FAIRBANKS, Alaska – Contango ORE, Inc. (NYSE American: CTGO), currently valued at approximately $220 million, has updated its financial guidance for the Manh Choh mine, part of the Peak Gold joint venture (JV), indicating higher anticipated costs and confirming its gold production target for 2025. According to data from InvestingPro, analysts maintain a bullish stance on the company, with price targets ranging from $27.80 to $40.00 per share. The company, which holds a 30% stake in the JV, plans to produce approximately 60,000 ounces of gold in 2025. All-inclusive sustaining costs (AISC) for the life of mine (LOM) have been revised up from previous estimates, and are now projected at around $1,400 per ounce of gold equivalent sold, with the AISC for 2025 alone anticipated at around $1,625 per ounce. This news comes as the stock has had a rough patch, with InvestingPro showing a 25% decline over the past six months.
The increase in AISC is attributed to logistical challenges, including weight restrictions on the Chena Floodplain Bridge, a critical route for ore transportation, and higher ore moisture content than initially anticipated . These factors have led to a 20% reduction in annual ore transportation capacity. Additionally, processing costs have increased, impacting overall AISC. Despite these challenges, the LOM is expected to extend over four to five years, with Contango forecasting approximately $50 million in cash distributions from the JV in 2025, assuming a spot gold price of $2,500 per ounce.
Contango is also negotiating with its lenders to restructure certain repayments under its credit facility and associated hedging agreements to align with the revised production schedule.
Rick Van Nieuwenhuyse, President and CEO of Contango, expressed satisfaction with the ramp-up in production and anticipated profitability over the life of mine, despite the increase in AISC. Although the company is currently posting negative earnings, InvestingPro’s analysis indicates expected profitability this year, with analysts forecasting positive earnings per share of $0.82. The company remains focused on reducing its credit facility debt and advancing other projects like Lucky Shot and Johnson Tract to capitalize on the direct-ship ore model.
This financial update is based on a press release from Contango ORE, Inc.
In other recent news, Contango ORE reported significant profits from its gold mining operations under the Peak Gold joint venture (JV) with KG Mining (Alaska), Inc., a subsidiary of Kinross Gold Corporation . The company received a cash distribution of $12 million from the JV’s second Manh Choh ore processing campaign, adding to its earlier distribution of $19.5 million from the first campaign. This brings Contango’s total cash distributions to $31.5 million for the year.
In addition to these benefits, Contango also completed the acquisition of HighGold Mining Inc., which includes the Johnson Tract project. This acquisition is expected to add more than one million gold equivalent ounces to Contango’s resources. Analytics firm Roth/MKM adjusted Contango ORE’s price target to $33.00, down from $38.00, but maintains a Buy recommendation on the stock.
Recent developments also include a public offering of Contango common stock and warrants, managed by Canaccord Genuity and Cormark Securities. The company is progressing with its Manh Choh project, with first gold production expected in the third quarter of 2024. These are the latest updates on Contango ORE’s strategic moves.
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