The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Mining Explorers 2024 - January 15, 2025
The first bar of gold poured from the Manh Choh mine represents a major milestone for Kinross Alaska and Contango ORE.
Rick Van Niuwenhuyse
Drill rigs and supplies being transported to Johnson Tract, a high-quality gold project on the west side of Alaska's Cook Inlet.
With its hybrid royalty model, Contango ORE is shortening the "Valley of Death" period of the Lassonde Curve closer to the two- to three-year span of the 1990s.
Contango ORE CEO Rick Van Nieuwenhuyse hefts the first 600-ounce gold bar poured from Manh Choh ore above his head.
Contango carried out roughly 3,000 meters of drilling in preparation for developing an underground exploration tunnel at the 1-million-oz JT gold deposit at Johnson Tract.
A drill tests an extension of the Breccia Pipe deposit at Golden Zone prior to Contango ORE's acquisition of this gold-silver project between Anchorage and Fairbanks, Alaska.
The July 8 pouring of the first bar of gold from the Manh Choh Mine in eastern Alaska elevated Contango ORE Inc. from an Alaska-based mineral exploration company that got its start when a Texas oil executive discovered hard rock mineralization at Mahn Choh in 2009 to the newest gold producer in the state.
"From the first discovery hole to pouring the first bar of gold emblazed with the special Manh Choh branding, it has certainly been a journey, but one that sets us up for future success," said Contango ORE President and CEO Rick Van Nieuwenhuyse.
Contango's future success is being built upon a new business model that is as unique as the company implementing it.
This new "hybrid royalty" business model is focused on exploring and developing high-quality mineral projects that can be advanced quickly to production by shipping ore directly to existing mills, tailings facilities, and other mine infrastructure.
This concept provides a path to developing high-grade orebodies that have been long overlooked because they were not large enough to endure the financial costs and arduous permitting process associated with developing a full-blown mining operation.
By identifying, acquiring, and advancing high-quality assets with a lower risk profile and a shorter runway to production, the hybrid royalty model provides a clearer path to the production of metals and the revenues that come with that.
"We believe this is a unique model and a right-fit for these continuing challenging capital markets for miners," said Van Nieuwenhuyse.
As a longtime executive who has founded and led multiple successful mineral exploration companies, Van Nieuwenhuyse knows how to find the large and high-quality mineral deposits global mining companies are looking for.
In fact, as the top executive of Novagold Resources Inc., he advanced the Donlin Gold discovery in Southwest Alaska to a 40-million-ounce gold deposit and brought Barrick Gold Corp. on as a 50-50 partner to permit, build, and operate a mine at this truly world-class gold deposit.
As a seasoned junior exploration company executive, however, Van Nieuwenhuyse also knows firsthand just how long it can take to reap the rewards of world-class exploration success – more than 30 years after Donlin Gold was discovered and nearly 20 years after Barrick forged a partnership with Novagold, the partners have yet to break ground on developing a mine there.
The often decades-long stretch between discovering a quality mineral project that has all the hallmarks of a successful mine and the moment that it produces its first metal is referred to in the industry as the "Valley of Death."
By lowering the financial, environmental, permitting, and engineering complexities that come with the development of a mill and tailings storage facility, Contango's hybrid royalty model substantially shortens the trek across the Valley of Death.
With its hybrid royalty model, Contango ORE is shortening the "Valley of Death" period of the Lassonde Curve closer to the two- to three-year span of the 1990s.
Manh Choh, which crossed the Valey of Death in less than five years and was advanced from a complete greenfield discovery to a 225,000-oz-per-year gold-producing mine in about 16 years, is a prime example.
Contango is applying the same direct shipping ore model to other advanced projects with deposits orphaned in the Valley of Death. The company has outlined a set of criteria for projects to fit within its model:
• Three metals – Gold, copper, and silver.
• Grade is king – The deposit must have high enough grade ore to support the cost of being shipped to an existing mill for processing.
• Available infrastructure – The orebody must be close enough to rail, road, or water transportation to keep shipping costs down.
• Simple permitting – The ability to permit the project quickly and efficiently is key to lowering risks and costs.
"The trick here is to get to cash flow with the least amount of headaches – the least amount of capital and the least amount of permitting," Van Nieuwenhuyse said during an April interview with Romeo Maione at 6ix Inc.
Contango's hybrid royalty model is a continuation and evolution of the Manh Choh Mine, which is trucking ore to Kinross Gold Corp.'s Fort Knox Mine north of Fairbanks, Alaska, for processing.
Seeing a win-win situation, Kinross and Contango forged a joint venture in 2020 to develop a mine at Manh Choh and process the ore through the Kinross Alaska mill at Fort Knox.
In exchange for a 70% JV interest in Manh Choh, Kinross took the lead on permitting and mining and is now processing the Manh Choh ore through its mill.
In just four years after the JV was formed, the partners permitted and developed a mine at Manh Choh.
Based on current reserves, the Kinross Alaska mill at Fort Knox is expected to produce roughly 225,000 oz of gold annually from Manh Choh ore for the next 4.5 years.
When combined with the lower-grade ore mined and stacked on heap leach pads on the Fort Knox property, Kinross Alaska is expected to produce upwards of 400,000 oz of gold per year through 2029.
"We are an international company and work in many different countries, and I can honestly say Alaska is a world-class mining jurisdiction," Kinross President and CEO Paul Rollinson said during a ceremony commemorating the first Manh Choh gold pour.
Contango's 30% share of the 2024 processing of Manh Choh ore came to approximately 38,500 oz of gold, and the company is expected to receive an average of around 67,500 oz/yr moving forward.
Rick Van Niuwenhuyse
For Kinross, the processing of high-grade ore from Manh Choh resulted in 149,093 oz of gold production at Fort Knox during the third quarter of 2024, which is more than double what the operation produced during the previous quarter.
While the annual output may not reach the nearly 600,000 oz indicated by third-quarter production due to the timing of the batches of high-grade Manh Choh ore processed, the ability to elevate the nearly 30-year-old mine's annual gold production to record levels demonstrates the power of Contango's hybrid royalty model.
With Manh Choh serving as a proof-of-concept for its hybrid royalty model, Alaska's newest gold mining company is now focused on tripling its annual production by fostering two more orphaned Alaska gold projects that have the potential to be directly shipping ore to already permitted mills in the next five years.
"Our five-year plan is to grow production from our existing projects to 200,000 ounces of annual gold-equivalent production," said Van Nieuwenhuyse.
On the day after the first Manh Choh gold bar was poured, Contango adopted the one-million-oz Johnson Tract gold project in Southcentral Alaska through the acquisition of HighGold Mining Inc.
"Contango now has a solid set of assets to become a significant Alaska gold producing company," Van Nieuwenhuyse said upon the July closing of the all-shares acquisition valued at roughly $33.6 million.
As a polymetallic gold project lying about 125 miles southwest of Anchorage on lands owned by CIRI, a Southcentral Alaska Native regional corporation, Johnson Tract checks off all the boxes of its hybrid royalty model.
First, the JT Deposit at Johnson Tract hosts 3.49 million metric tons of indicated resource averaging 5.33 grams per metric ton (598,000 ounces) gold, 6 g/t (673,000 oz) silver, 5.21% (400.8 million pounds) zinc, 0.59% (43.1 million lb) copper, and 0.67% (51.5 million lb) lead.
When you add up the value of all the metals, this comes to 9.4 g/t (1 million oz) gold-equivalent.
In addition to grades that fit within Contango's model, the deposit is located alongside Alaska's Cook Inlet, which means the project benefits from ocean transport – the lowest cost for direct shipping ore to a third-party mill.
The geometry and other characteristics of JT Deposit also check off the simplified permitting box and add the bonus of potential lower-cost mining.
The plan is to mine the JT deposit from underground, which inherently lowers the environmental footprint when compared to open-pit mines.
The lower-cost mining advantage comes from the fact that the deposit is inside a mountain above a valley floor, which means it is downhill from the mine face to the port and gravity can be leveraged to lower the energy and costs of mining and transporting direct shipping ore.
Drill rigs and supplies being transported to Johnson Tract, a high-quality gold project on the west side of Alaska's Cook Inlet.
Prior to the buyout by Contango, HighGold had advanced JT Deposit to the point where the development of an underground exploration ramp to complete the drilling needed to establish reserves to support a mine plan is necessary.
With its sights set on establishing a mine at JT and direct shipping the ore to an already established mill for processing, Contango launched a roughly 3,000-meter drill program at Johnson Tract in July focused onupgrading the resources within the upper third of JT Deposit; collecting samples for more detailed metallurgical testing; and gathering geotechnical and hydrologic information in preparation for permitting and developing a tunnel to support detailed drilling of the JT Deposit.
"We are focused on advancing the project towards feasibility and a mine development decision using our DSO approach," said Van Nieuwenhuyse. "Right now, that means advancing geotechnical, hydrologic, and other environmental and engineering studies in preparation for permitting an approximately 1.6-kilometer (one mile) exploration tunnel to support definition drilling of the deeper two-thirds of the JT Deposit."
Highlights from this year's drilling at JT Deposit include:
• 93 meters averaging 6.65 g/t gold, 7.7 g/t silver, 1.14% copper, and 2.23% zinc in hole GT24-007, including a 17-meter high-grade subsection averaging 21.3 g/t gold, 7.75 g/t silver, 1.16% copper, and 3.66% zinc.
• 223.5 meters averaging 8.89 g/t gold, 6.1 g/t silver, 0.45% copper, and 4.42% zinc in hole GT24-008, including a 55.5-meter subsection averaging 27.61 g/t gold, 8.3 g/t silver, 0.73% copper, and 3.54% zinc.
• 30.2 meters averaging 3.63 g/t gold, 4.2 g/t silver, 0.48% copper, and 4.95% zinc in hole JT24-159, including a 14.7-meter subsection averaging 6.27 g/t gold, 6.3 g/t silver, 0.53% copper, and 8.6% zinc.
Contango carried out roughly 3,000 meters of drilling in preparation for developing an underground exploration tunnel at the 1-million-oz JT gold deposit at Johnson Tract.
Upgrading the resources in the lower part of the JT Deposit with close-spaced drilling from underground is needed to support a feasibility study for a DSO mine that could later use the exploration tunnel for access and haulage.
Toward its goal of developing this exploration tunnel, Contango has received a Clean Water Act Section 404 permit from the US Army Corps of Engineers to construct a 2.6-mile (four kilometers) road to access the proposed tunnel's portal, as well as expand the airstrip at Johnson Tract.
"Planning is underway for a 2025 program," the Contango CEO said during a November update.
Contango's portfolio of high-quality assets expected to propel the company to a 200,000 oz/y gold producer in the near term also includes Lucky Shot, a high-grade gold project about 110 road miles north of Anchorage.
While Contango did not carry out exploration at Lucky Shot in 2024, the company believes this advanced-staged underground gold project could be a second cash flow generator for the company in two or three years.
Located in the historic Willow Creek Mining District, Lucky Shot encompasses three pre-World War II era underground mines – Colman, Lucky Shot, and War Baby – that produced gold from a high-grade vein system that extends for at least 1.5 miles across the property.
It is estimated that from 1922 until being shut down by the federal War Production Board in 1942, Lucky Shot produced 252,000 oz of gold from 169,000 tons of ore averaging around 40 g/t (1.6 oz per metric ton) gold. Additional gold was produced from the Colman and War Baby mines.
Since acquiring the Lucky Shot in 2021, Contango has been working toward establishing a resource that would support a high-grade direct shipping ore gold mine. This includes the rehabilitation and extension of the historical Enserch tunnel, which served as a platform for a 29-hole drill program the company carried out at the project in 2022.
According to a 2023 calculation, Lucky Shot hosts 226,963 metric tons of indicated resource averaging 14.5 g/t (105,620 oz) gold and 82,058 metric tons of inferred resource averaging 9.5 g/t (25,110 oz) gold.
The next step for this small but high-grade project is to carry out close-spaced underground drilling focused on expanding the high-grade Luck Shot Vein to around 400,000 oz of gold in preparation for developing a mine that is expected to produce around 40,000 oz of gold per year.
The gold being produced at Manh Choh is generating the cash needed to advance Lucky Shot and Johnson Tract toward production and for Contango to reach its target of being a 200,000 oz/yr gold producer by the end of the decade.
A drill tests an extension of the Breccia Pipe deposit at Golden Zone prior to Contango ORE's acquisition of this gold-silver project between Anchorage and Fairbanks, Alaska.
"I would like to emphasize that the company is in a strong financial position earning positive cashflow from ongoing operations at Manh Choh," said Van Nieuwenhuyse. "This will allow us to aggressively pay down our debt in 2025 and deliver into our hedges, while also advancing our Lucky Shot and Johnson Tract programs towards a production decision using our direct shipping ore approach, which reduces our environmental footprint, simplifies permitting and minimizes construction capital. Contango is in a strong position to take advantage of the current gold market."
Deeper in the pipeline, Contango's portfolio of road-accessible Alaska mineral projects with hybrid gold potential includes the Golden Zone gold-silver-copper project midway between Fairbanks and Anchorage; the Amanita and Amanita NE properties adjacent to the Fort Knox mine; the Shamrock gold project in the Richardson Mining District about 70 miles southeast of Fairbanks; and the Eagle-Hona gold and Triple Z copper-gold projects west and north of Manh Choh, respectively.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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