| Is this the highest-grade open-pit mine in the world?
| | | Please find below a special message from our advertising sponsor, Contango Ore. Golden Opportunities is a free service that gives you valuable investment intelligence all year long at no charge, and advertisements allow us to continue sending these reports.
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Contango Ore (CTGO.NYSE-A) is on the fast track to production from an ultra-high-grade, open-pit mine...and the transformational cash flow it will soon provide.
Urgent:
Watch this video to get the story on Contango — and the current view on gold itself — or read the exciting details below...
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It’s the perfect opportunity for today’s gold market:
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A company that, with relatively little attention or fanfare, is about to enjoy transformational cash flow from one of the more exceptional gold projects to be found anywhere.
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Consider the details...
Contango Ore (CTGO.NYSE-A), via the Peak Gold joint venture with Kinross Gold (70% Kinross, 30% Contango), controls the Manh Choh gold project in Alaska.
Manh Choh is a high-grade (8 g/t), open-pit deposit with not only exceptionally high grade for an open pit mine, but also extremely low cost and low capital requirements.
The project is on the fast track toward production, with ore that will simply be mined at site and then trucked to Kinross’ Ft. Knox processing plant.
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Now consider this: Manh Choh is expected to kick off free cash flow of around $50 million/year at today’s gold prices for Contango…starting this time next year…and to become one of the highest-grade, open-pit gold mines in the world.
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In a gold market that is now catching fire, Contango Ore is a “must own” for gold bugs who want to take advantage of gold’s next big uptick.
Read on to learn more about the Contango Ore story and to watch a “fireside chat” between Gold Newsletter Editor Brien Lundin and Contango Ore CEO Rick Van Nieuwenhuyse.
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An Extraordinarily Tight Share Structure
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Van Nieuwenhuyse is a long-time Alaskan mining veteran and a guardian of shareholder interests. CTGO only has 7.2 million shares outstanding — an incredibly low total for such an advanced company.
Thus, its share price is higher than most junior mining companies you’ll find, at around $30/share, which translates to a market cap of +/- $220 million. Against that consider the company’s formidable cash position of about $30 million…and that aforementioned free cash flow once production begins.
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Moreover, when production commences in 2024, remarkably, this $50 million+ in annual free cash flow to Contango is passive income, similar to a royalty or streaming company.
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The company anticipates significant free cash flow per share starting in two years — $6 to $10/share. To say the least, this is rare, probably unheard of, for a junior gold developer. In fact, it’s rare for any public company.
None of this is lost on Kinross. There is the prospect that Kinross, as well as other miners, may bid to acquire Contango’s 30% of the Peak Gold JV, or to acquire Contango altogether. At the start of this year, Kinross held $418 million in cash.
A take-out would, of course, accelerate the potential profits for shareholders.
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How The Partnership Works
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Kinross is the manager and operator of the Peak Gold JV.
The JV consists of Kinross (70%) and Contango (30%) as owners of the Manh Choh project, which includes the known resources of 1.3 million ounces of gold and the 875,000 acres of lands leased from the Tetlin Tribe, plus 13,000 acres of state mining claims.
Each partner pays their pro rata share of development costs until production is achieved at Manh Choh.
When production commences, CTGO receives 30% of net revenue after all-in sustaining costs of approximately $1,100/oz with about 67,500 oz. of gold production to Contango’s credit each year.
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That translates to approximately $50 million/year in free cash flow at today’s gold prices...with Kinross doing all the work.
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It's a sweet deal for both sides. Kinross paid $93 million in 2020 to buy their 70% interest from Royal Gold and Contango, with $32 million having gone to Contango. Explorer and miner coming together to join forces results in a sweet deal, especially for shareholders.
Contango’s CEO earlier served with Placer Dome (bought out by Barrick) as VP Exploration.
He founded and was CEO for many years of NovaGold, which discovered the giant Donlin Creek Gold project in Alaska. He then founded and served as CEO of Trilogy Metals and developed the large copper/zinc/precious metal Ambler mining district in Alaska. These are all quality companies.
Rick lives in Alaska and knows how to get things done there. So does Kinross. Manh Choh is another notch in his belt with hand-picked partner Kinross, taking advantage of the under-utilized Ft. Knox mill with long-term, experienced mining staff.
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Contango’s market value of $220 million is in range for a gold developer with a strong project and address.
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As mentioned, what’s unusual is that the shares outstanding are very low — just 7.2 million, 7.8 million fully diluted — with a compensating higher share price and less liquidity.
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In situations like this, the committed speculative investor frequently exercises patience to build a good position.
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Contango Ore is an entrepreneurial wonder — the company is piloting a new and potentially highly lucrative way to specialize in the discovery, exploration, expansion and development portions of the minerals sector.
It is not a royalty company. It is not a streaming company. It is not a producing miner.
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But as a junior partner in a compelling project with a major mining company and positioned for a serious ongoing payout, it combines the best of all worlds in one company.
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To learn more about Contango Ore’s amazing story — and the other ultra-high-grade project in its portfolio — click below to watch Brien Lundin and Rick Van Nieuwenhuyse discuss the company’s prospects and their views on the current gold market.
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