans in the future to reward shareholders with the dividend?

Yes. Again, I love that thought. It's definitely not at this year and probably in all honestly, not a next year thing. But yes, I mean, that is definitely one of the things we're focused on is delivering shareholder value and having a low share count is part of that. And whether it's -- whether in the end, if it ends up being a dividend or share buyback, those are things that longer term, we definitely want to grow the company. We definitely believe in the gold price. We are looking at other opportunities. I think I mentioned before, we're looking at -- we want to find a home for Lucky Shot and JT ores, and we're looking at a number of options there. So kind of stay tuned to that space. Obviously, we're under CA with a number of groups, so we're -- but we are definitely -- that's a bit of a longer-range plan. But if we can achieve our 5-year plan of producing -- getting JT and Lucky Shot into production and getting up to a 200,000 ounce a year production profile and keep our share count low, I mean, again, that's a rocket ship. So that's what we want to build here.

Awesome. Well, on that note, I'll wrap up for today. Rick, Mike, thanks so much for running through questions and talking about the last quarter. Everybody in the chat, thank you so much for participating, everybody who is in the room. If you have any additional questions, you can always reach out to info@contangoore or feel free to respond right to the e-mail that got you to this room. I'll make sure that question gets to the Contango team. But thank you so much. Hope everybody has a great afternoon.

Thank you.