Acquisition Of HighGold Mining
VANCOUVER - Contango ORE, Inc. and HighGold Mining Inc. have entered into a definitive arrangement agreement pursuant to which Contango will acquire all of the issued and outstanding shares of HighGold by way of a court approved plan of arrangement under the Business Corporations Act.
Upon completion of the Transaction, existing Contango shareholders will own approximately 85% and HighGold shareholders will own approximately 15% of the combined company.
Highlights: 1) Creation of a leading Alaskan gold company with a low-risk and properly sequenced portfolio - Manh Choh is Alaska's next gold mine with first gold pour expected in the second half of 2024. Organic path to +100 thousand (k) ounces (oz) in annual gold production with the potential to apply the direct ship ore (DSO) model used at Manh Choh to both HighGold's Johnson Tract Project and Contango's Lucky Shot Project. 2) Addition of a third high-quality deposit with long term upside potential - Immediately increases Contango's current resources threefold by adding +1 million (M) oz of gold equivalent ("AuEq") @ approximately 9.4 grams per tonne ("g/t") AuEq4. Further exploration potential along the Johnson Tract Project's highly prospective 7.5-mile mineralized trend. 3) Management of Contango is ideally positioned to unlock value at Johnson Tract - Consistent with the development of Manh Choh, which is on schedule and on budget, Contango expects to unlock value from the Johnson Tract Project without the burden of large upfront capital requirements. The Johnson Tract Project's strategic seaside location expands opportunities for applying the DSO model. 4) Financial flexibility to fund growth through existing balance sheet capacity and near-term cash flow - Contango has the ability to progress the Johnson Tract Project with enhanced financial capacity underpinned by organic cash flow to be generated at Manh Choh and a track-record of successful project development and execution in Alaska. 5) Partnerships with Cook Inlet Region, Inc. (CIRI) and the Alaska Native Tetlin Tribe ("Tetlin Tribe") - HighGold has a lease agreement with CIRI, a regional corporation established by the Alaska Native Claims Settlement Act of 1971, authorizing the exploration and development of the Johnson Tract Project while Contango, through its joint venture with Kinross, has an existing partnership with the Tetlin Tribe authorizing mining and exploration activities at Manh Choh. 6) Compelling re-rate potential - Re-rating to be driven by multiple near-term catalysts, led by achieving commercial production at Manh Choh, and an enhanced combined capital markets profile.
Rick Van Nieuwenhuyse, President and CEO, said, "Darwin Green and his team have done an excellent job adding value to the Johnson Tract Project in a very tough market. The combination of HighGold and Contango makes a tremendous amount of strategic sense for both sets of shareholders - it is a true win-win for all. With the cash flow expected in the second half of 2024 from our high grade Manh Choh operation achieving commercial production, we will be able to continue to create value for the Johnson Tract Project and advance this high-quality project through to production. When combined with our Manh Choh and Lucky Shot projects, the Johnson Tract Project represents another asset that meets our criteria to be a run-of-mine, direct shipping ore operation. Contango will now develop a growth plan to advance these three assets to a production decision and target producing well in excess of 150,000 ounces of gold per year."
"We believe that a model of focusing on assets that meet three specific criteria: 1) located near existing or amenable to new infrastructure; 2) sufficient grade to directly transport run-of-mine ore to an existing third party processing facility; and 3) inclusive of a simple ore body - specifically in terms of permitting; will enable Contango to continue to build a significant production profile while minimizing our environmental footprint. As demonstrated, this business model would result in low permitting and execution risk, low initial capital outlay and shorter timelines to production. This model has worked well for Manh Choh and we believe it will work well for the Lucky Shot and Johnson Tract projects."
"We look forward to working closely with CIRI to rapidly advance the Johnson Tract Project to a production decision. In addition to the three projects discussed, Contango has assembled an impressive group of exploration stage properties in Alaska including: the 675,000 acres of highly prospective ground in the Tintina Gold belt and under lease from the Tetlin Alaska Native Tribe by our Peak Gold JV partner Kinross; our early stage assets (Eagle-Hona, Triple Z, and Shamrock); most of the Willow district surrounding the Lucky Shot Project; and now a large tract of private land owned by CIRI, a very successful Alaska Native Corporation based in Anchorage, Alaska."
Darwin Green, President and CEO of HighGold said, "HighGold believes this transaction with Contango represents a compelling value creating opportunity for our shareholders, with obvious synergies, an enhanced capital markets profile, financial strength, and a robust platform for future growth. It is a union that brings together three of Alaska's most compelling high-grade gold deposits in one company with ability to self-fund growth out of cash-flow."
"Contango's unique business model sets it apart in the mining sector. Focusing on assets with potential for DSO development, in which mineralized material is shipped to an existing off-site facility for processing mitigates much of the risk of conventional stand-alone mines. Advantages of the DSO model include lower capital costs, lower execution risk, lower environmental impact, and potential for significantly shorter timelines to achieve production. Contango's management has a strong track record of achievement in Alaska, most recently with their near-production Manh Choh project, in partnership with Kinross, which was permitted and built in 2.5 years. With Contango's experience, financial capabilities, and projected robust cash flow we are confident in their ability to propel the Johnson Tract Project forward. We extend our gratitude to our shareholders, stakeholders and the entire HighGold team for their dedicated efforts and support. We look forward to joining with Contango as it enters production and moves forward with the leading development pipeline in Alaska."