Contango ORE Inc

As of June 30, 2024, neither the Company nor the Peak Gold JV has commenced producing commercially marketable minerals. Neither the Company nor the Peak Gold JV has generated any revenue from mineral sales or operations, including any reoccuring 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. On July 8, 2024, the Peak Gold JV poured its first gold bar. The ore mining continues along with stockpiling ore at the Fort Knox facility. The Project is on schedule and full commissioning of the modifications at the Fort Knox mill is expected in the third quarter. The Project remains on track to deliver its planned production this year. 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 June 30, 2024 Compared to Three Months Ended June 30, 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 June 30, 2024 and 2023, claim rental expense were $0.1 million and $0.1 million respectively.

Exploration Expense. Exploration expense for the three months ended June 30, 2024 was $0.1 million compared to $1.0 million for the three months ended June 30, 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 June 30, 2024 and 2023 were $2.2 million and $2.5 million, respectively. The Company’s general and administrative expense primarily relates to legal fees, regulatory fees, payroll and stock-based compensation expense.

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 June 30, 2024 and 2023 was $1.0 million and $6.7 million, respectively. The capital contributions for the three months ended June 30, 2024 and 2023 was $11.8 million and $6.7 million, respectively. The capital contributions are higher for three months ended June 30, 2024 compared to June 30, 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 June 30, 2024.

Interest Expense. For the three months ended June 30, 2024 interest expense was $2.9 million related to the Queen's Road Capital Investment, Ltd. Debenture (the "Debenture") and interest expense related to the Company’s cumulative $60.0 million draw-down on the Facility. Prior year interest expense of $1.0 million included interest expense related to the Debenture and interest expense related to the Company's cumulative $10 million draw-down on the Facility. See Note 13 - Debt.

Loss on Derivative Contracts. The Company incurred a non-cash loss of $12.6 million during the threre months ended June 30, 2024 related to derivative contracts compared to $0 during the three months ended June 30, 2023. The Company did not enter into any derivative contracts until July 2023 (see Note 14 - Derivative and Hedging Activities).

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 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 six months ended June 30, 2024 and 2023, claim rental expense was $0.3 million and $0.3 million respectively.

Exploration Expense. Exploration expense for the six months ended June 30, 2024 was $0.1 million compared to $1.3 million for the six months ended June 30, 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 six months ended June 30, 2024 and 2023 were $4.7 million and $4.5 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 slightly higher for the six months ended June 30, 2024, as a result of a surety bond requirement for the Manh Choh Project.

Loss from Equity Investment in the Peak Gold JV. The loss from the Company’s equity investment in the Peak Gold JV for the six months ended June 30, 2024 and 2023 was $1.0 million and $11.8 million, respectively. The capital contributions for the six months ended June 30, 2024 and 2023 was $27.2 million and $11.8 million, respectively. The capital contributions are higher for six months ended June 30, 2024 compared to June 30, 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 June 30, 2024.

Interest Expense. For the six months ended June 30, 2024 interest expense was $5.0 million related to the Debenture and interest expense related to the Company’s cumulative $60.0 million draw-down on the Facility. Prior year interest expense of $1.1 million included interest expense related to the Debenture and interest expense related to the Company's cumulative $10 million draw-down on the Facility. See Note 13 - Debt.

Loss on Derivative Contracts. The Company incurred a non-cash loss of $28.2 million during the six months ended June 30, 2024 related to derivative contracts compared to $0 during the six months ended June 30, 2023. The Company did not enter into any derivative contracts until July 2023 (see Note 14 - Derivative and Hedging Activities).

Liquidity and Capital Resources

As of June 30, 2024, the Company had approximately $24.3 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 13 - 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 began production during the second half of 2024. On July 8, 2024, the Peak Gold JV poured its first gold bar. The ore mining continues along with stockpiling ore at the Fort Knox facility. The Project is on schedule and full commissioning of the modifications at the Fort Knox mill is expected in the third quarter. The Project remains on track to deliver its planned production this year. For fiscal 2024, it was anticipated that there would be $31.3 million of capital calls to the Peak Gold JV to reach production. The Company has already funded the $31.3 million as of July 31, 2024. As of July 31, 2024, the Company has funded $78.6 million of the 2023 and 2024 capital calls to the Peak Gold JV, of which $60.0 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 budget primarily relates to continued ore and waste mining along with mill modifications at the Fort Know mill. Including the completion of the ore delivery road and tie-ins for the pebble recycle conveyor.

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 began production during the second half of 2024. The Company believes it has sufficient capital to continue production at the Manh Choh mine, with its cash on hand and the $5.0 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 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 13). 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.