Growing an Emerging North American Gold
Producer with an Industry Leading Pipeline of High-Grade Gold
Deposits located in Alaska, USA
Contango ORE, Inc. (“Contango” or the
“Company”) (NYSE American: CTGO) and HighGold Mining Inc.
(“HighGold”) (TSXV: HIGH, OTCQX: HGMIF) are pleased to
announce that they have entered into a definitive arrangement
agreement (the “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 (British Columbia) (the “Transaction”).
Under the terms of the Agreement, each HighGold
share (“HighGold Share”) will be exchanged for 0.019 shares
of Contango common stock (each whole share, a “Contango
Share”) (the “Exchange Ratio”) based on the respective
volume weighted average price (“VWAP”) of Contango for the
five-day period ending on May 1, 2024. The Exchange Ratio implies
total consideration of C$0.55 (approximately US$0.40) per HighGold
Share and total HighGold equity value of approximately US$37
million (Cdn$51 million)1. The consideration represents a premium
of 59% based on Contango’s and HighGold’s 20-day VWAP2.
Upon completion of the Transaction, existing
Contango shareholders will own approximately 85% and HighGold
shareholders will own approximately 15% of the combined
company3.
In connection with the Transaction, Contango
will grant to HighGold the right to appoint one (1) director to its
board of directors.
CONFERENCE CALL AND WEBCAST
Contango and HighGold management will host a joint conference
call and webcast to discuss the Transaction on May 2, 2024, at
12:00pm EST / 9:00am PST. Participants may join the webcast using
the following call-in details: Contango ORE Announces Acquisition
of HighGold (6ix.com)
TRANSACTION HIGHLIGHTS
- 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.
- 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”)
AuEq 4. Further exploration potential along the Johnson Tract
Project’s highly prospective 7.5-mile mineralized trend.
- 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.
- 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.
- 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.
- 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 of Contango 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.”
BENEFITS TO CONTANGO SHAREHOLDERS
- The Johnson Tract Project is a high-grade +1 M oz AuEq
polymetallic deposit (grade of approximately 9.4 g/t AuEq) with an
opportunity for near term production and excellent exploration
potential.
- Strengthens Contango’s the core portfolio and positions it to
continue executing its strategy of building Alaska’s next gold
mines and growing annual gold production to +150 k oz Au.
- Significant potential to unlock value by leveraging Contango’s
expertise, resources and projected cash flow to accelerate the
development of the Johnson Tract Project.
- Opportunity to execute Contango’s proven low-risk development
strategy using its DSO platform. Contango has developed Manh Choh
on schedule and on budget with production expected in the second
half of 2024.
- Highly accretive to Contango on an in-situ basis with
HighGold’s ounces being acquired at ~US$30/oz AuEq with potential
for a re-rating within Contango’s portfolio as Manh Choh achieves
commercial production.
- Expanded platform for Contango to continue its growth strategy
in Alaska and elsewhere in the US and Canada.
BENEFITS TO HIGHGOLD SHAREHOLDERS
- Significant upfront premium of approximately 59% and 79% based
on both companies’ respective 20-day and 5-day VWAP.
- Early participation in an emerging growth-focused gold mining
company with a mission to become a low-risk multi-asset
producer.
- Elevated capital markets profile, improved trading liquidity
and NYSE American listing and inclusion in the Russell 2000
index.
- Ability for Contango to progress the Johnson Tract Project with
enhanced financial capacity, supported by projected organic cash
flow and the teams impressive project development track-record in
Alaska.
- Manh Choh projected to generate US$54 million per year in free
cash flow at a gold price of $1,920/oz (based on Contango’s 30%
interest).
- Near-term re-rating potential once transitioned into a
producer, with first gold pour from Manh Choh expected in the
second half of 2024.
- Potential to apply DSO model successfully utilized at Manh Choh
to both the Johnson Tract Project and Contango’s Lucky Shot
Project.
- Continued exposure to exploration upside with lower execution
and funding risk.
TRANSACTION STRUCTURE AND TERMS
The Transaction will be carried out by way of court-approved
Plan of Arrangement under the Business Corporations Act (British
Columbia) and will require approval by 66 2/3% of the votes cast by
HighGold shareholders and option holders, and 66 2/3% of votes cast
by HighGold shareholders and option holders, voting together as a
single class at a special meeting (the “Meeting”) expected
to be held in late [June] 2024. Directors and officers of HighGold,
representing an aggregate of approximately 1.9% of the issued and
outstanding HighGold Shares, have entered into voting support
agreements pursuant to which, among other things, each director and
officer has agreed to vote in favor of the Transaction at the
Meeting.
In addition to HighGold securityholder approval, the Transaction
is subject to other applicable regulatory approvals and closing
conditions which are customary for a transaction of this nature.
The Agreement contains customary provisions including
non-solicitation, "fiduciary out" and "right to match" provisions,
as well as a C$2.0 M termination fee payable to either company
under certain circumstances. Subject to the satisfaction of these
conditions, Contango and HighGold expect the Transaction to be
completed in July 2024.
Full details of the Transaction are set out in the Agreement,
which will be made available on SEDAR+ under the issuer profile of
HighGold at www.sedarplus.ca and will also be contained in an
information circular that will be mailed to HighGold shareholders
in May 2024.
SUSTAINABILITY AND INDIGENOUS
Contango will continue to honor HighGold’s lease agreement with
CIRI, a regional corporation established by the Alaska Native
Claims Settlement Act of 1971. This lease agreement authorizes the
exploration of the Johnson Tract Project by HighGold, which was
granted to CIRI under the terms of the Alaska Native Claims
Settlement Act of 1971 and the Cook Inlet Land Exchange of
1976.
Contango understands that respect and partnership with Native
communities and organizations, including CIRI, are central to
operating in Alaska. Contango is committed to advancing sustainable
mining operations through environmental, social, and governance
practices. Contango’s efforts in this regard have been demonstrated
through an existing partnership with the Tetlin Tribe, and will
also encompass the lease agreement of the Johnson Tract Project and
continued collaboration with CIRI going forward.
BOARDS OF DIRECTORS’ RECOMMENDATIONS
The Agreement has been unanimously approved by the Contango
board of directors and the HighGold board of directors. The
HighGold board of directors recommends that securityholders vote in
favor of the Transaction at the Meeting.
Agentis Capital Mining Partners and Evans & Evans, Inc. have
provided fairness opinions to the Board of Directors of HighGold
stating that, as of the date of such opinion, and based upon and
subject to the assumptions, limitations and qualifications stated
in such opinion, the consideration to be paid under the Transaction
is fair from a financial point of view, to HighGold
shareholders.
ADVISORS AND COUNSEL
Contango has engaged Cormark Securities Inc. as financial
advisor, Blake, Cassels & Graydon LLP as Canadian legal counsel
and Holland & Knight LLP as US legal counsel in connection with
the Transaction.
HighGold has engaged Agentis Capital Mining Partners as
financial advisor and DuMoulin Black LLP as legal counsel in
connection with the Transaction.
TECHNICAL INFORMATION
Contango has appointed John Sims, C.P.G. of Sims Resources LLC
as its Qualified Person as defined in subpart 1300 of Regulation
S-K; he has approved the scientific and technical information
related to Contango operations contained in this news release.
Ian Cunningham-Dunlop, P.Eng., Senior VP Exploration for
HighGold Mining Inc. and a Qualified Person as defined by Canadian
National Instrument 43-101, has reviewed and approved the technical
information related to HighGold contained in this release.
ABOUT CONTANGO
Contango is a NYSE American listed company that
engages in exploration for gold and associated minerals in Alaska.
Contango holds a 30% interest in the Peak Gold, LLC (the “Peak Gold
JV”), which leases approximately 675,000 acres of land for
exploration and development on the Manh Choh Project, with the
remaining 70% owned by an indirect subsidiary of Kinross, operator
of the Peak Gold JV. The Company also has a lease on the Lucky Shot
Project from the underlying owner, Alaska Hardrock Inc. and through
its subsidiary has 100% ownership of approximately 8,600 acres of
peripheral State of Alaska mining claims. Contango also owns a 100%
interest in an additional approximately 145,000 acres of State of
Alaska mining claims through its wholly owned subsidiary, which
gives Contango the exclusive right to explore and develop minerals
on these lands. Additional information can be found on our web page
at www.contangoore.com.
ABOUT HIGHGOLD
HighGold is a mineral exploration company focused on advancing
the high-grade Johnson Tract Gold-Zinc-Copper Project located in
accessible Southcentral Alaska, USA. HighGold’s experienced Board
and senior management team, are committed to creating shareholder
value through the discovery process, careful allocation of capital,
and environmentally/socially responsible mineral exploration.
Additional information can be found on its web page at
www.highgoldmining.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements and
certain “forward-looking information” (within the meaning of
Canadian securities legislation) regarding Contango, HighGold, the
Transaction, the terms of the Transaction, the expected benefits of
the Transaction, the completion of the Transaction, the timing of
the Transaction, the development timeline of the Man Choh Project,
expectations with respect to the development of the Johnson Tract
Project post-Transaction, Contango’s growth plans post-Transaction
and the continued cooperation of Contango with CIRI, that are
intended to be covered by the safe harbor for “forward-looking
statements” provided by the Private Securities Litigation Reform
Act of 1995, based on Contango and HighGold’s current expectations
or assumptions as to the outcome and timing of such future events
and includes statements regarding future results of operations,
quality and nature of the asset base, the assumptions upon which
estimates are based and other expectations, beliefs, plans,
objectives, assumptions, strategies or statements about future
events or performance (often, but not always, using words such as
“expects”, “believes”, “targets”, “approximately”, “projects”,
“anticipates”, “plans”, “estimates”, “potential”, “possible”,
“probable”, or “intends”, or stating that certain actions, events
or results “may”, “will”, “should”, or “could” be taken, occur or
be achieved). Forward-looking statements are based on current
expectations, estimates and projections that involve a number of
risks and uncertainties, which could cause actual results to differ
materially from those, reflected in the statements. These risks
include, but are not limited to: risks related to the ability of
the parties to close the Transaction; risks inherent to the
exploration and mining industry (for example, operational risks in
exploring for and, developing mineral reserves; risks and
uncertainties involving geology; the speculative nature of the
mining industry; the uncertainty of estimates and projections
relating to future production, costs and expenses; the volatility
of natural resources prices, including prices of gold and
associated minerals; the existence and extent of commercially
exploitable minerals in properties acquired by Contango or the Peak
Gold JV; ability to realize the anticipated benefits of the Peak
Gold JV and the Johnson Tract Project; potential delays or changes
in plans with respect to exploration or development projects or
capital expenditures; the interpretation of exploration results and
the estimation of mineral resources; the loss of key employees or
consultants; health, safety and environmental risks and risks
related to weather and other natural disasters); uncertainties as
to the availability and cost of financing; Contango’s inability to
retain or maintain its relative ownership interest in the Peak Gold
JV; inability to realize expected value from acquisitions;
inability of our management team to execute its plans to meet its
goals; the extent of disruptions caused by an outbreak of disease,
such as the COVID-19 pandemic; and the possibility that government
policies may change, political developments may occur or
governmental approvals may be delayed or withheld, including as a
result of presidential and congressional elections in the U.S. or
the inability to obtain mining permits. Additional information on
these and other factors which could affect Contango’s exploration
program or financial results are included in Contango’s other
reports on file with the U.S. Securities and Exchange Commission.
Investors are cautioned that any forward-looking statements are not
guarantees of future performance and actual results or developments
may differ materially from the projections in the forward-looking
statements. Forward-looking statements are based on the estimates
and opinions of management at the time the statements are made.
Contango does not assume any obligation to update forward-looking
statements should circumstances or management’s estimates or
opinions change.
1 Equity value presented on a fully diluted in-the-money basis 2
Based on trading on the NYSE American for Contango and trading on
the TSXV for HighGold 3 Presented on a basic basis 4 Based on
commodity prices of US$1,650/oz Au, US$20.00/oz Ag, US$3.50/lb Cu,
US$1.50/lb Zn and US$1.00/lb Pb
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240502930760/en/
Contango ORE, Inc. Rick Van Nieuwenhuyse President & Chief
Executive Officer (907) 888-4273 www.contangoore.com HighGold
Mining Inc Darwin Green President & Chief Executive Officer
(604) 629-1165 Or Nicole Hoeller Vice-President, Communications
(604) 629-1165 nicole@highgoldmining.com
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