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 2025 gold production target. According to InvestingPro data, analysts maintain a bullish stance on the company, with price targets ranging from $27.80 to $40.00 per share. The company, holding a 30% interest in the JV, expects to produce approximately 60,000 ounces of gold in 2025. All-in sustaining costs (AISC) for the life-of-mine (LOM) have been revised upward from previous estimates, now projected at approximately $1,400 per ounce of gold equivalent sold, with the AISC for 2025 alone anticipated to be around $1,625 per ounce. This news comes as the stock has experienced a challenging period, with InvestingPro showing a 25% decline over the past six months.
The increased AISC is attributed to logistical challenges, including weight restrictions on the Chena Flood Plain Bridge, a critical route for ore transportation, and higher moisture content in the ore than initially projected. These factors have led to a 20% reduction in annual ore transport capacity. Additionally, processing costs have risen, impacting the overall AISC. Despite these challenges, the LOM is expected to span four to five years, with Contango forecasting roughly $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 some of its credit facility repayments and related hedge contracts to align with the revised production schedule.
Rick Van Nieuwenhuyse, President and CEO of Contango, expressed satisfaction with the production ramp-up and anticipated profitability over the mine's life, despite the increased AISC. While the company currently shows negative earnings, InvestingPro 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 progressing 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 statement from Contango ORE, Inc.
In other recent news, Contango ORE has reported significant earnings from its gold mining operations as part of the Peak Gold Joint Venture (JV) with KG Mining (Alaska), Inc., a subsidiary of Kinross Gold (NYSE:KGC) Corporation. The company received a cash distribution of $12 million from the JV's second campaign of processing Manh Choh ore, 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 earnings, Contango has also completed the acquisition of HighGold Mining Inc., which includes the Johnson Tract project. This acquisition is expected to add over 1 million ounces of gold equivalent to Contango's resources. Analyst firm Roth/MKM has adjusted Contango ORE's price target to $33.00, down from $38.00, but maintains a Buy rating for the stock.
Recent developments also include a public offering of Contango's common stock and warrants, managed by Canaccord Genuity and Cormark Securities. The company is progressing with its Manh Choh project, with the first gold production expected by the third quarter of 2024. These are the latest updates in Contango ORE's strategic moves.
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