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Contango completes HighGold acquisition

North of 60 Mining News - July 10, 2024

Unique mining company adds new high-quality Alaska asset to portfolio just two days after its transition to gold producer.

Contango ORE Inc. July 10 announced the completion of its acquisition of HighGold Mining Inc., a junior mineral exploration company that comes with the 1-million-ounce Johnson Tract gold project in Southcentral Alaska.

"(W)e believe the combination of HighGold and Contango makes a tremendous amount of strategic sense," Contango ORE President and CEO Rick Van Nieuwenhuyse said in June.

This merger is a good fit for Contango because the Johnson Tract property complements the company's unique business model of advancing high-quality mine projects with the potential to produce direct shipping ore (DSO) to be processed through permitted and operating mills.

Former HighGold shareholders that have now joined Contango as part of the all-shares buyout come onboard at a time when Contango's DSO mining strategy is bearing fruit.

Kinross Gold Corp.

The first bar of gold poured from Manh Choh ore.

On June 8, Contango and Kinross Gold Corp. celebrated the first gold pour from Manh Choh, a high-quality gold project in eastern Alaska that is shipping ore to the Kinross Alaska mill at the Fort Knox mine site north of Fairbanks.

Over the roughly 12 years leading up to the partnership with Kinross, Contango advanced Manh Choh from a greenfield discovery to a development-ready deposit containing 9.2 million metric tons of measured and indicated resources averaging 4.1 grams per metric ton (1.21 million oz) gold and 14 g/t (4.2 million) oz silver.

In exchange for a 70% JV interest in Manh Choh, Kinross took the lead on permitting and mining and is processing the Manh Choh ore through its mill.

Based on current reserves, roughly 225,000 oz of gold is expected to be recovered from Manh Choh ore annually for the next 4.5 years. Contango's 30% share of this annual gold output would be 67,500 oz.

Direct shipping ore model

Contango ORE Inc.

Contango is applying a strategy similar to what has worked so well at Manh Choh to the other high-quality Alaska gold assets in its portfolio. This pipeline of DSO mining projects includes Lucky Shot, a high-grade gold project about 125 miles north of Anchorage, Alaska, and the Johnson Tract project that came with the HighGold acquisition.

"With the Manh Choh project now in production, the Lucky Shot and Johnson Tract projects provide a solid portfolio for growing gold production using our unique direct ship ore (DSO) model," said Van Nieuwenhuyse. "Our five-year plan is to grow production from our existing projects to 200,000 oz of annual gold-equivalent production."

Toward this goal, Contango is ramping up a drill program at Johnson Tract focused on collecting the information needed to permit and develop a tunnel that will provide a platform for more detailed underground drilling of the JT Deposit, the most advanced target on the project.

"We are working closely with the HighGold team to commence a $3 million surface exploration drilling program this summer to complete 3,000 meters of core drilling focused on in-fill drilling the roughly 1-million-ounce Johnson Tract resource," Van Nieuwenhuyse said last month.

According to a 2022 calculation, JT Deposit hosts 3.49 million metric tons of indicated resource averaging 5.33 g/t (598,000 oz) gold, 6 g/t (673,000 oz) silver, 5.21% (400.8 million pounds) zinc, 0.59% (43.1 million lb) copper, and 0.67% (51.5 million lb) lead.

Including the value of all the metals, this comes to 1.05 million oz gold-equivalent.

Contango ORE Inc.

Contango ORE plans to carry out drilling in preparation for permitting and developing an underground exploration tunnel at JT Deposit.

The plan for Johnson Tract, which lies near the coast about 125 miles southwest of Anchorage, is to produce DSO from an underground mine at JT that will be shipped to a third-party mill for processing.

"(B)y transporting our ore to existing and permitted operating processing facilities, we will reduce our environmental footprint and thereby lower our permitting risk, as well as lower the overall capital requirements to achieve commercial production," said Van Nieuwenhuyse. "We believe this is a unique model and a right fit for these continuing challenging capital markets for miners."

To complete the HighGold acquisition, Contango issued HighGold shareholders 1.7 million shares valued at $33.57 million (C$45.74 million) based on Contango's opening share price of $19.67 today on the NYSE American stock exchange.

Author Bio

Shane Lasley, Publisher

Author photo

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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