I’m starting a regular series of under the radar mining prospects on The Armchair Trader, and where possible speaking to the CEOs and CFOs. Make sure you sign up to our newsletter so you don’t miss one.
Today we look at Contango Ore (NYSE American:CTGO), which is an interesting hybrid gold prospect in Alaska. We say hybrid, because its main assets are a royalty fee from one mine about to start production, plus some other exploration stakes, including a second historic gold mine which it is in the process of reopening.
Joint venture on the Manh Choh gold mine
Starting with the producer: Contango Ore has a joint venture, formed last year, with Kinross and Royal Gold, in which Contango Ore receives a 30% royalty on the Peak Gold deposit in Alaska. This is based on a lease from the local Tetlin tribe. The JV, Peak Gold LLC, also has an option on the adjacent Tok block which was staked by Contango in 2010.
Contango currently has a precious metals production royalty rate of 3% on the first four years of full scale production on the Tetlin lease. This goes up to 4% for years five to seven, and then 5% for year eight and the following years. There is also a 3% net smelter royalty in place for Royal Gold, which is Contango’s former partner in the original Peak Gold JV.
Peak Gold has been delayed by Covid in Alaska, but the mine is attracting attention (e.g. from a JV between fund manager Baring Asset Management and the Alaska Permanent Fund, which has picked up a 7% stake). The project has measured resources of 473 tons versus a further indicated 8,728 tons. Measured grades for gold and silver are 6.4 g/t Au and 17 g/t Ag. Measured and indicated grades for gold alone are around the 4.1 g/t mark.
Excellent proximity to infrastructure
Peak Gold is in close proximity to Alaskan highways which remain open all year round and ore will be trucked to the processing facilities already extant at the Fort Knox Milling Complex which is owned by Kinross already. Kinross estimates the mine should yield about 65,000 gold equivalent ounces (GEO) per year over a five year period, at an average all in sustaining cost of $750/GEO.
New CEO Rick Van Nieuwenhuyse told us that he anticipates the open pit mine will be running all year round. “This project is right next to the road, and we have also been engaging with local communities all the way to Fairbanks,” he said. “We will also be improving local infrastructure which will have benefits for the tribe.”
The mine’s construction is expected to commence in the summer.
Lucky Shot historic gold mine opportunity
Contango Ore is not a one shot pony – it has a number of other exploration projects under its belt in Alaska and with the federal government transferring more land to the state of Alaska, expect other opportunities to emerge imminently.
We should also mention its Lucky Shot project, which is an historic gold mine that has been closed since World War 2 when the Roosevelt administration shut down non-essential mining operations in the state (1942). This is very close to Anchorage with good road access. It consists of a pool of underground mines. Contango Ore expects to commence diamond drilling (a down dip extension) in the tunnels of two mines, namely Coleman and Lucky Shot.
The latest data available on this site stems from drilling carried out by Full Metal Minerals in 2005-09 and a subsequent survey in 2016 commissioned from Hardrock Consulting of all available historic data on the property. The results look very positive indeed, but Contango Ore is at pains to emphasise it is not treating these as current estimates of mineral resources. We shall await further progress with the drilling at Lucky Shot with great interest.
