Contango Silver & Gold: Four Projects, One Growing Development Pipeline

0:18All right, the merger recently with Contango Ore and Dolly Varden, which now is Contango silver and gold. That was big news a couple of months ago. And I think this is our first interview, I believe, since that announcement of the merger was made. The company did produce an updated mineral resource estimate for the Kitzel Valley project this morning. So more on that. In fact, we're not even going to talk to Rick. We're not going to talk to Sean. We're going to talk to the CFO where he knows where all the bodies are. Mr. Mike Clark. Hey, Mike, good to see you. You as well. Thanks for having me.

0:50Yeah, good to have you on. Listen, before we kind of jump into the numbers, Give us a sense of the last number of months. Does it feel like the machine is turning in the direction the way you would like it after that merger?

1:03Mike Clark: Yeah, no, the merger's gone extremely well. We have three projects on the go. We have all of our teams working at each of the sites. They're all ahead of schedule, under budget, and we've kind of executed on everything we wanted, whether it be at Lucky Shot underground drilling and development, as well as surface exploration. At Johnson Track, we've completed the road from the camp to the portal site. which included some pretty sizable bridges, as well as advanced permitting. And then at Kitsalt, we started with a 40 ,000-meter program that's going to get over 50 ,000 meters, and it's gone extremely well, and the assays so far have shown that.

1:40Yeah, okay. The cash flow for Mancho, it seems like it's on track. Any sort of surprises there?

1:46Mike Clark: No, no surprises. It's a lower year of the production for Mancho as we transition from the North Pit to the South Pit. So, you know, our guidance this year was 40 ,000 to 45 ,000 ounces of gold. We still expect to hit that. The costs are slightly on the higher side. But what that really does is set the stage for next year where our production goes to 75 ,000, 80 ,000 ounces as we're fully into the South Pit and our costs get cut in half. So a lot more free cash flow will come out next year. Okay, very good. Lucky shot. You had some really nice exploration hits recently. About 2.5 meters of 86 grams per ton gold.

2:19In there was 0.8 meters of 244 grams per ton. So obviously incredible grades there.

2:26Mike Clark: At those holes, is the continuity now, you know, is the grade more important than the continuity? Well, I think the most important thing is that's a new discovery. That's a new vein we weren't aware of. And so that's what we found. And we think just that little portion alone represents about 50 ,000 ounces of gold. And it's right, you know, right near the where we'll begin production. So that was a nice to have, a nice to find. and we continue to learn more about the deposit as we continue to drill. And it is very encouraging to our team and we're confident that we're going to have a new updated resource out next year and we're still targeting a 400 ,000 to 500 ,000 ounce resource and then from that we'll develop a mine plan which we expect to have completed next year as well.

3:07Does this seem like Lucky Shot's getting a little bit more complex than originally anticipated because of it?

3:12Mike Clark: I wouldn't say complex. We've just got a better understanding of it and the various vein systems and how things all connect. and so it's gone it's gone very well okay you're doing some underground work right underground drilling yep yeah how's that going yeah no the under the underground drilling has gone gone very well and we're also continuing to drive the decline or the ramps so we'll continue to advance that and when we finish that section then we go to the drilling and all that is going very well on time on budget and there's still a number of assays to come and they'll be coming out through through early next year okay we didn't I did mention that updated mineral resource estimate that was published actually this morning for the Kitsall Valley Project indicated resources did increase 93 % to 89.5 million silver equivalent ounces.

3:55Mike, let's break this down. How much of that increase was through pure exploration and how much of it was just a metal price factor?

4:03Mike Clark: Well, this MRE was really based on the last, you know, 433 ,000 meters of drilling that was prior to us acquiring them so this was consulting all that updating it and so what we've you know the drilling this year is not included in that so this was just bringing it more into the indicated category and inferred and giving us much more confidence on the on the deposits itself okay and you said you're doing another another updated MRE yeah yeah so you know this MRE we just had to get a current has an SK 1300 and And so this year we've done 50 ,000 meters. We're just about finished. And we've got all the data now in the right geological software.

4:45Mike Clark: And so it'll be a very easy update. And so the plan is to have that done near the end of the first half of next year. And from there, we'll focus on getting a PEA or an initial assessment completed. Okay. There's a huge remodel of the geological framework. Talk about what's happening on the exploration side there. You're probably asking the wrong guy. But, you know, they were using various softwares, various technical reports from other companies prior to Dolly Varden. And so, you know, having it all into this new LeapFrog has given them much more clarity on where everything is, and it's very easy to update, and they have a better understanding of the deposits and how they connect.

5:22Okay, very good. What's on the horizon? Like, I mean, what should we be expecting to be seeing over the next, you know, throughout the end of Q3 but into Q4? Like, what's the catalyst coming up?

5:33Mike Clark: Well, the catalyst, you know, with having four projects, there's a number of catalysts. You know, just on all, you know, on Lucky Shot, as well as Kitsall Valley, there's still a lot more assays coming, and they'll be coming into the new year. So we're excited to get those out. With Moncho, we're getting into the bigger half of the year as we get into the fourth. We're finishing the third campaign now, and then the fourth campaign is where we're going to have, we expect to have a lot more production. So generating better, you know, continued better results at the end of the year for Moncho. and then what leads us really into 2027, where we're going to have much more production at much lower costs and ultimately result in a lot more distributions from the joint venture.

6:11As CFO, what is keeping you, what's the biggest challenge for you right now that you need to see the company maybe get over?

6:20Mike Clark: You know, I think just getting through this year and into the higher production levels on show and having those campaigns kick off and demonstrating that we are at these lower costs because they all come down as a result of higher throughput, higher tons mined, less machinery being used, and just showing that to the market because I don't think they give us full credit for that yet. You don't think that? So where is your valuation coming from? Is it strictly Mancho? I think the majority of the valuation does come from Mancho, but I think we're viewed at as also a development company because Mancho has a relatively short mine life.

6:57Mike Clark: And so you kind of get discounted on that side, and then the fact that we're still in kind of development at Lucky Shot and Johnson Track and then Kitsil Valley a little further along. So I think as we execute, complete these programs and start moving towards the updated resources, updated preliminary economic assessments, and then get Johnson Tracks tunnel built so we can start that underground drilling, I think all those things between now and the end of next year is what's going to drive the value. Okay. The relationship with Fort Knox, with Moncho, So how much has the diesel kind of eaten into this stuff?

7:30Yeah, I've been asked that a few times today.

7:33Mike Clark: It's a factor. You know, I don't have the exact numbers. You know, Kinross has that information. But, you know, my best guess is, you know, because trucking is a large component, which requires a lot of diesel. You know, my back of the napkin guess is maybe it's$100 increase to the ASIC. But we also buy our diesel a year in advance. And so we don't really, I don't actually know the impacts of how much it's affected us this year. When do you start buying diesel for the upcoming? I don't actually know when they do. You don't know? Okay. Kinross manages that process. Oh, okay. Okay. Right on. And what about, how does it affect in the bottom line with the exploration budget?

8:09How is the bottom line? With the exploration budget, are you seeing increased costs in your exploration budget?

8:14Mike Clark: No, we haven't had really any increase. If anything, we're more efficient. In Kitsil Valley, we've got an extra 13 ,000 meters because they're so efficient. Johnson Track also didn't have any issues there, and that's below budget. And Lucky Shot the same. So, you know, haven't really noticed any real impact. Okay. I did notice that at Fort Knox they're allowing recovery of higher-grade sulfide material from South Pit. Does this improve? How does it improve the economics of Moncho? Well, yeah, so when you move to the South Pit, there's more sulfide, and they got away from the higher oxide component, which was primarily at the North Pit.

8:52Mike Clark: They could keep that two-to-one ratio. So then they got the oxygen sparging circuit in this quarter, so that's making a big difference. Okay, so better recovery, more money. Yeah, and it was all, you know, everyone kind of looks at this as a linear project, but it was always intended to have lower recovery in this transition period, and as you moved into sulfides, you had much higher recovery in the front half, and so we'll continue to see it improve. Okay. Where does the next dollar-free cash flow come from? Well, the next, you know, outside I'm on show, it's going to be Lucky Shot and we're targeting production from that in 2028 and then we're working towards Johnson Track in 2030 and hopefully as we advance Kitzel Valley, that'll be similar to Johnson Track.

9:36And with today's gold market, But are you, do shareholders expect maybe some more aggressive development from you? Are they generally happy?

9:47Mike Clark: You can't speed up what we're doing. Some of it involves permitting. But no, we're taking a systematic approach. These are the timelines. You can't really move it much faster, and we wouldn't want to. Okay. Okay. All right. Well, give our best to Rick and Sean and team. Thanks for setting in in the hot seat. We don't always get the CFO. I think they're kind of scared that we're going to ask them the questions everybody's asking. So I'm sure those conversations will maybe happen out on the patio later tonight. But Mike, thanks so much for sitting with us. Thanks for having me. Yeah. All right. Contango Silver and Gold does trade on the NYSE American with the symbol CTGO.

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