Contango to buy HighGold with 59% premium

Contango Ore has announced it is to acquire Alaska gold explorer HighGold Mining in an all-stock deal valued at C$51 million.

Each HighGold will be exchanged for 0.019 shares of Contango stock, which implies a consideration of 55c per HighGold share, a 59% premium. Upon completion, existing Contango shareholders will own 85% and HighGold shareholders 15% of the combined company.

The transaction will add HighGold's Johnson Tract project to its Lucky Shot project and Manh Choh mine development, providing a pathway to producing more than 150,000ozpa, with the potential to apply the direct shipping ore (DSO) model used at Manh Choh. 

"The combination of HighGold and Contango makes a tremendous amount of strategic sense for both sets of shareholders – it is a true win-win for all.  With the cash flow expected in the second half of 2024 from our high-grade Manh Choh operation achieving commercial production, we will be able to continue to create value for the Johnson Tract project and advance this high-quality project through to production," Contango Ore chief executive Rick Van Nieuwenhuyse said.

"This transaction represents a compelling value-creating opportunity for our shareholders, with obvious synergies, an enhanced capital markets profile, financial strength, and a robust platform for future growth," HighGold Mining chief executive Darwin Green said.

Contango owns a 30% interest in the Manh Choh open pit gold mine that is operated by 70% partner Kinross Gold, where the first pour is expected in the second half of this year from ore shipped to the Fort Know mine. Contango's share of production will be about 67,500ozpa at an all-in sustaining cost estimated at US$1116/oz.

This deal increases the company's mineral resources threefold through the addition of more than 1Moz of gold equivalent grading 9.4gpt at Johnson Tract. Lucky Shot is permitted for mining and has a 106,000oz indicated resource grading 14.5gpt. Contango believes Johnson Tract can also be a run-of-mine, direct shipping ore operation due to its grade and proximity to infrastructure. 

Prior to the transaction, Contango was planning a 3,000m drilling program to extend mineralisation of the Coleman segment of the Lucky Strike vein down plunge.

HighGold was working to assess the feasibility of a DSO operation and had initiated a plan to permit and develop an exploration ramp for underground drilling, engineering and economic studies.