• JT's coastal location and high-grade ores facilitate a Direct-Shipping Ore (DSO) model, allowing for quicker production with reduced CAPEX, and accelerated permitting. This is the same model employed for its flagship Manh Choh and Lucky Shot projects.
  • Kinross Gold (NYSE: KGC/70%) and Contango (30%), are on track to commence production at Manh Choh in Q3-2024. This project has potential to operate for 4.5 years, producing 225 Koz/year (67.5 Koz for CTGO), with an average grade of 8 gpt; making it a medium-sized/ultra high-grade open-pit gold mine.
  • With the pending acquisition of JT, we believe the company has assembled a portfolio of projects capable of potentially producing 150+ Koz of gold per year. 
  • We maintain a bullish outlook on gold, anticipating inflation to stay above historic averages in 2024, and expecting the Fed to commence rate cuts in Q4-2024. That said,  we are more bullish on gold stocks than the metal itself, with gold producer valuations averaging 20% lower compared to the past three instances when gold surpassed $2k/oz.
  • Upcoming catalysts include the commencement of production at Manh Choh, and resource expansion drilling at Lucky Shot, and JT.

Price Performance (1-year)

 

  YTD 12M
CTGO 4% -38%
NYSE 7% 18%
GDX 14% -1%
Gold 13% 14%

*See important disclosures at the bottom of this report rating and risk definitions. All figures in US$ unless otherwise specified.

 

Portfolio Summary

Three high-grade gold projects in Alaska hosting 1.6 Moz AuEq 

 

Johnson Tract Polymetallic Project, Alaska

Located southwest of Anchorage

Given the project’s coastal location, and proximity to active mills, CTGO is poised to expedite production through a Direct Shipping Ore (DSO) model

DSO operations involve transporting ore to a third-party processing facility, enabling quick, low-CAPEX production, and faster permitting, due to no on-site processing

The property hosts a high-grade gold deposit with resources totaling 1.1 Moz AuEq at 9.4 g/t (indicated), and 108 Koz AuEq at 4.8 g/t (inferred).

An ultra high-grade gold deposit amenable to underground mining

High grades could potentially offset transportation costs related to DSO operations

Metallurgical tests returned high metal recoveries, including 97.2% for gold, 92.3% for zinc, and 84.5% for copper 

We note significant resource expansion potential, as the JT deposit, and multiple prospects such as the Ellis zone (located 4 km northeast of the JT deposit), remain open along strike and at depth

A geophysical survey has identified several high-potential epithermal / VMS / porphyry targets along a 12-km trend 

 

Management’s immediate plans include initiating permitting for constructing a portal access road and an underground exploration ramp, and resource expansion drilling in H2-2024. We believe the project can be advanced to production within two-three years. 

Multiple catalysts

 

Upcoming Catalysts

  • Manh Choh: Commence commercial production in H2-2024
  • Johnson Tract: Permitting and resource expansion drilling in H2-2024
  • Lucky Shot: Surface and underground drilling; Similar to Manh Choh, Lucky Shot can be fast tracked to production as ore can be processed at Fort Knox, or other facilities in the region

 

Financials

At the end of 2023, CTGO had $3.8M in working capital, and $37M in long-term debt

Management has no plans to pursue any equity financings this year

 

FRC Valuation and Rating

CTGO is trading at a 43% discount (previously 27%) to junior gold producers 

We are not making any material changes to our DCF valuation on CTGO’s 30% interest in Manh Choh, plus 100% interest in Lucky Shot

Our DCF valuation on JT is $12.56/share; our inputs are preliminary / speculative as the project has not undergone any economic studies 

The increase in valuation confirms our belief that CTGO's proposed acquisition of HIGH is accretive

We are maintaining our BUY rating, and raising our fair value estimate from $23.22 to $29.67/share. Our valuation does not include any upside potential from the company’s upcoming resource expansion drill programs. Gold producer valuations are 20% lower compared to the past three instances when gold surpassed $2k/oz. 

Maintaining our risk rating of 4 (Speculative)

 

Risks

We believe the company is exposed to the following key risks (not exhaustive):

  • Our valuation is highly sensitive to gold prices
  • Exploration and development 
  • Potential for delays in advancing to production 
  • No guarantee that the proposed acquisition of HIGH will be completed
  • Potential for share dilution