Disclosure: Contango Ore, Inc. has paid FRC a fee for research coverage and distribution of reports. See last page for other important disclosures, rating, and risk definitions.
The analyst’s rating and fair value are one click away. Free FRC account, no credit card.
Already have an account?
Price Performance (1-year)
*See important disclosures at the bottom of this report rating and risk definitions. All figures in US$ unless otherwise specified.
Three high-grade gold projects in Alaska hosting 1.6 Moz AuEq
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
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
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)
We believe the company is exposed to the following key risks (not exhaustive):
