Contango Silver & Gold (TSX:CTGO) - Direct Shipping Cash Flow Funds Path to 200koz/year Gold Plan

Rick Van Nieuwenhuyse (0:00)

My name is Rick Van Nieuwenhuyse. I'm the Chief Executive Officer of Contango Silver & Gold. And we are a junior producing company in Alaska. We're producing gold, about 60,000 ounces of gold a year.

And we have a growth profile, a growth plan, for the next five years to grow to an intermediate production level of 200,000 ounces of gold and 5 million ounces of silver in a safe jurisdiction, Alaska and British Columbia.

SPEAKER_2 (0:25)

Rick, nice to meet you. We didn't have time last week. You were a bit busy. We were in Beaver Creek, weren't we?

Rick Van Nieuwenhuyse (0:29)

Beaver Creek was crazy, but it was a good crazy. A lot of interest in the gold and silver sector.

SPEAKER_2 (0:35)

Right, so it was investors as well?

Rick Van Nieuwenhuyse (0:37)

A lot of new faces, a lot of generalists were there. And we had a number of, I'd say at least a dozen meetings with folks that we had never heard of before, so it was good.

SPEAKER_2 (0:45)

And we're here down at Colorado Springs, I guess one of the next premier conferences on the calendar, again, slightly different profile, but invested down here. What are you expecting from it?

Rick Van Nieuwenhuyse (0:57)

Yes, same thing. We had, it's a bit of the invitations. We had a number of people ask us to meet, again, new faces, more on the general side of things. So yeah, we're looking forward to a busy schedule down here as well.

SPEAKER_2 (1:12)

Fantastic, fantastic. We met, I think, online.

You were at the Zurich Conference last year, and a lot has changed since last November with the company. We're in production at Manh Choh. Can you explain the business model there? Because there's a kind of DSO component where some people may not understand. So what's the deal with Kinross there?

Rick Van Nieuwenhuyse (1:34)

So we found a million ounce, eight gram open pit gold deposit, which is amazing. It's an amazing geological occurrence.

We proactively decided not to build our own mill, tailings facility and power plant to run all that because it would take a long time to permit, it would cost a lot of money.

We knew that there was excess capacity at the Kinross's, Fort Knox mill located on the highway, about a five hour drive from our project. So rather than raise the money and go through the permitting nightmare of building a tailing facility specifically, we said, okay, let's build a form of business partnership with Kinross. And so we entered into a 70-30 joint venture, them being the 70% partner and operator manager of the project. And just took advantage of that existing capacity. So the mine produces 200,000 ounces of gold a year on average. Our share of gold on average is about 60,000 ounces of production. This year we're a little on the low side because we're doing a transition between North and South pit, so a lot of pre-stripping on the South pit. Our costs are a little higher and our production is a little lower than average. Next year we get the benefit of all that with production of about 75,000 to 80,000 ounces of gold. Again, our share and cash costs in the, we're going to guide about $2,000.

SPEAKER_2 (2:54)

Right. Okay.

Rick Van Nieuwenhuyse (2:55)

All instantiated cash.

SPEAKER_2 (2:56)

All instantiated. So this year would be what? 40, 45 you were indicating. Right. Next year is 70, 75

So this 70, 30 agreement is one of precisely what you end up with. So 70, 30% of gold produced, where is our net number?

Rick Van Nieuwenhuyse (3:11)

That is, all the numbers we quote are net to us. Right.

SPEAKER_2 (3:14)

Okay.

Rick Van Nieuwenhuyse (3:15)

And we're more like a royalty company because they do all the work.

SPEAKER_2 (3:18)

Yeah.

Rick Van Nieuwenhuyse (3:19)

You know, we found it, but they do all the work in terms of managing the operation.

And we basically get quarterly dividends from the joint venture. Right. That average over the life of the mine, five-year mine life, the average of about $100 million of free cash flow or a dividend to us.

SPEAKER_2 (3:41)

Right. Okay. And in terms of short life of mine there, because I know it's extremely high grade, and you want to get through it as quickly as possible, you know, times money and all of that.

Is there any kind of expiration cost or additional cost which you could be netted off against whatever you get or meant to get?

Rick Van Nieuwenhuyse (3:56)

The dividend is what we quote, and that's net of everything. So if we're doing $5 million of exploration on the project, yes, net of that.