Contango focus on JT with Manh Choh cash flowing

It has been a busy few months for Contango Ore chief executive Rick Van Nieuwenhuyse, with the first gold pour from its Manh Choh joint venture project in Alaska, USA and the acquisition of junior explorer Highgold Mining. The cash flow from the former puts the company in a unique position to fund the exploration of the latter and protect its shareholders from future dilution.

Manh Choh is a joint venture with Kinross Gold (70%), where its high-grade gold ore is trucked to Kinross' Fort Knox, which is in the process of upgrading its process plant to handle the material. It is set to produce 225,000ozpa of which Contango will receive about 67,500ozpa. Mining began in November 2023, which will be pushed through the Fort Knox plant in batches.

"Manh Choh is a solid project. The ore body is relatively simple, so the challenge was financing it in a tough market. Kinross developed it on schedule and budget, and poured the first gold in July as planned. We will get three batches done this year," Van Nieuwenhuyse told Mining Journal.

With cash now flowing, Van Nieuwenhuyse expects the company's stock to move higher as the market differentiates it from other gold explorers with a rerate. Meanwhile, the company is keen to get back to exploration, especially at the Johnson Tract, or JT, project it has just acquired with Highgold, which came with 1Moz of gold equivalent grading 9.4gpt gold.

Contango

Contango has one rig operating on infill and conversion drilling, and to generate other data, it will need to prepare for a future feasibility study and to permit an access tunnel. "We want to get the permit for the underground underway, so we need to collect hydrological and geotechnical information, mostly for the access tunnel, which is in a post-mineral intrusion with no sulphide. We want to drill in that to show the regulator that the tunnel will be in rock that does not generate acid, that it is inert," said Van Nieuwenhuyse.

The company also wants to develop an access tunnel to take a bulk sample and create chambers for underground drilling to test the deposit further.

"We want to drill from underground with short holes and better geometry on steeply the dipping ore body. It is a big mountain [that JT is under], plus it will be the main access point for an eventual mine," said Van Nieuwenhuyse.

Contango's timeline includes building an access road for the tunnel in 2025, obtaining the permits for and to start building the tunnel in 2026, and completing a feasibility study in 2028, possibly with a prefeasibility study beforehand. With JT also likely to send ore to Fort Knox, the technical aspects of the project are reduced.

"The feasibility would be a short one as we are not building a tailings storage facility, mill or power plant. The permitting for the mine is the tunnel and the feasibility to support that is really just a mine plan. It makes a big difference when you don't build a mill or tailings facility, particularly regarding permitting.

We are working on a PEA [preliminary economic assessment] that will look at the cost to build a new plant at an existing facility, as the JT orebody is polymetallic with gold, zinc, silver and copper," said Van Nieuwenhuyse.