Please note: The following is part of an ongoing paid promotional campaign by Dolly Varden Silver, (now Contango Silver & Gold). See details at bottom of the page. All $ figures are US$.
As hostilities ease across the Middle East… Wait, it’s Sunday night, everything just changed… Investors are revisiting the narrative for commodities including silver (“Ag“) & gold (“Au“).
The past seven weeks has been difficult to navigate. Soaring oil/gas/diesel prices were the focus, not to mention serious threats to global food security (fertilizer availability) and other second-order implications.
Some were surprised that Ag/Au haven not performed better as safe-haven assets. Yet, the fundamental reasons for owning precious metals remain intact. They are stores of value & inflation hedges at a time when global debt levels are at extremes, with no end in sight.
Europe is on a spending spree to beef up military defenses. The U.S. has $39 TRILLION in debt. Currency debasement is a grave worry. Central banks are likely to continue stacking Au!
If one agrees that Ag/Au companies offer compelling risk/reward, should one buy explorers, developers, or producers? In a bull market, investors can certainly take on more risk and reach for explorers & developers, but being in production greatly diminishes risk!
M&A is starting to takeoff, G2 Goldfields was acquired for over $500/oz in the ground, and Agile just announced a takeover of Rupert Resources at ~$600/oz. Both targets are PFS-stage, years from initial production.
A company offering current production, ample free cash flow compared to its enterprise value, and a robust exploration/development portfolio in safe jurisdictions is Contango Silver & Gold.
While the average of 25 other Ag-heavy names is +346% from 52-week lows, and a group of 25 Au-heavy companies is up +205%, Contango is +90%. A small cap, but not a junior miner with 150M+ shares outstanding. It has 34.7M, fully-diluted, incl. a $20M convert.
That means the enterprise value {market cap + debt – ~$100M in cash} = ~$694M. Compare that figure with anticipated operating cash flow in 2027. Guidance is for 75,000-80,000 Au Eq. ounces (net to Contango) for its 30% interest in the high-margin Manh Choh mine.
Assuming all hedges are gone, with existing cash, 2027 production of 75,000 ounces at $4,000/oz, and operating AISC of $1,500/oz (~15% incr. vs. AISC guidance), adjusted for hedging losses, I estimate ~$188M in net profit.
At $4,000 Au, vs. today’s $4,720, the Company is valued at a forward cash flow multiple of just ~3.3x. (shr. price of $22.60).
As attractive as those metrics are, they give zero credit for 3 of 4 of Contango’s assets. I estimate that Manh Choh’s value is under a third of the entire portfolio’s net worth. In fact, a recent analyst report has Manh Choh at under a quarter of company-wide NAV.
Yes, Contango is much more than Manh Choh. It has a portfolio of four assets leading to potential production of 200,000 ounces Au + 5M ounces Ag by the early 2030s.
The other key assets are Johnson Tract, Kitsault Valley & Lucky Shot. The Johnson Tract Au project in south-central Alaska has an estimated post-tax NPV(5%) of $615M and +60% IRR at $4,000 Au.
I calculate at $5,000/oz the NPV would be ~$830M vs. upfront cap-ex of $213M. It’s very high-grade, with ~1.1M Indicated ounces @ ~9.4 g/t Au Eq.
This is a project that could be in production in 4-5 years. Importantly the deposit is open along strike and down dip. There are multiple exploration targets along a 12 km mineralized corridor.
Underground drilling, the Ellis Zone, and the broader 12 km corridor point toward meaningful resource growth potential in the years ahead. At spot prices, ~16% of in-situ metal value comes from zinc, which is +34% in the past year.
Readers may note that nearby projects have been delayed due to various issues. Why is Johnson Tract different? First off, it’s U.S. FAST-41 approved, placing it on a federally-coordinated permitting track with mandatory timelines, significantly reducing bureaucratic delays.
Second, it’s on private native land (CIRI-owned), which avoids federal land permitting battles. Third, it’s high-grade and near Tidewater, so no need for 100s of miles of roads/ports.
Finally, it will copy the successful Manh Choh mine’s Direct Ship Ore (“DSO“) model. DSO offers compelling speed-to-market, with far less logistical complexity & cap-ex. Simply put, no mill is needed, as ore is shipped to a third-party, and therefore no tailings facility.
Mills + tailings management take years and many $100s of millions to plan, permit, fund, construct, commission, and decommission & rehabilitate. I provide this DSO tangent regarding Johnson Tract because management’s business model revolves around DSO.
As mentioned, Manh Choh, 70% owned by Kinross Gold, delivers run-of-mine mined ore via trucks ~250 miles to Kinross’ Fort Knox Mine near Fairbanks, Alaska.
A DSO operation requires high-grade material to justify shipping costs, which is why Johnson Tract is so attractive and why Manh Choh works well at ~8 g/t Au Eq. (proven & probable reserves).
Kitsault Valley is the newest addition to Contango’s growing portfolio. It has 166,000 oz Au and ~34.7 M oz Ag (Indicated) + 817,000 oz Au, and ~29M oz Ag (Inferred). T
hat’s roughly 1M oz Au and ~65 M oz Ag. A new resource estimate is coming this quarter. Contango sees potential to produce 5M ounces Ag/yr. per from Kitsault Valley.
Th new resource is expected to show a material increase. In my view, instead of 5M oz, post new resource in June (and several more drill seasons), the Company could probably produce 6-8M oz/yr. Compare that to some of the world’s larger primary Ag producers.
Seven million ounces, if it occurred in 2025, would have been a Top-10 result. Note that MAG Silver was acquired by Pan American in May, 2025 for ~$2.1 billion. At the time, the underlying Ag price was in the low $30s/oz. Today, Ag sits at $80.
A 40,000 meter Kitsault drill program will start soon, one of the larger programs in B.C. this year. Importantly, it too is looking at
DSO operations to speed the path to production.
The latest thinking for Kitsault is the potential of selective underground mining, with ore hauled by truck to tidewater, (possibly after ore sorting) then barged to a regional mill or future hub facility.
The final project is Lucky Shot, a smaller (with plans to increase resource to 400-500k Au ounces) version of Johnson Tract, that should be quicker to production.
Both are very high-grade underground Au projects in Alaska, both will use the same DSO model. Lucky Shot is targeting 40–50,000 oz/yr, and close to infrastructure (less than 20 miles to the Alaska Railroad).
Bottom line: Manh Choh & Lucky Shot will fund most of the development costs of Johnson Tract & Kitsault Valley. Cash flow + untapped debt capacity should eliminate the need for significant equity raises.
As each project continues to take prudent de-risking & growth steps, I believe the share price could move meaningfully higher (but not a sure thing).
One should never invest in precious metal producers/developers based on the expectation of rising prices. With that in mind, I waited until the end of this article to show the following table. I exclude perennial goldbugs & online coin dealers, just reputable sources.
One need not count on higher prices, but above is what the more bullish consultants, financial firms & pundits are saying for next year. The median is ~$6,500, which might sound crazy, ~34% above today’s $4,800.
Yet, Au is +40% in the past year… So, is $6,500 really that crazy? To be clear, Contango Silver & Gold doesn’t need soaring prices to thrive, $4,000+ would be just fine.
Disclosures/disclaimers: The content of this article is for information only. Readers fully understand and agree that nothing contained herein, written by Peter Epstein of Epstein Research [ER], (together, [ER] ) about Contango Silver & Gold, including but not limited to, commentary, opinions, views, assumptions, reported facts, calculations, etc. is not to be considered implicit or explicit investment advice. Nothing contained herein is a recommendation or solicitation to buy or sell any security. [ER] is not responsible under any circumstances for investment actions taken by the reader. [ER] has never been, and is not currently, a registered or licensed financial advisor or broker/dealer, investment advisor, stockbroker, trader, money manager, compliance or legal officer, and does not perform market-making activities. [ER] is not directly employed by any company, group, organization, party, or person. The shares of Contango Silver are highly speculative, and not suitable for all investors. Readers understand and agree that investments in small-cap stocks can result in a 100% loss of invested funds. It is assumed and agreed upon by readers that they will consult with their own licensed or registered financial advisors before making investment decisions.
At the time this article was posted, Contango Silver was an advertiser on [ER] and Peter Epstein owned shares in the company, acquired in the open market.
Readers understand and agree that they must conduct due diligence above and beyond reading this article. While the author believes he’s diligent in screening out companies that, for any reason whatsoever, are unattractive investment opportunities, he cannot guarantee that his efforts will (or have been) successful. [ER] is not responsible for any perceived, or actual, errors including, but not limited to, commentary, opinions, views, assumptions, reported facts & financial calculations, or for the completeness of this article or future content. [ER] is not expected or required to subsequently follow or cover events & news, or write about any particular company or topic. [ER] is not an expert in any company, industry sector, or investment topic.
