Contango Ore, Inc. (CTGO) Earnings Call Transcript & Summary

Good morning, good afternoon, good evening, depending on where you're signing in from. It's quite an international audience today. So, really do appreciate everybody's time. I've got with me Rick Van Nieuwenhuyse, CEO of Contango Ore; and Mike Clark, the company's CFO, to discuss this week's announcement on financing and exploration plans. Gentlemen, how are you today?

Doing good. Good to be here.

Awesome. So here's how today is going to work just for the folks in the room. I've got a number of questions for both of them about the financing and their exploration. But this is an interactive event. So please do enter your questions in the chat button in the bottom right of your screen at any point during today's event, I'll make sure we get to as many as possible while we go through it. Even if I don't get to your question today, I will be sending the entire transcript to the Contango team, so I'll get back to you as soon as possible. This event is also being recorded and will be available for replay probably at about 3:30 p.m. Eastern Time. It will pop in right into your inbox, but it will be on the same link, but also on 6ix's YouTube channel. But enough out of me, I want to get into the protein of today's event as quickly as possible.

So, Rick, just closed $50 million raise, $20 per share to institutional investors. Obviously, this is a pretty big cash injection for a company that's already generating positive cash flow. So, I'm looking for from you is the strategic rationale behind both this timing and then tell me who are the investors that participate.

Yes. So, very important, I would call it a transformational financing for us. As everybody knows, we've got Manh Choh into production. It's generating good cash flows for us, but most of that cash flow goes towards paying down the delivery into the hedge book. And that was the deal when we raised the $60 million to get Manh Choh into production. As we know, the mine is performing well. We just finished up the third batch, I think as everybody knows, and we'll be getting a distribution from that here, which I think we'll be able to announce next week. But with all that, we're paying -- delivering the hedges and paying down debt. That's where most of the money goes. And in order to move our two other projects forward, Lucky Shot and JT, we felt it was important to get that going now and not delay. We certainly didn't want to delay a whole year. We've been talking with a number of investors. These two investors stood out. One is an existing shareholder and one is a large institutional shareholder who we -- again, we've been having a dialogue with the last two, three months here. So, we wanted to -- we didn't want to issue a warrant. That was one of our criteria for having it in our dialogue with our groups that we've been talking to for -- to finance the company's next growth here. And that was a big -- that was an important part. So these two investors stepped up and gave us what we wanted on the one side was a warrantless financing. And -- but they insisted on a significant discount. And that's hard to swallow. It's hard for me to swallow. But I guess you have to say that is the cost of their capital. It's always -- when you have a company that's like Contango that's been supported by its shareholders for a fairly long period of time, it's always hard to bring in new shareholders because they just have a different view and particularly institutional shareholders are they're sophisticated. They're looking at the risks. And certainly, I think everybody in the mining business knows that there's still a fair bit of risk left in building new projects. And so that's where this money is going to get directed towards to help build our new projects. It's a great plan. It's -- we're going to grow our production -- gold production by 3x from the current 60,000 ounces coming out of Manh Choh, at Lucky Shot, at Johnson Tract, you're at 200,000 ounces of production. We think we've got lots of work to do to demonstrate the economics, but we think we can get our cash flows in the -- sorry, our all-in sustaining costs in the $1,500 neighborhood, and therefore, the cash flows are -- everybody can do the math. It's -- we have strong cash flows now. We want to get these two other opportunities in production while the gold price is in a good place, and we think it will be for a while, but we want to take advantage of that. We don't want to wait a year. I guess that's kind of the bottom line.

There's a cost related...

[indiscernible] answer, but there you go.

No, no, I appreciate it very much. And I appreciate you referencing the discount because it certainly did come up in questions over e-mail. If anybody has further questions about it, please do shoot to us in the chat. One thing I wanted to talk about just because I noticed it and a lot of people reached out to ask about it as well. Michael, I'll throw this to you. Part of this offering structured with those prefunded warrants. I'd love if you could explain to folks what those are and how they work because warrant feels like a misnomer for what those actually are, but I'll throw it to you.

Yes. It is a bit of a misnomer and prefunded warrants are a new concept for me. But we don't view these as a warrant, and they really are because they're fully funded minus penny. So, yes, we look at these as fully issued shares. And then the whole reason that the prefunded warrant is there is basically for certain institutions that can exceed 9.9%. And so this mechanism or tool allows them to invest more than that while staying below 10%.

Okay. No, I appreciate that. And Rick, another question that came in over e-mail, and I'll just use one person's specific question, but it's reflective of a couple that I saw. And that's looking for your strategic view on why to go with shareholder dilution rather than bank borrowing, hedging, et cetera. People are just looking for your insight on that.

Yes. I mean, look, I mean, gold is at not only all-time highs numerically, but all-time highs on an inflation-adjusted basis. We are in new territory. So if you're a chartist, you've got no more chart left. So it's -- we want to take advantage of that. We want to -- like I said, we don't want to wait a year to be able to advance Lucky Shot and Johnson Tract. This year at Johnson Tract was a slow year in the sense of it was mostly about permitting, gathering information to support permitting. And so -- but Lucky Shot, we would have loved to be drilling. And this money will allow us to get the drills turning. In fact, we're already in the process of getting the drills reaching out to getting the drillers mobilized and getting them -- getting all the equipment necessary because we're drilling underground. This is not surface. We're not crazy. We're going to start drilling on the surface in late September in Alaska. It's breaking 35 degrees out this morning. It's good. So we're going to be going underground. And obviously, these are somewhat specialized rigs, and there's some extra support work that we need to do to get the we have to get air flow back there, so we need generators to do that. And there's a little bit of a setup. So give us about a month and we'll -- the drills will be turning here. And we can -- nice thing about being underground is you can -- it's just the same temperature underground all the time. We've got everything we need is we're set up. We're fully permitted again. Again, Lucky Shot is a fully permitted mine. So if we've got money to get the drilling done, and that's really all we need to do is the drilling. Obviously, the drilling is resource definition, infill, geotech, metallurgy, all the things that you do to create a feasibility level mine plan. And then in parallel with that, obviously, a transportation plan. So, and we will obviously be having discussions with potential offtakers for the ore. And we've got several options to go with there. Again, we've got the rail at Lucky Shot that we can take advantage of it can go north. It can go south to the support of sewers. And then once you're on the ocean, the world's oyster. So we're excited to get the drills turning and realize our vision for Lucky Shot specifically. And then the same for Johnson Tract. And the idea there would be to be mobilizing to build the road next summer, get the tunnels equipment, all the pad laid down pad for where the added the tunnel is going to go at Johnson Tract and upgrade camp so we can do wintertime operation. Then we're set up to get underground, get the drilling going there. So kind of a wash rinse repeat to Lucky Shot, but a couple of years behind because we've got to get that tunnel built and the work done. So, two solid projects and a solid plan, and we've got the money to do it now.

You can move on both. That's certainly something. Mike, one thing I noticed just in the disclosure part of the press release, I mentioned the risks related to unwinding hedge contracts. So I'm just curious if you could discuss Contango's hedge position and how this capital factors into the decisions around delivering into those contracts.

Yes. We're always looking at the gold price. It has recently spiked. And so we're less enthused to try to early settle or voluntarily kind of unwind these hedges, but we always want to keep it as an option. If gold dips down below $3,500, we would consider cash settling those, which in turn is just -- the money recycles back to us through Manh Choh production, and it's more of a cash management exercise in fairly short term. But currently, we raised this money specifically for Lucky Shot and JT, and the plan now is just to continue delivering those hedges. We've got them -- the hedges are now below 50,000 ounces, and we anticipate fully settling those next year by just delivering into them. And the sooner, the better. And so we're going to be aggressive on delivering into those and getting the debt and hedges paid off before the end of next year.

Maybe I'll just add that we're not ringing in business to guess what the gold price is going to do. And when the gold price is going up, we're making more money. So, yes, the hedges are -- if we didn't have the hedges, we make more money. We get that. But we also don't want to sort of guess, guess wrong. I mean that's not -- I don't think that's a prudent thing with shareholders' money because buying hedges out of the future gold price that's higher than today's. And then if gold price corrects by 10% or 20%, which it could do, we just end up looking foolish. So we don't -- we're not going to guess on what the gold price is going to be. We're going to be very prudent here, continue to deliver into it. We've got opportunity to do that sooner for the gold resets or if we produce more gold than planned, we can always deliver those into the hedges.

I appreciate that. I know you've already spoken to broadly the plans for Lucky Shot and Johnson Tract in this event today. But I got some really quick pointed questions on each one. So, for Lucky Shot, we're looking to get to a production decision in two years, which is a really nice ambitious time line. What milestones should people be watching for over the next 24 months? What's next at Lucky Shot? And what should people keep an eye out for?

Well, as someone famously said, drill, baby, drill. So that is what we're going to be doing. So, and we're not -- look, we're not going to release drill results one hole at a time sort of thing. But, so there'll be definitely drilling going on. I'd say we'll outline when we get to a point where we have an arrangement with an offtaker. That will be a big milestone. That's probably a year out sort of thing. But we want to aggressively get the drills turning and get the mine plan done. So, I think, within a year, you're going to know that we've got an ore body here. And then we -- there's development work. And just to put some numbers around this, I think I've heard some questions about that, too. So, two years, we want to get the -- it's basically a $50 million program. $25 million to do all the drilling in a feasibility level mine plan, transportation plan. And then once we sort of make that mine decision, putting the mine into production, it's not traditional because, again, it's this DSO model. So we're not building a mill and a tailing facility and a power plant and all that, pretty fairly simple, I call it feasibility light. But the key thing is where is this going to go? So once we have all that set in place, we would get -- we'd spend another $25 million getting the development ramps in place, stope development plan in place, and that's about another $25 million. So, and again, these are estimates, and we'll hard code these numbers once we have contracts in place and things like that. But this two years is a very realistic time frame. And again, you have to consider or keep in mind that Lucky Shot is fully permitted for mining. So we put rocks in a box. We don't really need any more permit. And keep in mind, we've got the rail there. So that definitely simplifies the transportation aspect of our project. We're 20 miles from the railhead. The Alaska Railroad is a state-owned business, and they'd love nothing more than to have a bunch of boxes full of Lucky Shot ore going north or south. They don't care.

I think it was actually a conversation with you and Byron King. You said there's a lot of things that are sexy, visible gold sexy, but a train and a permit is more sexy like that. I'll talk about Johnson Tract quickly. I know earlier just in this event, you said that it's a few years behind, obviously, because it does still have some permitting to go. Realistically, how quickly should investors be looking for you to advance Johnson Tract from here?

Yes. We've said it's a five-year plan. And I'd say we're -- we've been into it most -- a good part of a year now. But -- so I'll just stick with sort of a five-year plan. We're -- we have two permitting tracts at Johnson Tract. One is focused on what I call the mine. And we have our road access permit, the 404 permit from the U.S. Army Corps of Engineers to get to where we have the mine portal site identified. We're working with the state to get state permits to build the tunnel. It's actually an incline technically so that the water will drain out. We purposely put it in the hanging wall rocks that are non-acid generating. It's a post-middle dayside intrusion. So it doesn't have any of the -- any sulfides or anything to cause acid rock drainage or metal leaching. And we've done that purposely. There is an extra cost of doing it that way, but it's the right way to approach this project. So, we expect to get permits on that in the next -- by Q1 of next year is what we're sort of aiming for. That's in time because that we can then mobilize all the equipment to get the work done next summer to complete the road and to get underground. Key thing is going to be to get the camp winterized so that we can then work year-round. So that's -- those are the three main things we want to get done on the mine site permitting and execution. It will take about a year to build the tunnel and about a year to do all the drilling to get again to a feasibility level of study. And so that's roughly $25 million each just in terms of framing some numbers around that. So, another $50 million. And again, keep in mind, we're making money at Johnson -- at Manh Choh here. So, and then the other permitting tract is access to the coast and a barge landing facility. Cook Inlet Region Corporation or CIRI as they're commonly known, has -- they're the landowner at Johnson Tract, the two North and South tracts there that's an inholding in Nashville Park. We do recognize that. We work closely with the National Park Service. And CIRI has the easements already granted to the coast. And there's technically two easements. One is for the road access to the coast and then the one an easement for a barge landing site or port, but it's -- we're envisioning a barge landing site. So, we're collecting all the data, engineering and environmental data now to support application for permits for that, which we expect to do next year, put the formal application. And we'll do that through what's called the FAST-41 process, which is basically a federal process that's been in place for quite a while. I think it was started under the Obama administration, and that is to basically coordinate federal and agencies in the permitting process. And they definitely need coordinating. They all have different ways of doing things, and it's a devil in the detail exercise. And then one of the new things that has been implemented this year for Alaska at least is that there was an MOU signed here recently between the Obama permitting group, federal permitting group and our state government. So now there's also a coordination of the state and the federal agencies in this dynamic, which, it sounds like a little thing, but it's a big deal because the coordination is really important because coordination -- lack of coordination is what slows the permitting process down. And of course, having a federal agency that is all about critical -- producing critical metals is critical for our project because we're producing five of them. So, as you know, this is a copper, zinc, lead, gold, silver deposit. Gold and silver make up about 75% of the value, but the base metals that are also critical for the country make up about 25%. So, yes, permitting is permitting, and we know there's always risk involved with permitting and it's mostly slowing things down. So having that coordination of FAST-41 and especially now with -- including the state agencies, it's a big deal. It's a good step.

Great. And I will talk about FAST-41 in a bit, but I do want to get to Mike for a second. So with the $50 million raise in hand, how are you prioritizing capital allocation? So where exactly is that money going? Just what rough split should investors be expecting?

Yes. It's a little early, but based on kind of current kind of projections, it's roughly 50-50 between Lucky Shot and JT. Lucky Shot is going to be -- we'll spend more earlier because we're going to start that like this next month. But it's about 50-50 over the next 15 to 18 months. But then once you get to '27, we have a free cash flow from Manh Choh, which will continue to fund anything that's remaining.

And I guess that actually relates to my next question, which is with the existing cash flows from Manh Choh and now this raise, what's the financial outlook for Contango? Are you funded all the way through to production at Lucky Shot? Should investors expect additional financing down the road? What's up next?

Well, subject to something unforeseen, we think we have more than enough money to get Lucky Shot into production with more financing, and we think we can get Johnson Tract all the way to production, if not -- or just to that decision. But there's -- at these gold prices, there's more than enough cash flow internally that we don't need more financing subject to something that unanticipated or a rapid or a huge decline in gold price.

I appreciate that. And Rick, given operational risk, even when things are smooth sailing, there's always operational risks, potential permitting delays, like you said, commodity price volatility, et cetera. How would you -- what would you tell investors about how this capital raise helps derisk Contango's profile? Basically, what keeps you up at night? And how is this financing address those concerns?

Well, I slept really well last night. But it's, I mean, being able to realize our plan and execute our plan is a big deal to me, and we're all getting a little frustrated with seeing the gold price doing what it's doing. And that's a good news event. But like not having the extra capital to advance our projects and realize our growth profile was definitely frustrating. So, what keeps me up at night is probably in the U.S., it's always litigation. That's -- Alaska is a great place for NGOs to raise money. That's their business plan. And they take nice pictures of something that has nothing to do with your project, but that's how they raise money. So that's the lay of the land, and we'll -- we know that's part of the game plan, and we'll be ready to address that. In fact, we -- I think everybody knows on Manh Choh, there was still an outstanding lawsuit that the Center for Biodiversity brought against -- on behalf of Dot Lake and brought against the project for filling wetlands that were filled three years ago and the mitigation was completed three years ago. I was always perplexed why the court would even accept the case, but that was -- everybody's right to sue, I guess. So -- but that case was dropped yesterday. So another piece of good news. And I think that is addressing or speaking to some of the recent decisions that have come out of the Supreme Court and not to get too into the weeds on legal stuff because that's certainly not my background. But the Chevron case and what they call the seven counties case in Utah, which were two really important Supreme Court decisions, they really kind of put some narrow side bars up on what people can sue over. And the strategy has always been throw as much c*** on the wall and see if something sticks.

I think we lost Rick for a second, but I imagine he'll pop right back on. I don't know if you have any bow to vamp while we wait, Mike.

I don't and I try not to talk about lawsuits.

Laws a bit out of my bailiwick too. I'll leave it to the lawyers. I think Rick's popping back on relatively quickly. I'll give another couple of seconds. There's a good opportunity while we wait actually to throw in any questions you might have into the chat. I know there's 150 of you in the room, so it's unusually silent. So do feel free to throw in some questions. We're going to try to wrap up with the half hour. But if Rick comes back, we'll try to get to a couple as soon as we can. Probably just refreshing to pop back in. Hopefully, that works.

I can try always to field the questions if you want the account's version.

Yes, up there. Rick's back right on time.

I'm back. I think the lawyers shut me down or something Let's go to somebody.

I was just throwing questions to Mike, so we were in a high-risk environment. So he popped right back up. I do actually -- while we're on kind of the same topics before you got bumped off is I want to talk about federal administration support for mining. We kind of alluded to it, but I want to get to it directly, particularly in Alaska because it seems to me from reading the tea leaves that Trump is a massive Alaska fan or certainly interested in the industry in Alaska. What's your view on that?

Yes. I mean, look, I mean, we're the only state with our own executive order that's specifically aimed at developing our natural resources, which both energy and metals and critical metals. Look, Trump's history, I can't think his great grandfather was -- came up with the Klondike gold rush. And so there's a personal connection there to this place. And obviously, Alaska's incredibly strategic location from a military standpoint, we -- and Trump loves a deal. And when Seward, Secretary State, Seward, bought Alaska from Russia from whatever it was, $7.9 million, I can't remember the number exactly, but -- that's a deal, man. Not only militarily, globally strategic location, but wonderful place from a geological standpoint with one of the largest oil fields in the world that got developed and the -- we don't have a lot of infrastructure. We need more infrastructure, but we got that Alaska pipeline and the North Slope of Alaska is a huge potential reservoir for oil and gas. And so Doug recognizes that. He's thinking about the big picture and Alaska features very, very much in the middle of that big picture, both from a political and military global standpoint, but also from the resources that we can develop here. And we can do it well. And that's the thing that frustrates us with the NGOs is they don't mind letting little kids in Africa with no shoes and working with shovels to dig cobalt out of the ground in Africa. But when we do it here in the United States, and in Alaska in particular, we do it well. And we care about people. We care about the environment. We care that the things we do -- our governor says it all the time, we execute on the ESG parameters extremely well in Alaska, better than most places in the world. The good example of that is North Slope of Alaska, Inuit people, the oil and gas industry is big up there, the oil industry right now, gas is hopefully going to come. They've seen a 30% increase in their lifespan in the last 50 years because of all the infrastructure that's been put in place, and the fact that they now have hospitals and sanitation, all those things came from development. That's a real statistic. That's not made up. That's just a real statistic. The life expectancy has expanded significantly in a 50-year period of time. So, that's where the rubber meets the road, and that's why we're proud of what we do, developing minerals in Alaska and Alaska does it well. We all care about the environment. NGOs don't get to claim that territory by themselves.

It's efreeman in the chat, just not Alaska continues to be the leader in responsible resource extraction wishes the NGOs realize that. So, an interesting perspective. I want to talk about the FAST-41 program because you alluded to it earlier. And I know a lot of companies I talk to, a lot of the ones I work with applied or on the watch list, et cetera. Is Contango applying? How does that list impact your operations?

Yes. So, the short answer is we haven't applied yet, but we will when we have -- when we're ready to. You don't want to enter a program like FAST-41 until you have all your ducks in a row. And so we're putting all our ducks in a row. That's why we collect all the scientific engineering information. So we know what we want to build, where we want to build it and why we want to build there. And then obviously, your plan, the execution plan. When you permit something, you're kind of permitting things all the way through the process now, right? You're not -- so what do you do at the end of this? Are you taking it out? Is it going to -- are you going to be using it long term? So those are all considerations that have to be kept in mind. So, the FAST-41 program is something we'll likely enter into next year is kind of the plan to get all of our information in ducks on road. We've been collecting information this year. We'll do the same next year. And again, that's the road access permit on the road easement and then the barge landings -- barge facility on the port.

Oh, shoot. Just wrapping up. Ricks dropping out. Usually, you've got the Internet problems, Mike.

Yes.

So, turnabout. There's actually one question I can throw to you, Mike, from the chat while we wait. Begg asks when the Manh Choh loan and hedges are gone, will the freed up cash flow going to be spent on Lucky Shot and Johnson Tract? And if so, when are we looking at for that to happen? What's the time line?

Well, we expect the debt and equity -- sorry, the debt and the hedges to be delivered into and paid off by the end of next year. And after that, that's when -- that's the best production year at Manh Choh is when we have higher grade portion and less costs. And so there will be lots of free cash flow. And at these gold prices, we're anticipating a little over $100 million this year. Those years will be better and lower cost. And so there's plenty of cash flow. Lucky Shot only, like Rick said, only $50 million to get to production. And then the year in production, produce -- we hope we intend to put a mine plan to get about 40,000 ounces a year, but when you have an all-in sustaining cost of about $1,500, that's going to generate a lot of free cash flow. So that will also add to our production. And then Johnson Tract, we anticipate the total CapEx to be around $215 million. And over the next three years, we'll be -- we're budgeting to put in about $100 million into that. And then we'll still have lots of cash from operations at Manh Choh Lucky Shot by then. So. Does that answer your question?

Yes, I think so. Appreciate it. And one more thing I can throw to you just in case Rick doesn't pop back in is -- actually, one just came in from Nathan. The end of -- until the end of 2026, what is the Contango cash flow after paying loan and hedges?

What is the cash flow to the end of 2026?

Yes.

Well, I'm just looking at -- just updated my budget today. We expect -- we're still waiting for the 2026 budget for Manh Choh. So we'll look at that in the next month. So, I'm still using kind of outdated rough data. But we raised this $50 million. We expect to end next year above $40 million in cash and still spend $50 million. These are still rough numbers, and we're going to do more work on this and give better guidance by the end of the year when we have the Manh Choh '26 budget. But there's -- right now, I'm budgeting to spend $40 million between now and the end of next year on Lucky Shot and JT. And then Manh Choh will refine what that actually generates for us.

Okay. Great. Another question just in case you have the answer for it. J.S. Nevada from the chat ask, what's the estimated life -- mine life projected for each of the three projects?

Manh Choh takes you...

Yes, I'm on the back here.

Sorry, is that Rick back?

Yes, I'm back here. But it seems to be a system-wide, web or Internet down here. So, I'm on my phone, so I'll just -- I'll stick to just being on speaker here. Sorry about that.

No, no, all good. Just a quick question from the chat. Somebody want to know what the estimated mine life is for all three projects.

Yes. So, Manh Choh is a 4.5-year mine life. And we think we're going to add a year just with the bits and pieces around the mine site around the sort of pit expansion. And again, this is -- keep in mind, the feasibility study was done at $1,400 gold, and we're now in excess of $3,500. So we think there'll be some other things that come into the mine plan just based on the gold price. We're starting to do more exploration in between the two pits. So, I'm expecting that some of that will be successful at, again, finding some bits and pieces around the known deposit. And then we've got a very large low-grade stockpile that, obviously, at higher gold prices is potentially ore. So, that's Manh Choh. At Lucky Shot, we're going to outline at least a five-year plan in terms of defining reserves, and that will be a subset of the resource that we focused on. And these high-grade gold veins or mesothermal veins are typically the higher grades and shoots. And so that's what you focus your mine plan on. And that's -- so that's the idea of the intense close space drilling fan drilling that we're planning to do from underground. So, five years for there, but we certainly expect it will -- the mine life will continue. But typically, an underground mine with five years of reserves ahead of it is -- that's sort of standard operating procedure. So you just keep the five years every year, you've got a -- if you're mining 50,000 ounces, you have a plan to drill out 50,000 more ounces in your annual drill program. And then the Johnson Tract project based on our initial assessment that was completed and we released earlier this year. It's a seven-year mine plan with the current resource. Once we get underground, we think we can get more drilling done down dip and along strike. As you recall, maybe, it's a difficult deposit to continue drilling down dip because the ore body obviously dips steeply underneath the mountain and the mountain goes straight up. So, that's the whole purpose for putting the exploration tunnel in. It will serve dual purpose to be able to be the main add to get all the materials out when we're mining, but it will also provide a platform to drill the ore body out at depth further. So, I'm fully expecting that we'll get that up to a 10-year mine plan to start with. And producing roughly 100,000 ounces of gold equivalent, gold, silver, copper, lead, zinc. Yes. So, I'd say we've got a great five-year plan to get to achieve that 200,000 ounces a year of production. And as we've talked about, we can -- with this financing, we can fund that internally now.

Awesome. Roc from the chat asked about midway through the presentation, I was like somebody looking at what's next. I asked how much time money you allocated looking for the next one after a Lucky Shot and Johnson Tract. Is that on the company's mind? What are you looking for?

Absolutely. We're always looking at new opportunities. We like our DSO model. And I'd say, in short, we're looking -- the kind of opportunity we're looking for would be we've got a great five-year plan. I want a great 10-year plan. So that's the way I would express that. We want high quality. we want to keep our high margin to the gold price. We're -- without the hedges, we're making in excess of $2,000 an ounce. And that's how we see both Lucky Shot and Johnson Tract. We see them with the same sort of all-in sustaining cost level of sort of $1,500 an ounce. And we like that $2,000 margin because it's just -- we'd like to keep that. I don't want to go out and find a big low-grade thing that has a $2,500 to $3,000 all-in sustaining cost. I don't think that's where we want to go with this company. We want to stick on quality, high grades and opportunities that -- where there's synergies in terms of production opportunities. And again, we like the DSO approach. So those kind of opportunities are going to be a priority.

Great. I'll wrap up. I know we're a little past the half hour that I promised you, Mike, so I apologize. But I'll wrap up by asking real quick. What are you most excited about for the rest of this year? Mike, I'll start with you and then I'll go to Rick.

I'm excited to get Lucky Shot going. It's been sitting there for two years basically since I joined the company. And I'm excited to get there and start really adding value to the company. And we've been kind of on the sideline with Kinross operating Peak Gold. And now we have capital to deploy and also at Johnson Tract to get that going and actually start moving towards our kind of our five-year target of getting three assets into production. So, that excites me most and getting these hedges off our back next year is the other thing I'm looking forward to.

Awesome. Rick, I'll throw the same question to wrap us up today.

Well, I got to say, if my accounting CFO is excited about drilling, that excites me in itself. So, that's awesome. But to add to that, I'm excited about growing the company because I think we've got a rocket ship here. I think we have a good plan. And as I said earlier, we've got a great five-year plan that we can self-fund to get to triple our production level. And I want to do the same thing, but I want to have a 10-year plan and continue to grow the company. So that's what I'm excited about.

Awesome. Well, Mike, Rick, thanks so much for running through it. Give us your rationale, give us some context for the news and letting us know what's next. It sounds like exciting news coming up. So, looking forward to talking about it when it hits. Everybody in the room, thank you so much for joining us today. If you have any other questions, please do send through. I know I tackled all the ones in the chat today, but always eager to hear more. And Rick and Mike, thanks so much for your time. We have a great afternoon.

Thanks. And sorry for my Internet complication. I'm not sure it's a system-wide thing here. So.

Though me and Mike danced, it's not a problem. We're all good. Have a great afternoon, everyone. Cheers.

Thanks, everybody.

Thanks.