Good morning, good afternoon, or good evening, depending on where in the world you're logging in from today. I'm lucky enough to have with me today Rick Van Neuenheise, CEO of Contango Silver and Gold, and Mike Clark, the company's CFO, discussed their recently released Q2 Financials. Gentlemen, how are you doing today?
Good morning, Bianca. Good to see you again. Good morning. And you too, Mike.
Always good to see you both. For folks in the room, this is an interactive event. So you can use the chat button at the bottom of at any point at today's event to get to submit your questions We will try to get to your questions, but note that this is only a half an hour event today So if for whatever reason we don't get to your questions Someone from the contango team will be able to help you very shortly You can also request a meeting with the team at any point during today's event by clicking the request meeting button at the bottom of your screen All right, let's get into it today. Rick This is the first full quarter reporting as contango silver and gold at Kitsult Valley with Kitsult Valley in the portfolio and the hedge book fully behind you as of July. Before we get into the numbers, how would you like to frame where the company sits today compared to where it was at this point last year?
Yeah, I mean, obviously adding the Dolly Varden asset, the Kitsult, I mean, it really is a world-class asset. And I think that's why we were eager to get the transaction completed. The teams are integrated. We'll talk more about the drilling later. But, you know, we've got five rigs turning at Kitsalt. But there's a lot of other activity going on in the company at Lucky Shot and at Johnson Track. But I think, frankly, the most exciting news for me is we're out from underneath the hedges. We've got a clear exposure for our shareholders to the upside in the gold price, which I think, you know, it shot up over, you know, 5,500, went back to 4,000, seemed to find a floor at 4,000. And that's when the team said, okay, now's the time to take care of the hedges. And I think that was the right call. So we've seen gold price continue to move up. And we're seeing now the, you know, we're getting the advantage of that. So I think from the macro side, which we can talk about later, but But I think the company is in a great, great position. We're generating strong cash flows. We've got the better half of this year ahead of us with production from Manchow. We always guided that the first half was going to be lower and higher cost. And then, of course, we're set up well for 2027 when we'll have probably the best year at Manchow with good grades and high grades, good grades and low costs. So, yeah, I think I'm really pleased with where we are as a company, and we still only have 33 million shares outstanding. So, I think we're all pretty proud of that.
Very good. And, Mike, let's get into the quarter. Your 30% share of Mancho came to about 8,900 ounces, with 8,627 ounces sold at an average spot price of $4,328. dollars the jv is still working through lower grade material from the north pit before higher grade south pit ore comes through with that said walk us through the production cadence for the back half of the year and why the 40 000 to 45 000 ounce guidance is still intact yeah thanks bianca um yeah so you know rick already kind of alluded to the the grade being lower in the north pit especially as we mined out kind of the uh outside of the the resource model there were lower grade ounces that we did pick up before back filling so we didn't uh so you know this
year we're or the second half of the year we're fully into the south pit which has there's gonna be more mines more tons mine there's going to be higher grade mind um and so we expect there to be about 12 000 ounces produced in both campaigns three and four which should get us to just slightly about 41 000 ounces of gold production for the year so it's within our guidance and that's what we're currently estimating as of today.
Very good. And cash costs for the first half came in at $2,665 an ounce, with all sustaining costs at $2,830. And full year guidance sits at around $1,900 to $2,000 on cash costs. That implies a meaningful improvement in the second half.
Can you bridge that gap for investors so they understand how much of this great timing is this structural yeah it seems like a lot higher number than what we're projecting for the year but we still maintain that guidance and it's largely driven by the pre-stripping in the south pit and so you spent the whole first six months of the year spending money on that while also mining lower grades and so as we get into this second half of the year you're you know the pre-stripping is behind us you're going to have higher tons mined and processed as well as the grade going up significantly so all those things together we still expect to to come close to our guidance awesome and q3 will be the first quarter in the company's history where every single ounce sells
its spot with gold sitting about 4 400 right now with the puts at 3 100 providing the floor what does the margin picture actually look like on each ounce delivered from here and how does that change the cash flow story for the rest of 2026.
Yeah, I think of the puts more as just an insurance policy, and I don't really focus on those. We're always expecting gold to be above $4,000, and we budget everything at $3,700. But if you just look at it simply, you'd say $4,400 minus your $2,000 cash costs, you'd expect about a $2,400 margin. But because we're a 30% JV, I kind of look more focused on what the cash distributions distributions will be from the JV from the year because they always do hold some funds back to pay for the next three or four months of production. So, you know, I expect we should receive 18, about $36M in the back half this year from distributions. And if you apply, you know, using that $3,700, that's using $3,700 Gold. So if you apply your $4,400 Gold price, you'd expect to receive about another $7M. So that should get our total cash distributions this year to a slightly above $60 million if $4,400 gold holds.
Very good. And Rick, on July 1st, you closed the purchase from Alaska Hard Rock, which brings in the mineral claims around Lucky Shot, along with the 2% net smelter royalty, plus property and equipment. You now control that project outright with significantly reduced royalties. Why was that important to get that done now ahead of the feasibility study?
Yeah, we just, it was a sort of opportunistic, you know, we've known the underlying landowner for a number of years. And, you know, he said, you know, when you're ready to, you know, talk, we'd love to own the asset and, you know, buy the royalty. And, well, I think he thought about it for a while. And, you know, obviously, when we started this whole, when we acquired Lucky Shot, you know, the gold price was, you know, $2,000-ish. And so, you know, as that gold price ran up to $5,500, I think he thought, well, we better get something done. So, yeah, it was 100% opportunistic. There, you know, no real magic there. We think it's a good deal for him. He did a great job in consolidating that district uh and uh putting all the different patented claims together and he's he's held on it for a long time so you know we were grateful to him for doing that because uh uh that's a work of you know you have to work hard to put all these different patents together so um yeah it worked out well for us uh we own the uh the underlying patented uh mining claims now obviously the state mining claims all around it uh we control the district effectively um and um yeah we obviously bought the royalty out as well so we're uh we're we're pleased with the overall transaction and obviously it's a you know we obviously wouldn't have done it if we didn't think we're finding
good things at lucky shot so uh i mean that's it sort of underscores our our belief that we've got a real mine here well speaking of lucky shot the final assays from the underground program included intercept grading 972 grams per ton with visible gold in the core gms is back underground advancing development and you've got two helicopter supported rigs turning on the surface program between coleman and lucky shot what are these programs designed to prove ahead of the feasibility study and the 2027 production decision yeah so you know basically we don't we're uh we're gathering all the geologic data, the geotechnical data, the assays, obviously, to do a DSO,
direct shipping or based feasibility study. And first step is to get the geologic model put together, the resource model, update that. Obviously, we're targeting four to five hundred thousand ounces of gold grading in the, you know, I'll say 10 to 10 to 15, 10 to 14 gram range. Obviously, it's an underground mine. It was historically an underground mine. It produced a quarter million ounces at very high grades. We are going to look at, they used hand sorting back in the day. We will take a look at ore sorting and probably, but obviously more of a modern version of it with these ore sorters that work at incredibly high speeds and they can sort on a lot of different variables so that is something we'll take a look at because obviously transportation is a significant amount of the costs and a dso model so if you can you know simply put the geology here is a quartz vein in a granodiorite and the granodiorite is rock that doesn't have any gold in it if you can mine something that's you know two three meters wide and and a meter of that is granodiorite you can get rid of it or get rid of you know 50 of it with the ore sorters you're you know that's that much you've upgraded your average grade your diluted mine grade and you're not transporting that material so yeah we've got a lot of work to do um but the the first step is gathering all the getting the the drill spacing down we're drilling on about 25 meters uh centers and then uh you know we do fan shots so between the each time we're hitting the quartz vein, uh, you know, we're, we're probably in the neighborhood of 10 to 15 meters apart. So this is, this is a, you know, this will be measured, indicated, uh, resource, and we'll be able to develop a mine plan around that. And as I said, you know, other, uh, metallurgy here is like super simple. It's quartz and gold, a very small amount of sulfide. Um, we've talked about, you know, the possibility of taking it to, uh, the Fort Knox mill. That's, that's an obvious choice. I think it's fair to say that Fort Knox is interested. They still have a mill that has plenty of capacity in it, but there are other options that we are evaluating as well. So that's kind of where I give us, you know, I think the drilling will take place between now. I mean, we've been drilling, obviously the surface drilling, two rigs, the underground rig will start back up at the end of the month. And then, and let's see what else. Oh, we'll be drilling until about march of next year um and obviously uh working on all the engineering and what have you work uh between now and then and don't have a date on when we'll have a feasibility study done but you know it'll be in 2027. awesome and over at kitzel valley you had more than 35 000 meters of the 40 000 meter program done by the end of june and a new resource estimate coming together this quarter this is the first update since the merger closed what should investors be watching for in that number and how has the integration of the dolly barton team gone on the ground yeah i know great integration i mean it's a it's a it's a really good group of people and they're uh i have to say they're like really kicking butt on getting the drilling done uh we've got five rigs turning uh they're averaging beginning of the season when they're drilling the shallower holes. They're over 500 meters a day, 100 meters a rig, which is really good. They're a little under that now, but they are the high four, 74, 80 sort of level. So they're cranking out a lot of core and they're doing it very efficiently from a timing perspective, but also from a cost perspective, which obviously makes me smile and makes Mike smile. But we're smiling because we're going to do more drilling we're going to get more drilling bring more drilling out of the budget and uh this was flow through finance so uh we're probably going to get another i'd say you know five to ten thousand meters drilled uh with the same budget so we're uh we're excited about that obviously uh uh we'll have drill results out i'm going to you know guess within a month You know, that's up to the laboratory gods, which never seem to favor anyone. And when I go to conferences, that's probably the number one complaint of exploration geologists is how long it takes to get assays. So, but yeah, I think we're tracking them and I think we'll have results out within a month.
So hopefully sometime later in August at the earliest, but probably more likely early first half of September. and then once we put results out you know you're going to have results every two three weeks after that so brilliant uh silver is trading around 65 an ounce up roughly 70 from a year ago and it's been leading gold for stretches of this rally uh when you rename the company contango silver and gold in march some people saw that as a bet on exactly this kind of market how does the silver exposure i could sell change the way investors should think about this story i i think you know i use the term world class and you know i don't use that lightly um there are very few silver only
uh silver deposits most most silver producers are uh you know it's a bit of smoke and mirrors frankly because it's they produce more gold value wise than they do silver um kit salt is a silver centric silver deposit. It makes up 90% of the value for, you know, the Torbrett and the Wolf Fane and Dolly Varden and North Star. Those are all, you know, you're 90% of the values in silver. You've got some base metals, lead zinc. You don't have a lot of gold. There is gold at Homestake, which is sort of a separate center. That's part of the same overall geologic system, but it's uh you know it's five kilometers away and it is it's gold rich interestingly enough between the two you you do have a gold and silver deposit which we uh which is right adjacent uh and and uh named homestake silver uh but it has good silver and good gold so uh nothing nothing wrong with that but the lion's share of the ounces uh are silver ounces and uh uh so that's you know that's a that's going to make for a very interesting story that's why we kind of we talk about you know our objective in five years is to produce 200 000 ounces of gold and five million ounces of silver that and five million ounces of silver is coming from that silver silver centric part of this the district you know torbitt dolly barden um and uh and uh and new wolf discovery Now, we're drilling in some really exciting stuff right now, and I can't say much more, but you'll wait for the assays, and they'll be out within a month here.
Excellent. And Johnson Tract is getting a bit less airtime than the other assets right now, but there's real work happening this summer with bids in for road construction and helicopter support to connect the camp to the proposed portal site. What does the 2026 field season look like there? And where does Johnson Track fit in the queue behind Lucky Shot and Kitsult?
Yeah, so, yeah, when you're permitting, that's always kind of the, I call it the boring part of the Lausanne curve. So we're permitting, and that's moving, we're part of Fast 41, and that's all moving along according to the schedule. And people can, what I love about Fast 41 is it's transparent in the schedules on the internet. So everybody can go and see. We have these reports due and we get those reports due and they have the agencies have so many days to review and that's all happening according to schedule. So that's that's that's great. But while they're doing that, we've been building roads and bridges. And so I'm actually headed out there next week and we'll take some take some photos and some video and we'll we'll get that up on the Internet. And I'm I'm I'm really excited to to walk across the Johnson River on the bridge and I'll send you some photos.
It's under budget, too, Rick.
Love that. That's great. I can't wait to see.
That's an important point to me. It's because that's, you know, whenever you look at construction projects, they have a habit of going over budget and taking longer than you plan. And I think the guys, again, have just done a great job. The team out there has done a great job of getting it done. And Allegra and her environmental team have done a great job just working with agencies, keeping everything permitted. And there's still a lot of permitting to do while you're doing all this construction work, right? You're never done permitting.
Mike, back over to you. Let's talk about the balance sheet. You ended the quarter with $89 million in cash. Repayments on the facility are just $2 million for the rest of this year. And distributions from the JV should build as the Southpick grades come through. You're funding three projects at once. How do you prioritize where the dollars go over the next 12 months?
Yeah, well, we forecast out the next kind of three to four years. But, you know, if you kind of just isolate over the next 12 months, you know, we have, you know, $89 million in the bank as of June 30th. you know we do have distributions coming from on show and so with those we have sufficient capital to advance all these three projects as planned so you know it's it's just making sure that you know those each of those individual budgets stay within you know within where we're currently sitting um then there's plenty of cash to to to fund those you know you'll see the cash probably in the year around 45 million but what you're you know and you'll probably see it dip to its lowest amount in kind of q1 of next year but then as we ramp up into 27 with moncho you're going to see the cash steadily increase while continuing to advance all those projects very good and rick
let's close off today by asking a macro question uh gold appears to be making a comeback yet again despite the feeble warnings of gold bears what do you think about the macro setup for this year uh up 10 in a month is no slouch yeah i mean look you know we talked about it earlier that But, you know, we we saw gold retrace down to the four thousand dollar level.
It didn't seem to want to go down below four thousand for any significant period of time. There was always a buyer. And then, oh, it turns out that those central same central banks that have been buying were buying again. And, you know, first led by China, but other banks as well. So I think it's, you know, kind of the song remains the same sort of a scenario here. You know, we keep printing money. The bed's stuck between a rock and a hard spot. You know, we're still, what, close to $40 trillion in debt. The U.S., and it's not just the U.S., all the other currency, all the other governments are in debt, too. And, you know, there's only, you know, gold's the commodity that, or I should say the currency, that is no one's liability. So whereas when you keep printing money, at some point, somebody says, what are we doing here? So, yeah, gold is king. And we're unhedged. So we're going to see that upside delivered to our shareholders, which I think is the most important thing we've done this year.
Absolutely. Speaking of, thank you, everyone who joined today. If you have a question for the Contango team and it's just occurring to you just now, please feel free to send them in. and we will make sure that they get to the team. Big thank you to you, Rick and Mike, for joining us today. Always a pleasure to have you on the platform and hear an update on the story. But, Rick, I'll pass it over to you for a final word.
Yeah, if there's no other questions from audience. Look, I mean, we're pleased with where the company sits today. Unhedged, 33 million shares outstanding. NYSE and Toronto listings, so, you know, good liquidity. I think if you're looking for exposure to the gold business, I encourage I've always encouraged people to look at it on a per share basis because as a shareholder, you own a part of the company and and that leverage is what you want when you get an investment in the gold space. So, yeah, we're in a great spot. We're going to have a lot of news flow, a lot of catalysts coming your way in the next few weeks with Lucky Shot drove results, Kit Salt drove results, some great photos of roads and bridges at Johnson Track. And we're on the move. We're going to keep moving. So keep adding value for shareholders. That's our job and that's our mission.
Thank you guys again. Have a lovely rest of your day.
