Contango ORE, Inc. Q4 FY2025 earnings call

• Cash distributions from Pico JV are accounted for via equity accounting. The investment in peak JV balance changed from $60 million at start of year to $47 million at end. Cash position went from $20 million at start to $65 million at end, driven by equity raise and profits from Moncho.
• For 2026, higher ASICs cost is due to more stripping and pre-stripping in the mine plan. Also, wage-related inflation and potential inflation from Iran war affecting transport costs are noted.
• Regarding capital structure, debt is under $15 million, scheduled to be down to $10 at end of year, with hedges to be paid down. Plans for exploration and development at Lucky Shot, Johnson Track, and Kitsalt.
• At Lucky Shot, there's an 18,000-meter drill program underway, targeting specific veins, with exploration program costing about $25 million this year and another $25 million in 2027 for feasibility study.
• At Johnson Tract, it's on the FAST41 dashboard, with the goal of getting permits by March 2028 through a coordinated process with federal agencies.
• For Dolly Varden merger, expect vote tomorrow, approval by B.C. courts on March 26, then Q1 consolidated results, and more guidance in April.

The cash distributions from the Pico JV came in at $102 million for 2025. For ASICs, in 2025 it was about $16.16 per ounce sold, almost on guidance. 2026 guidance is higher due to more stripping and pre-stripping leading to higher all-in sustaining costs. 2027 gold production guidance is 75,000 - 80,000 ounces with cash costs 1,200 - 1,300.

• 2026 ASICs guidance is higher due to mine plan with more stripping and pre-stripping. 2027 gold production guidance is 75,000 - 80,000 ounces with cash costs 1,200 - 1,300. Guidance for Lucky Shot and Johnson Track projects based on exploration and development plans. Merger with Dolly Varden will impact future capital allocation and guidance once completed.

• Potential inflation from Iran war closing Straits of Hormuz affecting transport costs as a third of costs are related to transporting ore. Wage-related inflation is also a risk.

Q: About ASICs, what drives the increase in 2026 and how much is due to math on lower ounces vs cost inflation?

A: 2026 guidance is higher due to more stripping and pre-stripping in the mine plan. The main driver of increased cost is pre-stripping, with inflation like wage-related and potential oil price spikes from Iran war also being factors.

Q: Mike, about capital structure, how does it tie to cash and future expenditures?

A: Debt is scheduled to be paid down, cash position starts at $65 million, with $40 million spent on exploration/development at Lucky Shot and Johnson Track, expecting to steer around $60 million this year, and being debt-free and hedge-free in 2027/28 with significant free cash flow from Moncho.

Q: Explain the mechanics of the transition from North Pit to South Pit and the four-month lag in processing?

A: There's a four-month lag between mining at Moncho, stockpiling, transporting, batch processing, and getting paid. Mined ounces at Moncho are different from processed and sold ounces due to this lag, with 2027 benefiting from the lagged mining.

Q: Gold production guidance for 2027, what are the assumptions?

A: Based on feasibility study and mine plan, with higher grade and more tons processed in 2027 due to the mine plan sequencing, offsetting the higher costs of 2026.

Q: Early drill results at Lucky Shot and DSO approach?

A: 18,000-meter drill program underway, excited about KM vein, adjusting program to explore, with DSO model being simple, costing about $25 million this year.

Q: FAST41 dashboard for Johnson Tract, what does it mean?

A: FAST41 is about fixing permitting, dashboard tracks the process with federal agencies like US Army Corps of Engineers leading, target to get permits by March 2028.

Q: Exploration plans for Dolly Varden merger, post-merger?

A: Updated mineral resource estimate by end of Q2, $25 million expenditure, 50,000 meters of drilling, including infill and greenfield exploration for Kitsalt assets.

Q: Combined portfolio capital allocation, post-merger?

A: Plans for Lucky Shot, Johnson Track are mostly funded, Kitsalt needs more work on MRE and drilling, still cash available internally, nearly debt-free and hedge-free.

Q: Update on acquisition of permitted mill?

A: Working on a number of opportunities, being patient, looking at a couple of good options.

Q: Plan with life of mine at Moncho, adding years?

A: Spending $5 million on expiration this year, potential to extend mine life a year or two, will evaluate mineralized waste material at $5,000 gold price in future.

Q: Preparing 2027 budget, consolidating Dolly Varden numbers?

A: Have high level numbers for 26 and 27, need to refine details, key driver for 2027 Kitsalt is PEA or initial assessment.

Q: Kinross Fort Knox mill foundation problems and impact on processing?

A: Not aware of any foundational issues, mill has been operating 30 years, had conveyor belt fire but workaround for Montreux ore.