Contango Ore, Inc. (CTGO): A Bull Case Theory

We came across a bullish thesis on Contango Ore, Inc. (CTGO) on Substack by Junior Resource Investing. In this article, we will summarize the bulls’ thesis on CTGO. Contango Ore, Inc. (CTGO)'s share was trading at $12.86 as of May 12^th. CTGO’s trailing and forward P/E were 4.97 and 10.17 respectively according to Yahoo Finance.

Contango Ore has unveiled a promising preliminary economic assessment (PEA) for its Johnson Tract deposit in southern Alaska, highlighting a significant step forward in the company’s expansion strategy. The report, though not yet formally filed, outlines compelling economics based on approximately 700,000 recoverable gold-equivalent ounces (GEOs) over a seven-year mine life. This represents a notable improvement in both annual output and longevity compared to the company’s currently operating Manh Choh mine. Johnson Tract is a high-grade, polymetallic deposit with substantial exposure to gold, silver, zinc, copper, and lead, though about 70% of its revenue will be derived from gold. The location of the deposit—tucked into a mountain—has historically limited drilling, but mineralization remains open above and below, suggesting ample room for future resource expansion beyond the current estimates.

Key highlights from the base-case scenario at $2,200 gold include a post-tax internal rate of return (IRR) of 30.2%, a payback period of just 1.3 years, and a post-tax net present value at a 5% discount rate (NPV5) of $224.5 million. The all-in sustaining costs (AISC) are estimated at $860 per ounce, with management confident that even after royalties and taxes, total costs will remain comfortably below $1,000 per ounce. With initial capital pegged at $213.6 million and sustaining capital at only $61.3 million, the project is relatively low-cost to build and maintain, and its NPV5-to-initial capital ratio of 1.05 at base-case pricing already signals economic viability. Contango also stands out for including generous contingencies—25% for initial and 20% for sustaining capital—suggesting prudent and realistic planning, rather than inflating economics with overly aggressive assumptions.

What sets this project apart further is its leverage to gold prices. At $3,000 gold, Johnson Tract’s post-tax NPV5 swells to $398.2 million, and at $3,300 gold (close to current spot), the NPV5 jumps to roughly $465 million—pushing the NPV5-to-initial capital ratio to an impressive 2.18. Even at a conservative $1,800 gold, the project retains a solid $140 million NPV5, showing strong downside resilience. This makes Contango uniquely positioned to thrive in a high-gold-price environment, especially as Manh Choh is already generating meaningful cash flow and paying down debt and hedges aggressively.

While the market seems to be in a “wait-and-see” mode, perhaps cautious about the company’s ability to deliver on expansion, the fundamentals and management’s execution to date suggest this skepticism may be misplaced. Contango successfully brought Manh Choh into production on time and on budget, beat production forecasts, and maintained cost estimates—all signs of operational discipline. Johnson Tract, while still several years from production, has now cleared its most important hurdle: proving robust economics. If the company can follow through on development timelines and financing, it could compound its production capacity meaningfully and unlock significant shareholder value.

In short, Contango is a well-managed gold producer generating strong cash flow at all-time high prices and building out a pipeline of high-quality, high-margin assets. If Johnson Tract is successfully advanced, the company’s valuation has clear room to multiply. The market may be slow to recognize the value here, but patient investors could be well rewarded.

Contango Ore, Inc. (CTGO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 4 hedge fund portfolios held CTGO at the end of the fourth quarter which was 5 in the previous quarter. While we acknowledge the risk and potential of CTGO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CTGO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.