Contango Ore targets debt reduction to $15M by year-end while advancing Johnson Tract permitting

Earnings Call Insights: Contango Ore, Inc. (CTGO) Q2 2025

MANAGEMENT VIEW

* Rick Van Nieuwenhuyse, President and CEO, opened by noting, "It was a great quarter. Operating earnings were $23 million, net income of about $16 million. I'm really proud of our cash costs, seeing those being well under guidance." He emphasized all-in sustaining costs of $1,548 for the quarter and $1,462 year-to-date, with cash costs at $1,416 for the quarter and $1,375 for the year. He also highlighted ongoing permitting progression at Johnson Tract and the start of the third ore processing campaign at Fort Knox mill, utilizing 250,000 tonnes at a grade of 0.23 ounces per ton.
* Van Nieuwenhuyse pointed to a "steady path here, focus paying down debt, delivering the hedges." He confirmed Lucky Shot remains on hold, with plans for a future drill program.
* J. Michael Clark, Executive VP and CFO, stated, "Last year, we were in a continually increasing gold price environment. So you kind of always had these unrealized losses on your hedges... In addition, we also... had a $6.4 million gain on our Onyx shares that we recognized in the quarter."

OUTLOOK

* Clark explained, "We'll finish the year around $15 million of debt with ING and Macquarie. And then our hedge position is currently at -- as of today is just under 63,000 ounces, and we should bring that down by another 20,000 ounces to about 43,000 by the end of the year." The company anticipates continued focus on debt reduction and delivering hedges, while keeping some capital aside for project advancement.
* Van Nieuwenhuyse reiterated, "The next stage for JT is getting the permit to go underground... That's the focus at JT."
* Guidance on 2026 production at Manh Choh is expected after the plan and budget are approved in November.

FINANCIAL RESULTS

* The company reported operating earnings of $23 million and net income of $15.9 million, reversing an operating loss of $3.1 million and net loss of $18.5 million in the prior year’s Q2. Earnings per share shifted from a loss of $1.90 to a profit of $1.24 per diluted share.
* Gold revenue for Q2 was $58.2 million. Operating cash flow for the first half of the year was $36.9 million, compared to $6.9 million last year. Q2 distributions from Peak Gold totaled $30 million, $54 million year-to-date, and $29 million in debt was paid down so far in 2025.
* Gold processed in Q2 was 255,000 tons at 0.22 ounces per ton; the current campaign is processing 250,000 tons at 0.23 ounces per ton. The company has maintained gold recovery rates of 92%-93% and is targeting all-in sustaining costs below $1,625 for the year, tracking "slightly ahead of our guided production of 60,000 ounces for the year," according to Clark.

Q&A

* Romeo Maione asked about the major shift from operating loss to profit. Van Nieuwenhuyse responded that production stability, strong gold prices, and cost control drove the change, adding, "Mining has been very smooth and on plan, on schedule, on budget. The ore transport has gone, I think, better than planned." Clark added that the stabilized gold price environment reduced unrealized hedge losses, and the quarter included a $6.4 million gain from Onyx shares.
* On gold pricing strategy, Clark detailed, "About 70% of our gold goes into the hedges, 30% goes into -- we sell at spot price during the year."
* Maione inquired about future drilling and project advancements. Van Nieuwenhuyse described Johnson Tract’s permitting process and stated, "Next stage, get the permits. That's going very smoothly."
* On cash flow allocation, Clark said, "Our focus has been on the permitting at JT... We're going to bring our debt down... We'll finish the year around $15 million of debt."
* Regarding the Onyx shares, Van Nieuwenhuyse confirmed plans to monetize them when appropriate, and Clark noted some shares are still under escrow or lockup.
* On anticipated all-in sustaining costs, Clark stated, "We do definitely hope and plan to come in below the $1,625."
* Maione asked about inclusion in ETFs. Van Nieuwenhuyse said, "Probably something we got to take a look at it because I'm a bit surprised we're not in it."

SENTIMENT ANALYSIS

* Analysts expressed a positive tone, repeatedly acknowledging the company’s profit turnaround and operational improvements. Maione referenced, "Always nice to see. Most mining companies I talk to don't see money, so it's always nice to see that."
* Management’s tone during prepared remarks and Q&A was confident and steady, emphasizing operational discipline and prudent risk management. Clark used phrases such as, "We're going to bring our debt down," and Van Nieuwenhuyse stressed, "We're not going to swing from the fences and make any big bets here."
* Compared to the previous quarter, both analysts and management displayed increased confidence, with less emphasis on risk or operational setbacks.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter showed a dramatic shift from Q2 2024’s operating loss of $3.1 million and net loss of $18.5 million to operating income of $23 million and net income of $15.9 million.
* The company continued to prioritize debt repayment, but with larger cash distributions and increased operating cash flow, management is now also highlighting growth project advancement.
* Guidance language remains conservative but slightly more optimistic regarding cost control and production volumes, with management stating that they are "tracking slightly ahead of our guided production of 60,000 ounces for the year."
* Both analyst and management sentiment has improved, shifting from cautious optimism in Q1 to a focus on strong financial performance and operational reliability in Q2.
* Strategic focus remains on debt reduction and project permitting but now incorporates more discussion of future growth and shareholder returns.

RISKS AND CONCERNS

* Van Nieuwenhuyse acknowledged that Lucky Shot remains on hold pending further capital availability, and that future drilling will be contingent on progress in hedge delivery and debt reduction.
* Clark discussed the company’s exposure to gold price volatility, noting the importance of the hedging strategy for risk management. He stated, "This just manages risk and that slight difference gives us about $1 million gain per quarter."
* Legal risks were discussed regarding the Johnson Tract permitting, with Van Nieuwenhuyse confirming, "The lawsuit is filed, and we've weighed in and joined the lawsuit, and that's the status of it."
* Operational risks include the need for capital expenditure on truck replacements and installation of an oxygen sparging system at the mill, both impacting sustaining costs.

FINAL TAKEAWAY

Contango Ore delivered a strong financial turnaround in Q2 2025, driven by stable gold production, disciplined cost control, and effective risk management. Management emphasized continued focus on debt reduction, targeting $15 million by year-end, and advancing permitting at Johnson Tract as the next key growth step. Steady operational performance, prudent cash allocation, and progress on strategic projects position the company for further potential upside as it moves closer to unhedged production and project expansion.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ctgo/earnings/transcripts]

MORE ON CONTANGO ORE

* Contango Ore, Inc. (CTGO) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4813860-contango-ore-inc-ctgo-q2-2025-earnings-call-transcript]
* Contango says 17,764 ounces of gold were sold in Q2 [https://seekingalpha.com/news/4474229-contango-says-17764-ounces-of-gold-were-sold-in-q2]
* Seeking Alpha’s Quant Rating on Contango Ore [https://seekingalpha.com/symbol/CTGO/ratings/quant-ratings]
* Historical earnings data for Contango Ore [https://seekingalpha.com/symbol/CTGO/earnings]
* Financial information for Contango Ore [https://seekingalpha.com/symbol/CTGO/income-statement]