Contango Ore revisited (October 2014)

Contango Ore recently announced a joint venture with Royal Gold (press release).  Royal Gold will invest $5M initially with an option to increase its ownership in the project.  It looks like I was too optimistic in my assessment of the company.  I thought that the company was ready to advance the deposit to production.  The terms of the joint venture suggest that this isn’t a sure thing.  The partners will likely need some luck to find more ore to make the deposit economic.

Looking back on my analysis of junior miners, I did not do a very good job in spotting deposits that would turn into profitable mines.  Nevertheless I managed to make money by playing the volatility and by being lucky.

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CTGO: Closed my position

Contango Ore is a company that should be releasing news but isn’t.  The reason to own it is if you think that it has a promising deposit that has very good chances of turning into a mine.  In that scenario, the logical next steps for CORE are:

1. Complete a resource estimate and then a pre-feasibility study.
2. Start hiring people with mine engineering experience.
3. Start working on financing.  The company could bring in a partner that brings mining experience and some financing, e.g. seniors like Goldcorp, Agnico Eagle, Teck, etc.
4. Perform additional drilling and/or announce plans for the next exploration season.

The lack of news makes me very antsy.  Something may not be right, e.g. the company has had difficulty selling the deposit or raising capital because the deposit is a dud.

Contango Ore: A promising deposit

This illiquid $35M exploration company is very difficult to value but could be worth up to $75-235M.

Contango Ore has issued a press release announcing (A) its initial resource estimate and (B) the engagement of a “strategic advisor”.  The CEO, Brad Juneau, has stated: “We feel we have reached the stage of proving sufficient known resources and defined upside to attract a buyer for the Company.”

I’ll start with the resource estimate.

Contango Ore (CTGO.PK) – Interesting drill results

Contango Ore is a mineral exploration company that spun off from Contango Oil and Gas (MCF).  Brad Juneau, MCF’s long-time oil & gas exploration partner, is the CEO.  Avalon Development Corporation provides geological services for the company.  Contango Ore has interesting drill results though it’s too early to tell if it has an economic deposit.