Contango ORE Inc. May 18 reported that it has secured a loan of up to US$70 million to fund its share of the construction, operation, and other expenses required to achieve the first gold pour at the Manh Choh mine project in Alaska.

Being advanced by Peak Gold LLC, a joint venture between Kinross Gold Corp. (70%) and Contango (30%), 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 next year.

The total preproduction capital needed to build the mine is estimated to be approximately US$255 million, to be paid by each partner proportional to their ownership. This includes the development and infrastructure at Manh Choh; modifications to the Fort Knox mill; a fleet of trucks to deliver the ore; and US$40 million in contingency.

For Contango, this would come to US$76.5 million if the contingency is needed and US$64.5 million without. Much of the preproduction work has already been completed or is in progress.

Earlier this month, Kinross reported that a 175-man camp in Tok, an Alaska crossroads town about 40 miles from the Peak Gold deposits at Manh Choh, is operational and being managed by the Alaska Native village corporation of Afognak.

Contango's Peak Gold partner also reported that the 18-mile road connecting the Peak Gold deposits to the Alaska Highway is nearly complete and is expected to be operational by early summer.

The Peak Gold JV also received state approval for the Manh Choh Mine operating and closure plan on May 15.

"With these approvals, PGJV is now able to start mine site facility construction," said Contango ORE President and CEO Rick Van Nieuwenhuyse. "Kiewit was hired as the mining constructor and is responsible for preparing the Manh Choh site for all mining-related activities, which will start immediately. Other major contracts have been signed with Black Gold Transport, a local Alaska contractor based in North Pole, Alaska to transport the run-of-mine ore to the Fort Knox Facility and a Tolling Agreement has been signed with Fort Knox Mine to process the PGJV ores."

Growing Contango

With all the pieces coming together, Contango is on track to be elevated to a more than 65,000-oz-per-year gold producer before the end of next year.

"Now that the major contracts are signed, and financing and permitting are concluded, all the elements are in place to bring our 30% interest in Manh Choh into production," said Van Nieuwenhuyse. "With a gold price hovering around $2,000, the high-grade nature of the Manh Choh deposit will ensure solid cash flows for the company and its shareholders."

With all the elements in place, Contango also finalized an agreement with ING Capital LLC and Macquarie Bank Ltd. for a senior secured loan facility of up to US$70 million to fund its portion of the costs to finish the work to get to the first gold pour at Manh Choh.

"We are very pleased to have finalized the up to $70 million credit facility with two of the mining industry's leading financial institutions," Van Nieuwenhuyse added. "Building upon the relationship with these two institutions will be a key part of growing the company going forward."

This growth includes the development of an underground mine at the high-grade Lucky Shot gold project in Southcentral Alaska.

A calculation completed for former operators in 2016 outlined 206,500 metric tons of historical measured and indicated resources averaging 18.3 grams per metric ton (121,500 oz) gold and 59,000 metric tons of inferred resource averaging 18.5 g/t (35,150 oz) gold at Lucky Shot.

Looking to update and expand this resource, CORE refurbished and deepened the Ensearch tunnel at Lucky Shot.

Rick Van Nieuwenhuyse

The results from 29 holes drilled last year from the refurbished and extended underground workings at Lucky Shot are being incorporated into an industry-compliant resource estimate now underway.

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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