Contango ORE Inc

Neither the Company nor the Peak Gold JV has commenced producing commercially marketable minerals. To date, neither the Company nor the Peak Gold JV has generated any revenue from mineral sales or operations. Neither the Company nor the Peak Gold JV has any recurring source of revenue. The Company’s ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund future exploration, and repay debt obligations and related interest, and working capital requirements. In the future, the Company and the Peak Gold JV may generate revenue from a combination of mineral sales and other payments resulting from any commercially recoverable minerals from the Manh Choh Project. The Company does not expect the Peak Gold JV to generate revenue from mineral sales prior to mid-2024. If the Company’s properties or the Manh Choh Project fail to contain any proven reserves, the Company’s ability to generate future revenue, and the Company’s results of operations and financial position, would be materially adversely affected. Other potential sources of cash, or relief of demand for cash, include external debt, the sale of shares of the Company’s stock, joint ventures, or alternative methods such as mergers or sale of our assets. No assurances can be given, however, that the Company will be able to obtain any of these potential sources of cash. The Company will need to generate significant revenues to achieve profitability and the Company may never do so.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Claim Rentals Expense. Claim rental expense primarily consists of State of Alaska rental payments and costs incurred to record annual labor documents. For the three months ended March 31, 2024 and 2023, claim rental expense was $0.1 million and $0.1 million respectively.

Exploration Expense. Exploration expense for the three months ended March 31, 2024 was $0.1 million compared to $0.3 million for the three months ended March 31, 2023. Current and prior period exploration expense relates to care and maintenance work performed on our Lucky Shot Property.

General and Administrative Expense. General and administrative expense for the three months ended March 31, 2024 and 2023 was $2.5 million and $2.0 million, respectively. The Company’s general and administrative expense primarily relates to legal fees, regulatory fees, payroll and stock-based compensation expense. General and administrative expenses were higher for the three months ended March 31, 2024, as a result of a surety bond requirement for the Manh Choh Project and an increase in audit and legal fees as a result of changing the Company's year-end to December 31, 2023.

Loss from Equity Investment in the Peak Gold JV. The loss from the Company’s equity investment in the Peak Gold JV for the three months ended March 31, 2024 and 2023 was $0.1 million and $5.1 million, respectively. The capital contributions for the three months ended March 31, 2024 and 2023 was $15.5 million and $5.1 million, respectively. The capital contributions are higher for three months ended March 31, 2024 compared to March 31, 2023 as operations are ramping up at the Manh Choh project with ore and waste mining ongoing and focus on capital improvements at the Fort Knox mill facility. There were no suspended losses as of March 31, 2024.

Interest Expense. In connection with the closing of the Credit Agreement, the Company entered into an amendment to its $20,000,000 unsecured convertible debenture (the “Debenture”) with Queen’s Road Capital Investment, Ltd. (“QRC”) that raised the stated interest rate from 8% to 9%. The Debenture currently bears interest at 9% per annum, payable quarterly, with 7% paid in cash and 2% paid in shares of common stock of the Company (See Note 14 - Debt for discussion of both debt arrangements). The current quarter interest expense of $2.0 million includes a full quarter of interest expense related to the Debenture, and a full quarter of interest expense related to the Company’s cumulative $42.5 million draw-down on the Facility. Prior year interest expense of $0.4 million only included the current quarter interest expense related to the Debenture.

Loss on Derivative Contracts. The Company incurred a non-cash loss of $15.6 million during the current quarter related to derivative contracts compared to $0 during the quarter ended March 31, 2023. The Company did not enter into any derivative contracts until July 2023 (see Note 15 - Derivative and Hedging Activities).

Liquidity and Capital Resources

As of March 31, 2024, the Company had approximately $7.9 million of cash.

The Company’s primary cash requirements have been for general and administrative expenses, capital calls from the Peak Gold JV for the Manh Choh Property, repayment of interest related to debt and exploration expenditures on the Lucky Shot Property. The Company’s sources of cash have been from common stock offerings, the issuance of the Debenture, and the proceeds from the Facility (see Note 8 - Stockholders' Equity (Deficit) and Note 14 - Debt, for a discussion of the recent activity).

The JV Management Committee has proposed a significant budget to complete the required development to start the operations of the Manh Choh mine, which is anticipated to begin production during the second half of 2024. The budget primarily relates to completion of the Manh Choh camp, mine access road construction, earthworks, general construction and installation, pre-production stripping, etc. For 2024, it is anticipated that there will be $27.2 million of capital calls to the Peak Gold JV to reach production, $15.5 million of such amount has already been funded by the Company. As of March 31, 2024, the Company has funded $62.7 million of the 2023 and 2024 capital calls to the Peak Gold JV, of which $42.5 million was funded from the Facility. The Company will be required to make capital contributions of 30% of the budgeted amounts when cash calls are received from the Peak Gold JV or face possible dilution of its interest in the Peak Gold JV.

The Company’s cash needs going forward will primarily relate to capital calls from the Peak Gold JV, exploration of the Contango Properties, repayment of debt and related interest and general and administrative expenses of the Company. The JV Management Committee has proposed a significant budget to complete the required development to start the operations of the Manh Choh mine, which is anticipated to begin production during the second half of 2024. The Company believes it has sufficient capital to reach production at the Manh Choh mine, with its cash on hand and the $22.5 million of availability under the Facility. Although there can be no guarantee that the Peak Gold JV will make distributions to the Company, the Company believes that distributions are probable and that it will maintain sufficient liquidity to meet its working capital requirements, including repayment obligations of approximately $29.9 million on the secured credit facility, for the next twelve months from the date of this report. Failure to pay current debt obligations will result in an event of default and the Company's debt would be due immediately or callable (See Note 14). If the Company elects to not fund a portion of its cash calls to the Peak Gold JV, its membership interest in the Peak Gold JV would be diluted. If the Company’s interest in the Peak Gold JV is diluted, the Company may not be able to fully realize its investment in the Peak Gold JV. Also, if no additional financing is obtained, the Company may not be able to fully realize its investment in the Contango Properties. The Company has limited financial resources and the ability of the Company to refinance current debt or arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, the results achieved at the Peak Gold JV Property, as well as the market price of metals. The Company cannot be certain that financing will be available to the Company on acceptable terms, if at all.

Further financing by the Company may include issuances of equity, instruments convertible into equity (such as warrants) or various forms of debt. The Company has issued common stock and other instruments convertible into equity in the past and cannot predict the size or price of any future issuances of common stock or other instruments convertible into equity, and the effect, if any, that such future issuances and sales will have on the market price of the Company’s securities. Any additional issuances of common stock or securities convertible into, or exercisable or exchangeable for, common stock may ultimately result in dilution to the holders of common stock, dilution in any future earnings per share of the Company and may have a material adverse effect upon the market price of the common stock of the Company.

Available Information

General information about the Company can be found on the Company’s website at www.contangoore.com. Our annual reports on Form 10-K, transition report on Form 10-KT, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after the Company files or furnishes them to the SEC.