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

So I really appreciate all of your time today as we discuss some recent news for Contango. I've got with me today, Dave Lehman with his fresh title at Contango, Vice President of Exploration; and Rick Van Duneiser, the company's CEO. Gentlemen, how are you today?

Doing good.

Is doing well, so we're happy.

That's all good news. And I know there was a Hawaiian shirt theme today. I tried my best with a T-shirt with the Hawaiian shirt. So I'm trying at least to fit in with you, gentlemen, for today's conversation. We do have quite a big crowd and some exciting geo news at Lucky Shot. So I want to get through the housekeeping real quick so I can get into the good stuff. There is a chat button on the bottom right of the screen. Please use it any time during today's event. I would love to hear from you. We'll try to get to as many questions as we can. Hopefully, I'll cover a lot during the questions that I have. But anything I'm missing, please do bug me there. I'll try to get to as many questions as I can today. Only other thing that I'll say is today's event is being recorded. We will be available for replay before the end of the day, Eastern Time. It will be both in our YouTube channel, but also right in your inbox, especially for the folks in the room. But enough boring stuff. Rick, I want to talk right away with the headline number, 60 grams over nearly 6 meters from LSU25031 with a subriggeable pushing almost 295 grams. So it's a bit of a wow number there for sure. Walk us through what you're seeing with this vein and why the orientation matters specifically.

Yes. So we've named this the KM vein after Keith Miles, one of our employees who's been having some surgery done. So we want to honor him with that. But it is a different orientation. And of course, this is the sort of the first series of drill results from this campaign. And so we're very excited about -- this is a new discovery, a legitimate new discovery. It's not -- it's an orientation. It's at right angles to the Lucky Shot Shear system. We could nerd out and have a discussion on why that's an important thing, but the fact is it's different. And what excites me about it besides the structural connotations of what this means is that it's not something that any of the mine -- the historic mining would have even known about because it's down underneath them. where they mined historically is above us, and they never drill holes down below the system. They mined the system. It outcropped on the surface. They went in on the surface. They mined it and they just kept following it down. And of course, the government shut them down in 1942. So that's what's really exciting about this. It's a new orientation. We understand what it means geologically from a structural standpoint in a general sense, we've got to do a lot more drilling to really see if it goes anywhere and how extensive it is. But when you've got grades like this, one, it shows the strength of the system; and two, the fact that we've seen it in multiple holes now gets us gives us some hope that this thing will continue. You don't see big strong veins like that just disappear generally. So now it is right next to the Lucky Shot Fault, which offsets it, and that makes it difficult to drill on the west side of the fault, and we're having some discussions on how to attack that, and Dave will probably maybe talk about that a little bit. On the east side of the fault, Lucky Shot Fault, it's a relatively high angle fault structure. We know where it is. But what does it mean on the other -- on the east side of the fault? Well, we got to figure out how much displacement there is on the Lucky Shot Fault. So work to do, but a very exciting discovery, and that's separate from all the good results in the known part of the system, the Luckyhot Shear system, and Dave will talk more about that. But not only are we seeing what I used to call the hanging wall quartz vein, the main Luckyhot vein, which is we refer to now as the L2. We're also seeing an L1 and a number of other L1A, BC, we'll have an alphabet of other veins that we're seeing there. So very positive, very, very positive for an initial release on what amounts to about 12% of the drilling plan for this year.

Awesome. No, I do find the numbers certainly exciting. And Dave, I want to get you in here because you now have the CM vein from 3 different drill stations. When you overlay those intercepts with the exposure you mapped in the West drift last fall, the 139 grams per tonne gold over 1.5 meters in channel sample, how is the structural picture coming together? Is this thing open?

Yes, definitely. This definitely continues what Rick was saying. I would like to back up briefly when we originally mapped and did those channel samples, we were all scratching our heads. It was totally contradictory to what we kind of have the known kind of the structures that we were looking at. So being able to map that to drill it and get these intercepts and having grade come back, it's really starting to clear up that structural picture. It's starting to snap together in little pieces together, like little LEGO blocks. We understand this piece. We now understand the offset. So now I can start piecing the rest of this together. What I really like about the KM vein is it's really proven that it's not just a one single high-grade pod. It is discrete, it's shallow dipping, it's mineralized, but it's showing us that these are more distinct veins within the L2 system together that we can target, that we can pull out. As far as openness, yes, it is open. We consider it open until we've drilled it out, up dip, down dip along strike. And what we're doing now is systematically getting our drill plans to see how we step off this vein, continue pulling those expansions, where we hit the fault, where we know that offset is and drill it across the fault and offset it and just basically keep expanding this out as we go.

Absolutely. I will caveat, these are definitely hydrothermal systems and plumbing is key. How are we pushing fluids, how we're getting that dilated space. So what we're seeing with the visible gold in the L1C, the L2, the L1 and the KN veins is these are all linked. We have that connectivity of fluids that can be passed through, and we have repeatability of fluids as being able to generate our coarse gold. They're just not isolated systems or a single fluid pulse that just managed to hit one through there. It is a multi-vein stacked network gold-bearing system. This is very interesting and gets you really fired up because it gives you extra exploration potential now. When you're doing exploration, you generally find what you're looking for. If we were just trying to target the L2 vein system, we'd probably find that. But part of our mentality at Cango in drilling this is we got to keep our eyes open geologically. We've got to look at those orientations of our veins. And this is what opens up these other variations in these other veins, L1B, okay, she's sitting right underneath it. And now we know the KM is a different one, but they're stacked together. And it's all coming together. It's great to see the visible gold out there. It's great stuff. I do just want to caveat quickly that DG is qualitative. We systematically log the core. We log where it is, but it doesn't 100% guarantee grade continuity, metallurgy economics. We let the assay speak for those, but the DG is great to see in the core and a great indicator for us geologists that we're on the right system in the right plumbing, and we're in that system.

Awesome. And Rick, one thing I know you talked about -- and I'm always curious about terms like this. So I'd love if you could just give us some more information. I know you talked about using Photon assay. Can you explain what that is and how it's adding value?

Yes. So PhotonAssay is a relatively new type of an assay. It was developed in Australia by a group there. And it's a handheld XRF. It's basically a very, very large one that would fit in a typical living room size piece of equipment. It's a big piece of equipment. It's -- it is x-ray fluorescence. So it does have -- you're using a lot of x-rays, which -- so you have to have a safety thing around it. So it's shielded basically, which is part of why it's so big. And it's -- so it is basically an XRF and what the advantage of this type of assay as opposed to a typical gravimetric assay is that you don't destroy the sample. And so you have that sample forever as a reference. It's a much bigger sample. So we're drilling HQ core, which is about that size. We're sampling the entire core. So it's a large sample and they're kind of the rule of thumb, the larger the sample, the more accurate it is. So if you split the core, that's half as accurate as a whole core. And if you core the core, et cetera, you take half a core and then you take a 50-gram sample from that, you're not sampling a lot of the core. This samples the entire core. So it's a much more accurate sample and -- which is exactly what you want for a gold assay, particularly when you have lots of VG, like we've been talking about, these relatively cose-free gold. You want to -- if you sampled only half the core, did you get that piece of VG or did you not get it? And what is the real number? Well, now you've got a better assay. So it's better quality. It's a bigger sample. So it's more representative of what you're drilling. And you get to have that -- keep that sample. It's not -- you haven't used it up in a fire assay. It's -- you can go back and look at it again and do more testing on metallurgical testing or crush grinding testing, whatever you need to do.

Great. No, I appreciate that. I always love the nerdy explanations, help me. So I appreciate it. In the same vein, actually, Dave, I see that you noted that intercepts do not represent true widths. Can you just tell us what that means and how that's going to be addressed going forward, if I could.

Yes, absolutely. I mean true widths are something we will define down in the future. It's actually the true width of that vein with respect to kind of normality and how we want to mine it. Right now, our program is to be able to tap the veins, find the veins. And basically, it's a geometry fight. We want to increase our knowledge in that geometry -- so right now, we're actually just reporting true intercept lengths because we don't have 100% continuity of what that looks like. And what I mean is as we get increased drill hole density into our solids, these veins roll and they kind of come up and down and they come around. So by being able to drill them with these tighter drill holes that we're doing now with repeated fans going down the drift, we're increasing our knowledge and confirming our geology through there. And as this program progresses, it's systematically designed to do this. As we progress through this system, we'll have the high enough confidence that when we come back and do our estimate, our resource estimate in our TRS, we'll be able to confirm what these true geometries are, these true thicknesses. Right now, drill hole lengths, some could be smaller, some could be bigger based on that orientation. But you want to put this all together with your highest confirmed knowledge, and that's going to be at the end of this program when we put out our next resource estimate for the vein.

Awesome. I appreciate that extra context. Rick, I've got one for you. I know I've heard you be called Mr. DSO at conferences before. I like it, and I know you've been pretty deliberate about framing Lucky Shot as a direct shipping ore play. For folks who understand the economics of high-grade underground gold, can you talk about what DSO means in just practical terms for a project like this, what it takes off the table from a CapEx perspective?

Yes. So for us, DSO really starts with grade. You have to have a good grade deposit. There are really kind of 3 criteria we look for in evaluating projects that fit the DSO. And certainly, obviously, open pit versus underground is different. But -- for an underground mine, something that we have a 14.5 gram current resource for the 110,000 ounces of resource we have. That's good grade for an underground mine. And so that's first criteria. Second criteria is location relative to existing infrastructure. So road, rail and port or access to tidewater because that's how you move your product and your transportation cost is the next most important thing if you're not going to build your own mill and tailings facility, which is the whole point of DSO. And then the third is proximity to infrastructure. Lucky Shot, as an example, is 20 miles from the railroad. The railroad goes to the Port of Steward down to the south, which is a Pacific Ocean port. It's all set up for exporting. -- or it can go up to Fairbanks and to the Fort Knox -- close to the Fort Knox operation. So that's the second criteria, proximity to transportation. And then the third is, how easy is it to permit the project. And by far, the easiest land to permit on, I'd say, anywhere in the United States is private land. And Lucky Shots on private property. It's -- in fact, it's already permitted for mining. We have a valid mining permit. And so long as we don't build a mill and a tailings facility and a big power plant, we don't really envision that we need any more permits to mine and put rocks in a box literally and put them on a truck, haul them down to the railroad. Railroad can go north or south. And so we don't need additional permits to that. These are boxes, steel boxes. They're a little different geometry than a CC, but they're roughly the same size of the CCA's not quite as tall. They hold about 25 tonnes of ore. They have a lid that goes on them, so you don't have fugitive dust issues. You're not forming stockpiles in different places, so you don't have contamination issues related to forming stockpiles. They basically just load with a forklift or an overhead crane, just depending on your setup. So simple, and we like simple.

Perfect. Simple is great. Now Dave, I'll throw to you for a second. I know you're drilling from 4 stations along the Westrift, kind of working your way east. How are L1B and L1C veins behaving relative to what was modeled in that 2023 technical report? Are you kind of seeing them where you expected? And are they carrying grade?

Yes. We're definitely seeing what we expected, and I'd almost say it's a little more than what I expected. And what I mean by that is we had a higher confidence in the L2 vein. That's our primary target in there. It's the larger one, it's the primary target. We designed our drilling program off of that. We knew the L1B, the L1C veins were there, but they were very, very underdrilled in the original model. So when we went through there, being able to target coming across through those, we were able to target not only the L2, but the L1B and we continually got some good intercepts with it. And as we step through the stations, as I talked about, the geometry is really, really firming up on there and being able to pull together through all those. And additionally, as we step across, now we're starting to get those continuity through further and further, and we're seeing those grade continuities exist. And we're seeing that this is a multisystem that does connect all together. So it's actually a little better than my expectations, and we're really excited about how we're going to progress with these substack veins underneath the L2 there.

Awesome. Rick, I want to zoom out and talk about the whole exploration program for a second because I know you got 20 holes done and roughly 40 more, I think, planned through April. So when you think about what the second half of this program needs to accomplish to set up the feasibility study, which is on schedule, I think, for H1 2027. What boxes do you still need to tick?

Yes. So as I mentioned earlier, we're about 12% done with the overall program, roughly 18,000-meter program. Most of that will be underground, these relatively short holes that Dave and the team have been drilling in what we call sort of the fan shots, starting from the underground drift and drilling near vertical near horizontal. So we've got -- it's a 4-step program plus we've got some drilling on the surface we want to do up on the Coleman and basically to down drill down dip from the Coleman to sort of tag it into the level that we're working on from the Lucky Shot -- sorry, the Enserch level where we're currently working. So those are the different programs that we'll have going over the course of the summer. This -- the 40 holes that you mentioned by April, we should be wrapped up with that. Then Chris Kennedy, our mine manager, will get the underground mining team to build some new tunnels for us to continue to drill. And then in addition to the drilling and the assay, the photon assays that we're receiving and the modeling that goes on to develop a mineral resource estimate, we will be collecting a lot of geotechnical information and a lot of metallurgical information. Now the metallurgy here is relatively simple. I mean in the range of complex metallurgy to simple metallurgy. This is definitely on the simple end of the spectrum because it's basically quartz free gold and a very small amount of sulfide. I think the average sulfide content is 1% or so. So that's a really simple ore to process. And there's lots of places it can go. And so -- but that's the other information. Of course, we're underground. So we -- from a mining standpoint, we're actually mining. So we're gathering lots of geotechnical information as we're doing that. We know where the fault structures are because that's in addition to worrying about where the veins are, we also want to know where the faults are, so we where we have to do a little extra work from a safety standpoint. And default zones are what have broken up. And so you have to deal with that rock a little differently, just more bolting and some screening and things like that. So -- we're getting good hands on experience as we're doing the development work to create the exploration tunnels. And I think by this time, -- next year, we'll be in the middle of doing our feasibility study.

Awesome. -- great. Dave, I have 1 question that's just something that struck me. The intercepts in the OC are interesting. You've got that 82-gram head on LS 26041, gram hit 44 and 28-gram 045. And they're narrow for sure, but they're also scarce. So is the LMC becoming a more significant part of the resource story than originally anticipated in your eyes?

I would say to initially answer your question, yes, I would tell you in the 1C, L1B and the Kwan. Again, targets of opportunity for us right now, how we can pull those off. We specifically designed our program for the 2, and this is just the icing on the cake as the system evolves has stepped east through here. With some of the skinnier ones, I'm not too concerned about the skinnier intercepts. We got screaming grade rates came through there. But it is interesting to note how our plumbing system comes. A lot of these systems in this type of deposits bench well, pinch well through there as the fluids pass through there. Sometimes you're skinnier intercepts have higher grades. They've been concentrated through there might not have been diluted out as much. But L1B and C are definitely very high on our priority list, and we'll have a very, very strong eye on looking at that, those intercepts that variography, when we put our next technical report together on our mineral resource estimate of the Lucky shots.

I just want to Dave was the Chief Mine geologist at Pogo mine and Curis was the mine manager at Pogo mine. So these guys have a lot of experience in these kinds of systems. So -- and it's very practical experience of this is how you mine these things. And so obviously, that's why they're working for us now.

I always have to pick those guys up. That makes sense. Now I know the fact that you're drilling underground from established infrastructure rather than service. I'd love if -- and either of you can jump in on this. Talk about the advantage that gives you in terms of drill orientation and targeting those steeply dipping structures. How much more efficient is this compared to kind of from surface?

I'll definitely start off on this. It is extremely more efficient. Underground drilling is great because you're closer to your target. You actually have better orientations of how you can attack your target through that drift. Additionally, you got better control. not only control of how tight you want to place your INTERCEPT pierce points through there, but also controlling the deviation of the drill holes. You're not as long. You've got better surveys, you got better control on your drilling to optimize where that intercept is additionally, it's not cheaper at the end of the day, but you're not paying what we like to call that distance tax. We're not drilling 600 meters down to intercept that we're drilling shorter holes to get what we want. What this also does for this is it also helps us speed up our program. With the shorter drill holes, we can turn around crank out holes, 1 per day, 1 per shift -- our drillers high-tech have done a great job being able to sustain this rate, drill these holes, get it to our geologists and our core Shack. They can log it, and our logging technique right now is digital. So we log in our tap goes right to our net -- so that also gets uploaded, and then I can refresh our project geologists down there can refresh. And we can see in near time within a couple of hours of what we drill, how that model is behaving. And that data that we can look at can next influence those next drill holes. Hey, I need to shallow this drill hole up, hey, we need to cock it over to the right 15 degrees or pushing another 15 meters. So that just all increases our efficiency. While we have a similar program on the service, there are longer holes, longer time, helicopter supported. It's definitely more efficient to drill these veins with this underground with the development we have right now.

I'll just add that in addition to when the surface drilling, you've got helicopter logistics and weather logistics and all the other things that can affect a surface program -- it's not warm underground, but it's not coal, and it's snowing and raining. And so that's a big thing. And the 1 other thing I'll say is that back to the Foton assay is it's a very efficient system because you're logging you're longing that night or the next day when you get your core. And then within a day or 2, it's going off to the assay lab. And now we got so -- we don't have short turnaround from the assay labs because I think everybody in the world is suffering from the same a it takes a lot longer to get assays than you'd like. But it's pretty efficient. And as they said, it's all digital. So every day, I look at what the results are, and I can see them -- I'm a geologist, so I can I can call Dave up and bug him and say, geez, hey, how come you didn't do this or whatever I'm sure he gets tired of hearing from you, but it's really an impressive system.

1 more comment to that. Drilling underground is great, like Rick said, I was worried about our drillers when it was 40 below. So I went up there, "Hey, let's check on these guys, make sure they're okay. I had no issues with those drillers. They're down there in T-shirts, it's 55 degrees. They're -- and they're doing a great job working. I just turn out it not be boys are fine, an unlocked down. So underground drilling is really effective -- and then in the summertime, when it's 90 degrees outside hot and go underground, 55 degrees icing.

Actually sounds like perfect weather all year underground. So that's not so bad. Rick, I mean, I ask the question I've asked you probably 100,000 times. But every time you have news, I just want to know how you're thinking about it. because you've got Manshagenerating cash flow Johnson Tracking oral now lucky shot with, in my opinion, great results, advancing towards feasibility. Not to mention the soon-to-be likely assimilated Delligarden project kits. How are we thinking about capital allocation across all these assets in the next 1.5 years?

Yes. And obviously, there's definitely a lot going on. I'd say it's very measured. And then I'll start with with Mancha, we're in addition to the cash flow we're getting from there are also spending a little bit of money on exploration there. So on 100%, there's about a $5 million spend on exploration. That's actually included in our all-in sustaining cost because the way that all gets accounted for is we just basically get a check from the joint venture, right? That's the distribution that we talk about. So that pretty much running itself at Lucky Shot, our 18,000 meter program that's roughly going to take a year here -- that's a $25 million program. That includes the drilling that the days been talking about and in the underground development work that Chris Kennedy and his team will provide the access for the drilling. And then next year, the feasibility study and the expectation that, that will be a positive feasibility study. We'll develop -- continue to develop the underground so that you can now start mining the resource or the reserve at that point. That's in rough numbers, another $25 million. Obviously, we'll adjust these numbers as we gain more information and understand -- do we have a 250,000 ounce reserve or do we have a 400,000 ounce reserve. So that's lucky, Sean. Johnson Track is relatively simple in that we're -- the main event there is permitting. And there's -- as we've talked about before, it's the boring part of the Lasan curve, we are going to construct a road that goes between the camp site and the portal site. So that's something that's in the planning stages right now. And then we'll look to upgrade camp for wintertime operations so that the following year, we can operate year around when we're actually building our tunnel. This year's program is a $15 million program at Johnson Track. And then that leaves Kitsol which with the acquisition Dolivarden, I think their cash position is in the neighborhood of $60 million, $70 million. So the 50,000-meter drill program that we have planned there will largely be infill. And the first thing we're going to do in this year is complete resource. -- resource estimate for the roughly 200,000 meters of drilling that's been done since the last resource estimate was that day. I think, Dave, you're targeting is probably left may or some time for wrapping that up. and getting that out. And obviously, that source estimate will dictate where a lot of the drilling is done, but ends up, a lot of it will be infill drilling to start thinking about doing an economic study. So where do we expand the resource, where do we need some more information to infill it and get to a good quality indicated -- measured indicated sort of category of resource. And -- these are main systems. They're great continuity is important. And that's as a 50,000-meter program. I think it's about 20,000 -- sorry, 20 million those are Canadian.

Yes. That makes sense. And this will not be the last time I ask you that question. So I appreciate you bearing with me every time. I got a second last 1 for Dave. I know you mentioned the geological model doesn't fully capture the structural complexity yet. With the Kanban sitting at roughly right angles to the main shear zone, does that change how you're designing the next phase of holes? Are you chasing this thing specifically now? What's up?

It definitely gives us an eye open in what we want to look at for the future. This program was specifically designed to optimize our resource potential second in the Lucky shot L2 vein systems as we sweep across -- the discovery of the KM without right angles and different orientations. We did our initial drilling, confirm that. And what we're programming into our drilling now is as we step back, what are our targets of opportunities to reach down and target the down-dip extensions of the KM we continue. We want to maintain that continuity each down, tap it and maintain that we know exactly where it's at. Further, we're dividing our plan for our next phase of drilling on how we want to attack this on the up-dip side to optimize the resource through there. So it is a combined approach, but we want to stay disciplined to the payoff of the program is to optimize our resource for that resource estimate next year.

Great. And Rick, what do you think are the implications for future exploration of the district from what's gone on here?

Yes. So -- when we had the results from the KM, I'm a bit of a net structural geologist. So now you go back and you look at, okay, well, what's this whole system about? And this is a district that's produced a lot of alluvial gold and a little bit of hard rock gold from -- basically from 2 mines, independents and the Lucky shop. There's a bunch of other prospects trenches and some short adits all over the place. And I think our -- 1 of the maps in our -- and the Lucky shot section of the website has bunch of stars on it that show somebody Doug for gold here somebody doug for Gold there. And it's significant because it's relatively accessible now. But when these guys were -- when these people were digging the hole back in the day, this was a tough -- this was a hard slog to get to -- and we don't have -- we didn't have the infrastructure didn't exist that we do today. So when they're out there on the top of a mountain, taking a hole or digging a trench. It wasn't for nothing. They found some Gold. And at the time, there were like 10,000 people all over the place out here. So there was a little town just down from where the Lucky Shop mine is. So I'm very excited about the implications of finding multi-ounce vein orientations that none of those folks were focused on. None of the feature people are mining at Lucky Shot were focused on. I went back and look at the independents mine, the other mine in the district, and they were actually mining some things in this orientation. So there is definitely a history here of discovery. And I'm excited because we're basically controlled the district for the most part. There's a few bits and pieces here and there that we don't control. But for the most part, we have a whole district to explore long term. And -- we're going to start this thing out with, as I mentioned, or targeting sort of a feasibility study to support a 5-year underground mine plan producing 50,000 ounces of gold here. That's -- that's not like -- we're not trying to find 25 million ounces of gold, like a lot of other junior companies or are going to go fine. That's not our stick. That's not our plan. We want to make money, and 50,000 ounces of production from high-grade veins that are running 10 to 15 grams per tonne, we'll make a lot of money. So that's the best of plan.

In the money game. I think that's a good game to be in. So I like that. Dave, I'm going to ask you 1 last question, Might come up from the chat. But last 1 for me. And I love asking geologists this because people who aren't in the industry don't know. So you guys are adrenaline junkies like jumpers like Red Bull, advocates -- what has you most jacked up about Lucky shot, the remaining exploration there?

What has to be the most jacked up is finding how these vaning systems are coming together, right? [ KM ] just a total icing on the cake, we're holding together. I want to be the L1s, the L2s coming together through there. So I get jacked up pulling this system together. I'm not as a structural nerve as [indiscernible] is. I'm more a geochemical nerd. So this is why is this team works well. But seeing this coming together gets jacked up. I'll tell you why the highlight of my day is being able to get up and go to the core Shack the drillers are pulling off the core from the night year before, and we're all just sitting there, all right, put it on the table, put it on the table or go down is a straight and we're hunting for that BG on for the mineralization. Boom, there's my intercept. Are dive in there. Where is the gold, okay, this is really cool. Okay. Okay. We got that out of the way. All right, guys, let's get back a can I systematically log this and then we come back systematically in the computers, look at the models, get all excited again. And then Ricacan do it again the next day.

Awesome. -- lots to be excited about it. So I like asking the question. Rick, I got 1 more for you, and then we'll get into the questions both from the chat and he came in over e-mail. -- as the market wants to know, I want to know people texting me want to know. Any updates on where you plan to send the DSO or to be processed from like a said.

Yes. So no update at this time, so no drum role or anything. But Look, as I mentioned, we're 20 miles from the rail goes to end the Port of Steward goes to the world. We know there are opportunities to DSO process ores like this in Taiwan and in Mexico and in BC. We are looking at and evaluating those opportunities. We also respect our relationship with Kinross and the excess capacity that remains at the Fort Lox mill. So we'll definitely have a conversation there. It doesn't make sense to have it now. It makes sense to have it, when we have more of a resource defined. So just -- I guess we'll have to be a little bit patient on this, but we are working on a number of fronts and there are a number of opportunities out here. The old adage that grade is king in our business oftentimes gets forgotten and because everybody wants 20 million ounces of gold. JJ.

I love 20 million ounces of gold, but I actually want to get it in mind while I'm still alive. We found Donlin 25 years ago and it still is in the mine. So that's that's the reality. We want to make money. We want to make money for our shareholders, and we think Lucky shots the next 1 to get into production.

Okay. Appreciate it very much. Now I got 2 questions that came in over e-mail. One that I know you can't answer quite as asked, but hopefully, you can give us some clarity and 1 that we've kind of gone over, but it's good to reiterate. The first 1 is somebody wants to know the best way, which you can't answer on how to invest in the upcoming -- combined contango dollar and silver. So if you could just speak to what that combination process will look like.

Yes, the SEC let me give -- financial advice. So I am not doing that. No. But -- so just how it works, the proxy has gone out, the shareholder votes on March 17. We should close the following, I think, 26 is the date that's been chosen to close. And so in terms of buying shares, there's a set ratio that was fixed when we signed the agreement in December. And it's 0.16, was at 52 shares of Contango for every share of Dolly-br -- so there's an arbitrage that plays out always when you have an M&A transaction. again, not giving advice, but I honestly don't think it matters which 1 you buy because aged pet the ratio, and you can see that the ratio is plus or minus 5% every day.

Yes, I appreciate it. Another question. We've kind of touched on it, but good to reiterate somebody just asked when is most likely first or produced at Lucky shot?

So you're to do the drilling. And obviously, -- it's an approximation because, hey, if Dave and his team are -- the next 20 holes we drill are in the KM bane and in Silin again, we may adjust our plan a little bit here. The plan is the year's worth of drilling 18,000 meters, take that drilling, do in a mineral resource estimate update as we'll update the 110,000 ounces that we have, and we're targeting 400,000 to 500,000 ounces and from there, with that mineral resource estimate and along with metallurgy and Geotech that we'll be doing. We then put a feasibility study together -- we kind of refer to it as feasibility light because it is a mine plan and part of that transportation plan. It's -- and part of that transportation plan is where the hell is going. Is it going up to Fort Box? Is it going to the store, you over Taiwan, where is it going? That will be part of that study. So obviously, we'll be working in advance of that on looking at different opportunities. But it's feasibility light because it doesn't involve building your mill and a tailings facility and the big power plant to run all that. And that saves a lot of time certainly saves a lot of time in completing our feasibility setting because, as I said, it's a mine plan and a transportation plan.

Perfect. Now I've got a number of questions that I'll cover a similar topic. I encourage everyone in the chat. If you don't think I've covered your exact question perfectly, please let me know because I'm a go to get this clarified because there are some people in the chat asking about share count generally. And I think to sum them up, there are concerns of increasing authorized shares from 14 million to 250 million. I think some people believe that there's going to be 250 million shares doled out. So I'd love if you could both explain what -- where the equity count the share count is going to be after the Deli merger, but also why the increase in authorized shares and what that actually means just we can clear that up for everybody in the chat?

Sure. No, good question, actually. And so today, we have about 17 million shares, and I'll just use some rough numbers to the math easy. 17 million shares issued -- there are some warrants that are -- some of them are actually, I think, maybe slightly in the money. So -- but just leave those aside for a second. There are not that many of them. When we combine with Ollivarden, we'll have about a little less than 33 million shares outstanding, again, independent of any warrant exercise. And so the reason we ask shareholders to authorize increasing our share count to 250, it's not that we plan to issue -- or up to 250 million shares. We -- it's we had an abnormally small amount of share issuance that had been authorized before. And so we want to grow this company. And so -- this just gives us flexibility to do M&A to do other things that will be accretive for shareholders. Everything -- I'm a major shareholder, my own personal wealth standpoint, my -- a lot of my wealth is tied up in Contango. So I have absolutely no interest in diluting my own value in this company. But I do want to grow the company. And so having just a more realistic number of shares out there that are available. We want to do things that will be accretive. That's why we asked shareholders to approve that and authorize that. It's not that we have any plans to issue a bunch of shares anytime too. As we've mentioned many times before, when we combine with Donlin Garden, we'll have well over $100 million in cash in the bank. We'll have -- we'll be generating over $100 million of free cash flow from Montreal on an annual basis. And we'll have 33-ish million shares outstanding.

Perfect. If anybody has additional questions or don't feel that covers what you wanted to know. Please do let me know on the jet eager to get this 1 clarified because I know there were a couple there. Clash kit from the chat has, what's a ballpark on Lucky Shot reserves total obviously, forward-looking statements at at but ballpark on lockset reserves.

Well, stay tuned for the reserve number because we had to complete a feasibility study. And again, I don't look good in orange. So I'm not going to I'm not going to -- I can make certain forward-looking statements, but that's I think 1 I probably shouldn't make stay tuned for that. But what we're targeting for a resource is 400,000 to 500,000 ounces. And what we're targeting as a subset of that resource is a mine plan that can deliver 50,000 ounces of gold a year on average for 5 years. And that's a fairly typical underground mine plan. You don't often see underground mines with 10-, 15-year mine lives. You've seen they have resources out there that can you can envision the mine life that long. But in terms of reserves, typically the underground mine will have about a 5-year reserve life.

Great. The other big group of questions that I'll combine together and again, bug me in the chat, if I didn't quite answer I SIM question, to be honest, that I have, and I don't know if you have an answer for it or a guess, People want to know the disconnect because of their view of the Lucky Shot drill results obviously been great. And the market seemingly staying about static. We're not being as excited as the results seem to speak to. Curious if you have a perception on why that's the case.

Yes, I woke up this morning, not in the best mood because I thought trial results were awesome. And they are the first time we've had any sort of substantial release on Lucky Shop for several years, and we're excited about the drill program, and we're excited about what we're seeing in the drill program. So I'm disappointed, frankly, I gave up a long time ago trying to figure out what markets do day to day, and which is somebody decided they needed the new refrigerator or had this in their kid to give racers or, I don't know, want to go on vacation. And we had more sellers than we have buyers today apparently. So look, it's a healthy market. These are great results. I'm not going to say that they're not great built because they're awesome results. And so we're excited. Dave and I are both like static here we're like excited of it, we're talking about do we get another drill? Do we push the West drip forward and go drill on the other side of on the -- from underneath and drill up for the new KM bane and see if it's there or do we focus on trying to drill deeper on the other -- on the side of the Lucky Shot and see the depth -- so we got lots of options. I'm excited. Look, sometimes it takes a while for people to sift through results and understand what does this really mean? Hopefully, this form answers a bunch of questions, what does it really mean? Right now, it means that Rick and Dave are really excited to get more drilling done and -- like I said, we're only 12% into the program, so more to come for sure.

Great. And 2 versions of the same question. One of them is funny. So I'll just read them both. Somebody says, what are the chances of containing getting some real sell-side coverage? And the other version of it right under is, I am curious when we'll have some people with functional brains covering us in the press. So...

I probably should not comment on that, but -- those are good questions, good to lead you the question.

So I'm actually through, I think, all the audience questions, but actually, I'm sorry, that's not true. One person shut in asking the man show ASIC and the Lucky Shot likely ASIC. I'll hold off on Lucky Shot likely, but I'll say what we're targeting is sort of a $2,000 basic I think 3,000 in today's world, a $3,000 margin is not bad. And 1 of the things that -- and Trump mentioned this in his piece last night, oil prices are low. And oil prices and the prices for mines is a big component of any operating mine. So I'm hopeful that as the gold price tells you that we still have inflation, currency inflation. And -- but in terms of mining, if 1 of the main components like diesel is not going up, I think I looked at the oil price today was $65 a barrel. So outside of something not good happening in Iran and the states have removed, then we're -- that's a big component of our cost increases. At -- and so now I'm kind of transitioning to address the question at Mancho. This year, we're going to have higher costs. We're waiting for a specific guidance from Kinross, which we released with our year-end results here coming in about 3 weeks. So I'll say stay tuned for that number. But what I can say is based on our discussions with Kinross that our life of mine number in their estimation hasn't changed. And so I think rough numbers, we're still guiding as we have to that $1,600 number life of mine. This year, every year is a little different. I think we've guided -- certainly, this has always been in the feasibility study for Montreal. This was always the lowest year of production and the highest all-in sustaining costs. Next year is the reverse. Part of it is timing when you mine and when you actually get paid for the gold at the other end. But that's just -- that is the way this year and this year is going to play out, be a low year. Next year is going to be a higher.

Perfect. I want to give people in the chat, 1 last chance to ask a question because I already asked Dave, what has him most jacked up. Rick, I'll ask what has you most jacked up as we go towards Lucky Shot over the next year?

Maybe -- is that the question or Rick question?

No, that's Rick. I already asked Dave.

This is a -- we're both geologists ease more of a geochemist and more of a structural guy, but -- like I said before, the fact that we've found a high-grade vein that is not -- nobody has put a rock have on before and nobody is -- when these guys were mining here for 20 years, they never found it. because they never look for it. And so the whole active discovery is about being there and observing. And so when we built the West drift and we said, crap, what's that? That's a nice looking bane sample in, and it was like, "Oh, geez, that it really is a nice looking bane "Wait a minute, it's not like the other veins, what's going on. So -- that's exciting. And in a whole district, as I said before, where we've got, I don't know, 2 dozen stars on the map that somebody there's gold over there. there's a lot to do here. We're going to stay measured as they have said, been disciplined. We want to make money. We want to find a resource that can generate a reserve that can generate a 5-year mine life producing 50,000 ounces of gold. That's going to maintain -- we're going to maintain that objective and stay focused on that and not get distracted trying to chase something that may or may not exist. We're well aware of it, and we understand it. I think we understand it structurally, I think we've got more work to do to figure out where -- how far it goes and all those things. But look, we're on track -- and it's right there. So it's not -- we don't have to drill a 2,000-meter hole to find it.

Perfect. Johan had 1 last question that's snuck in, and that's when are the MonsoQ4 numbers looking to be released.

Yes. So year-end is in about 3 weeks.

3 weeks Perfect. Sorry, 1 last thing, snuck in. note, somebody just said thanks, guys with 5 exclamation mark. So Rick, Dave, I will echo that and say thank you so much for that [indiscernible]. I know a lot of technical questions tried to keep it as nerdy, but also laminate as possible. So I appreciate you guys playing ball. Looking forward to chatting with you guys again soon. Everybody in the chat. I know there are a lot of you. Thank you so much for joining. If you do have other questions additionally, Send them in to me. I'll get them with the contango team as soon as possible. But Rick and Dave, thank you so much. This is awesome.

Thank you.

Thank you, everybody. Bye-bye.