Contango Ore's Q1 2025: Key Contradictions in Hedge Strategies, Project Timelines, and Debt Management

Hedge strategy and debt reduction, underground access tunnel permitting, gold hedge management and strategy, hedge liability management, and Manh Choh project life and production timeline are the key contradictions discussed in Contango Ore's latest 2025Q1 earnings call.



Quarterly Financial Performance:
- Contango Ore recorded $19 million in income from operations for Q1 2025, including $22.3 million in equity income from the Peak Gold JV.
- The company reported a net loss of $22.5 million for the quarter, primarily due to an unrealized loss of $40.5 million related to hedge contracts.
- Operations at Manh Choh saw the sale of over 17,000 ounces of gold with another 3,800 ounces in recoverable inventory, with cash costs at $1,334 per ounce and ASIC at $1,374 per ounce.
- The decline in profitability was due to a significant increase in gold prices, with gold starting at $2,600 and ending at $3,100.

Cash Flow and Debt Management:
- Contango Ore ended the quarter with $35 million in cash and marketable securities of $900,000, with an increase to $4 million subsequent to quarter end due to investments.
- The company made principal repayments of $13.8 million during the quarter and another $8.2 million post-quarter, reducing the facility balance to $30 million.
- The focus on debt reduction and maintaining cash balance is driven by the need to manage hedge liabilities and ensure financial stability.

Hedge Strategy and Gold Pricing:
- Contango Ore's hedge liability technically remained at 86,000 ounces, although the effective balance is lower due to a carry trade strategy.
- The company is selling 30% of its gold at spot price and hedging 70% to manage cash flow more effectively.
- The current hedging strategy is a result of historical financing needs and is being reviewed as gold prices remain robust.

Exploration and Growth:
- The company is allocating a $5.7 million budget for exploration drilling at Manh Choh, focusing on targets around the current pit.
- Contango Ore is also working on the development of the Johnson Tract project, with a focus on permitting the access tunnel and infrastructure over the next year.
- These initiatives are aimed at maximizing the value from existing assets and evaluating new opportunities to drive future growth.