For sale: Peak Gold mine project, Alaska

Contango ORE Inc. Jan. 23 announced that the Peak Gold mine project near the crossroads town of Tok in Eastern Interior Alaska is officially up for sale.

The Peak Gold project is owned by a joint venture between Contango ORE (60 percent) and a subsidiary of Royal Gold Inc. (40 percent).

Royal Gold, which manages the work under the joint venture, has retained Scotia Capital Inc. to conduct a joint process for the sale of the Peak Gold properties in Alaska.

Given the high gold grades and robust economics calculated for developing a mine at this road-accessible project, the Peak Gold partners should not have any problems finding suitors, if they have not already identified the buyer.

A preliminary economic assessment published last October envisions an open-pit mine feeding a 3,500-metric-ton-per-day mill that is forecast to produce 1.09 million ounces of gold and 2 million oz of silver over an initial eight-year mine-life.

Mined from two adjacent open pits, Main and North Peak, the potential ore for this operation consists of 9.3 million metric tons of skarn material from the Peak deposits averaging 3.99 g/t gold and 11.7 g/t silver.

The after-tax net present value (at a 5 percent discount) of this operation is calculated to be US$393 million and the after-tax internal rate of return is 29.1 percent.

The capital costs to develop Peak Gold are calculated to be US$340 million, which includes US$294 million for the initial costs to develop the mine and US$46 million in sustaining capital and closing costs.

The cost to produce an ounce of gold, based on the initial capital investment, is calculated to be an exceptionally low US$428/oz of gold recovered. With the sustaining capital included, this cost is only US$470/oz gold.

While mining the Peak zones is intriguing, these high-grade skarn deposits represent only a fraction of the highly prospective land package held by the Peak Gold joint venture.

"The project considered in the PEA is a very small area of the consolidated land package of about 35,000 square kilometers (850,000 acres) we control in Tintina Gold Belt that runs through Alaska and the Yukon," Royal Gold President and CEO Tony Jensen informed shareholders late in 2018.

This larger land package is highly prospective for other skarn deposits similar to the Peak deposits; as well as porphyry or epithermal deposits containing gold, copper, silver, zinc and potentially other metals.

"The company and its joint venture partner Royal Alaska have spent several years exploring for a commercial gold deposit, and the previously released preliminary economic assessment of the Main Peak and North Peak resource areas are very encouraging," said Contango ORE CEO Brad Juneau. "There is significant exploration upside remaining on the acreage, and along with the Main Peak and North Peak resource areas, we believe our project will be one of the most attractive in the North American market."

CORE's 60 percent interest in the Peak Gold project plus cash on hand, which was US$11.7 million at the end of September, constitute substantially all of the Texas-based mineral exploration company's assets. CORE has retained Petrie Partners, LLC and Cantor Fitzgerald and Co. to advise on its strategic options. The Peak Gold partner said it is primarily interested in a sale of CORE stock in exchange for cash or liquid publicly traded shares.

Royal Gold, which owns roughly 12.7 percent of Contango ORE's shares, said it is considering all alternatives with respect to its own investment in the Peak Gold joint venture.

–SHANE LASLEY