Contango Ore (NYSE-A: CTGO) published its first assessment of the Johnson Tract project in southeast Alaska on Tuesday, showing positive economics and costs per ounce around a quarter of the current gold price.
Johnson Tract has a post-tax net present value of $224.5 million (C$309.2 million) at a 5% discount, according to the S-K 1300 technical report filed Tuesday under U.S. Securities and Exchange Commission rules. The project would have an internal rate of return of 30%. It has a 1.3-year payback on a seven-year mine plan.
Initial capital costs were pegged at $213.6 million and sustaining capital at $61.3 million. All-in sustaining costs would be $860 per gold-equivalent ounce (GEO) sold, according to the report. (The gold price was $3,432.50 on Tuesday.) Annual output is forecast at 102,258 GEO (including gold, silver, copper, lead and zinc) at 7.58 grams gold-equivalent.
“We look forward to investigating potential upsides to improve the economics and extend the mine life,” president and CEO Rick Van Nieuwenhuyse said in a news release. “It includes additional underground drilling to expand the resource to extend the known orebody down dip and along strike.”
Contango is one of several players betting a second Trump term will see their mining projects get built in the largely unspoilt wilderness of Alaska. Hedge fund billionaire John Paulson and Novagold Resources (TSX: NG) plan a feasibility update this year on the Donlin gold project they bought half of from Barrick Gold (TSX: ABX; NYSE GOLD) for $1 billion (C$1.38 billion) last month. .
Trilogy Metals (TSX: TMQ; NYSE-A: TMQ) and South32 (ASX: S32; LSE: S32) are exploring their Upper Kobuk 50-50 joint venture in the state’s northwest. And Northern Dynasty Minerals (TSX: NDM; NYSE-AM: NAK) wants approvals for its contentious Pebble copper-gold project.
Location map of Contango Ore’s Johnson Tract gold project in Alaska. Credit: Contango Ore
Mid-tier aspiration
Contango uses a direct-ship-ore model. This helps build a portfolio of assets in Alaska that would support annual production of 200,000 GEO by 2029, Van Nieuwenhuyse said. The company has a 30% stake in the Manh Choh mine joint venture with Kinross Gold (TSX: K; NYSE: KGC). It also owns the Lucky Shot project. Additionally, it has exploration rights over 620 sq. km of state and private lands, including road and port easements.
The model also cuts costs, and may ease environmental permits by reducing on-site milling, and processing using chemicals, as well as refining and concentrating. It relies on ore being high-grade enough to be mined, crushed and shipped directly to market. Transport becomes a main cost, in this case potentially to Kinross’ Fort Knox mill, which handles Manh Choh.
Located near the Alaska-Yukon border, Manh Choh entered production in last year’s third quarter, delivered 42,000 oz. gold-equivalent in its first year and targets 60,000 oz. this year under a 70% hedge programme. Lucky Shot and Johnson Tract are slated to start production by 2029.
Shares gain
On Tuesday, Contango’s shares in New York rose by 2.4%, or 34, to close at $14.28 apiece. The stock has ranged between $8.85 and $25.32 over the past 12 months and has a market cap of C$179.1 million.
Assuming a gold price of $3,000 per oz. demonstrates an NPV of about $400 million at a 5% discount and an IRR of 45% with less than a year payback from starting production, Van Nieuwenhuyse said.
Contango acquired HighGold Mining on July 10 last year. This gave Contango complete ownership of the Johnson Tract project. The all-stock deal was worth around 55¢ per share and totalled about $37 million.
Johnson Tract holds an estimated 3.5 million indicated tonnes at 5.3 grams gold per tonne, 6 grams silver, 0.6% copper, 0.7% lead and 5.2% zinc for 9.49 grams per tonne gold-equivalent, containing 598,000 oz. gold, 673,000 oz. silver, 43.1 million lb. copper, 51.5 million lb. lead and 400.8 million lb. zinc for 1.05 million GEO. It also has 706,000 inferred tonnes at 4.8 grams per tonne gold-equivalent for 108,000 ounces.
Exploring the Johnson Tract gold project in Alaska. Credit: Contango Ore
Preferred permitting
Permitting for an underground tunnel, portal site and laydown area will take about one year, the company said. Cook Inlet Region, one of the 13 Alaska Native Regional Corporations, granted rights of way for a 32-km road and barge landing. Contango recently met with federal regulators and Alaska’s congressional team. The groups pushed for FAST-41 priority under President Trump’s March 20 order on U.S. mineral production, according to Contango.
The company is also to conduct metallurgical, geotechnical and hydrology studies necessary to complete a feasibility study. That study is to include a detailed mining and transportation plan, as well as select a specific site for processing the ore.
“We look forward to working with the Trump administration and our congressional delegation to develop the Johnson Tract project and help secure the American supply chain of four critical metals,” Van Nieuwenhuyse said.
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