North of 60 Mining News - The mining newspaper for Alaska and Canada's North

Contango ORE Inc. March 20 announced that it has entered into an agreement with two financial institutions to arrange a US$70 million loan to help fund the company's portion of expenses to reach the first gold pour at the Manh Choh Mine project in Alaska.

Being advanced by Peak Gold Joint Venture, owned 70% by Kinross Gold Corp. and 30% by Contango, the Manh Choh Mine is expected to produce roughly 1 million gold-equivalent oz, which includes the value of both the gold and silver, over an initial 4.5 years of mining slated to begin late next year.

This operation is based on 3.9 million metric tons of proven and probable reserves averaging 7.88 g/t (998,000 oz) gold and 13.6 g/t (1.7 million oz) silver.

A feasibility completed last year details plans for trucking high-grade ore mined at Manh Choh roughly 250 miles to the Fort Knox Mine. This ore is to be processed through the existing Kinross Alaska mill and the tailings stored on the Fort Knox property.

The total pre-production capital needed to build the mine is estimated to be approximately US$255 million. This includes the development and infrastructure at Manh Choh; modifications to the Fort Knox mill; a fleet of trucks to deliver the ore; and $40 million in contingency.

Now Contango has a financing agreement in place that takes it one step closer to being elevated from gold explorer to producer.

"This year will be a transformational year for Contango," said Contango ORE President and CEO Rick Van Nieuwenhuyse.

Narrowing the field

After receiving significant interest from several banks and alternative lenders to provide financing to fund Contango's 30% interest of the pre-production construction and other activities associated with Manh Choh development, the company narrowed the field to three institutions that performed independent due diligence prior to providing detailed term sheets.

Contango selected ING Capital and Macquarie to provide a US$70 million senior secured loan facility.

"We received very competitive terms for the senior loan facility and an attractive cost of capital for the company," said Van Nieuwenhuyse. "Along with our upcoming equity raise, we will fully fund our obligation to the joint venture through production and execute on our other corporate objectives."

Construction activities at Manh Choh are already well underway.

This includes the completion of a 176-person camp at Tok, a crossroads town a few miles from the developing mine, and upgrades to a roughly 20-mile road connecting the Peak Gold deposits at Manh Choh to the Alaska Highway.

And contracts locking in the bulk of the costs are already in place.

"Contracts have been entered into for contract mining with Kiewit, a global mining and construction contractor and Black Gold Transport, a well-known local Alaska trucking company based in North Pole, Alaska. Capital costs are now 90% committed and the project remains on schedule and on budget," said Van Nieuwenhuyse.

What's next

Contango ORE Inc.

Underground development at Contango's high-grade Lucky Shot gold project about 75 miles north of Anchorage, Alaska.

With much of the heavy lifting done at Manh Choh, Contango looks forward to exploring the larger potential of the 675,000-acre Tetlin land package where the mine is located, the roughly 167,000 acres of state mining claims the company has accumulated in the area of the Tetlin property, and the high-grade Lucky Shot gold mine project in Southcentral Alaska.

"There is tremendous exploration upside on the vast Tetlin Lease and adjacent lands that we control," said the Contango CEO. "We also look forward to updating our shareholders and investors on exploration drill results at Lucky Shot, and publishing an initial SK1300 Technical Report Resource Estimate before the end of the month."

The company is also seeking new opportunities to expand its mineral exploration and mine development portfolio.

"I am excited about our plan to transform Contango into a gold producer and to the opportunities that being a producer will allow us to achieve," Van Nieuwenhuyse concluded.

Author Bio

Shane Lasley, Publisher

Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.

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