Shares of gold exploration and mining company Contango ORE dropped nearly 22% on Friday, November 29, after the company announced higher than expected production costs at its Manh Choh mine, which it is developing in partnership with Canadian mining giant Kinross Gold.
Details
On Friday, Contango ORE stock fell almost 22% on the New York Stock Exchange to close at $14.08 per share — a three-year low.
Earlier in the day, the company raised its projection for all-in sustaining costs for gold production at its Manh Choh mine in Alaska, which are now expected to be $1,400 per ounce, 25% higher than the earlier estimate. The increase stems from new weight restrictions on the Chena Flood Plain Bridge and higher than anticipated moisture content in the ore. As a result, the company expects to transport about 20% less ore annually than originally planned.
For investors
The Manh Choh project is being explored and developed by Peak Gold, a joint venture between Contango ORE, which owns a 30% stake, and Kinross Gold, which holds the remaining 70%. On Friday, Kinross shares retreated less than 1%.
Contango confirmed that its share of gold production in 2025 is expected to be approximately 60,000 ounces. In November, analysts at Freedom Broker had already predicted a 30% reduction versus the previously guided 99,000 ounces. In light of the weaker outlook, it also lowered its target price for Contango ORE shares by 16% to $27.80 per share. According to MarketWatch, five analysts currently track Contango ORE, and all have “buy” recommendations with an average target price of $32.76 per share.
Contango ORE projects that sales of gold from Manh Choh will generate around $50 million in revenue in 2025, based on a projected spot price of $2,500 per ounce (for comparison, it was $2,521 per ounce in the third quarter of 2024). The company is currently working on restructuring part of its debt, but details have not been provided. In its third-quarter earnings, Contango ORE pledged to “aggressively pay down our debt in 2025.”
