Contango Silver & Gold Inc.: Form 10-Q for the period ended Mar 31, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the accompanying notes and other information included in our Form 10-K for the year ended December 31, 2024, previously filed with the SEC.

Cautionary Statement about Forward-Looking Statements

Some of the statements made in this report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The words and phrases “should be”, “will be”, “believe”, “expect”, “anticipate”, “estimate”, “forecast”, “goal” and similar expressions identify forward-looking statements and express our expectations about future events. Any statement that is not historical fact is a forward -looking statement. These include such matters as:

• The Company’s financial position;
• Business strategy, including outsourcing;
• Meeting the Company's forecasts and budgets;
• Anticipated capital expenditures and the availability of future financing;
• Risk in the pricing or timing of hedges the Company has entered into for the production of gold and associated minerals;
• Prices of gold and associated minerals;
• Timing and amount of future discoveries (if any) and production of natural resources on the Contango Properties and the Peak Gold JV Property;
• Operating costs and other expenses;
• Cash flow and anticipated liquidity;
• The Company’s ability to fund its business with cash flows from operations and current cash reserves;
• Prospect development;
• Operating and legal risks;
• New governmental laws and regulations; and
• Pending and future litigation.

Although the Company believes the expectations reflected in such forward-looking statements are reasonable, such expectations may not occur. These forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which are outside of our control, that may cause our actual results, performance or achievements to be materially different from future results expressed or implied by the forward-looking statements. In addition to the risk factors described in Part II, Item 1A. Risk Factors, of this Form 10-Q and Part I, Item 1A. Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2024, these factors include among others:

• Availability and ability to raise capital to fund capital expenditures;
• Ability to repay indebtedness when due;
• Ability to retain or maintain capital contributions to, and our relative ownership interest in the Peak Gold JV;
• Ability to influence management of the Peak Gold JV;
• Ability to consummate and realize the anticipated benefits of strategic transactions;
• Potential delays or changes in plans with respect to exploration or development projects or capital expenditures;
• Operational constraints and delays;
• Exploration and operational risks associated with the mining industry;
• Timing and successful discovery of natural resources;
• Declines and variations in the price of gold and associated minerals, as well as price volatility for natural resources;
• Availability and costs of material and operating equipment;
• Potential mechanical failure or under performance of facilities and equipment;
• Weather;
• Ability to find and retain skilled personnel;
• Worldwide economic conditions;
• Federal and state legislation and regulation that affects or restricts mining development and activities;
• Impact of new and potential mining operating and safety standards;
• Environmental and regulatory, health and safety risks;
• Uncertainties of any estimates and projections relating to any future production, costs and expenses (including changes in the cost of fuel, power, materials, and supplies);
• Timely and full receipt of sale proceeds from the sale of any of our mined products (if any);
• Stock price and interest rate volatility;
• Actions or inactions of third-parties;
• Strength and financial resources of competitors;
• Competition generally and the increasing competitive nature of the mining industry;
• Expanded rigorous monitoring and testing requirements;
• Ability to obtain insurance coverage on commercially reasonable terms; and
• Risks related to title to properties.

You should not unduly rely on these forward-looking statements in this report, as they speak only as of the date of this report. Except as required by law, the Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events. All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

First Quarter 2025 Highlights and Recent Developments

Manh Choh Project

In July 2024, the Peak Gold JV commenced processing ore at the Fort Knox facility and on July 8, 2024, the Manh Choh Project achieved a significant milestone and poured its first gold bar, on schedule. In 2024, the Company received $40.5 million in cash distributions from the Peak Gold JV relating to production at Manh Choh, followed by $24.0 million received in the first quarter of 2025 and an additional $9 million received subsequent to quarter-end.

During the first quarter of 2025, the Peak Gold JV (on a 100% basis) processed 323,000 tons of ore with an average grade of 0.215 ounces (“oz”) per ton and containing approximately 69,500 oz of gold. Gold recovery averaged 93.5%, resulting in approximately 65,000 oz of recovered gold, of which Contango’s 30% share amounted to 19,500 oz of gold. During the first quarter of 2025, 17,382 ounces of gold dore were delivered to Contango and sold during the period and 3,810 ounces of gold remain in recoverable inventory as of March 31, 2025.

Johnson Tract Project

During the quarter ended March 31, 2025, the Company continued with ongoing work to permit the underground exploration drift and baseline environmental work. On January 15, 2025, the transportation and port easements were conveyed to CIRI by the National Parks Service and a Decision Record was issued.

On May 6, 2025, the Company announced that it had completed a Technical Report Summary ("TRS") on the Johnson Tract Project. The TRS summarizes the results of an Initial Assessment (“IA”) of the potential viability for a seven-year life of mine (“LOM”), underground mining operation, utilizing the same direct ship ore (“DSO”) approach as the Manh Choh mine. The TRS was filed on May 12, 2025.

IA HIGHLIGHTS:

• Pre-Tax net present value discounted at 5% (“NPV5”) of $359.0 million
• Pre-Tax Internal Rate of Return (“IRR”) of 37.4%
• Post-Tax NPV5 of $224.5 million with a post-tax IRR of 30.2%
• Seven-year LOM
• LOM annual average production of 102,258 gold equivalent ounces ("GEO") at 7.58 grams per tonne ("g/t")
• Initial Capital costs of $213.6 million, including $36 million for contingency costs
• Sustaining Capital costs of $61.3 million, including $12.3 million for contingency costs
• All-In Sustaining Costs ("AISC") estimated at $860 per GEO sold
• Non-discounted payback period 1.3 years

Lucky Shot Property

The Lucky Shot project remains in care and maintenance.

Committee for Safe Communities Complaint

On October 20, 2023, the Committee for Safe Communities, an Alaskan non-profit corporation inclusive of this same group of objectors and formed for the purpose of opposing the project, filed suit in the Superior Court in Fairbanks, Alaska against the State of Alaska Department of Transportation and Public Facilities ("DOT"). The Complaint seeks injunctive relief against the DOT with respect to its oversight of the Peak Gold JV's ore haul plan. The Complaint alleges that the DOT has approved a haul route and trucking plan that violates DOT regulations, DOT's actions have created an unreasonable risk to public safety constituting an attractive public nuisance, and DOT has aided and abetted the offense of negligent driving. On November 2, 2023, the plaintiff filed a motion for a preliminary injunction against the DOT and sought expedited consideration of its motion. If granted, the motion could impact the Peak Gold JV's ore haul plans. On November 9, 2023, the Court denied the plaintiff's motion for expedited consideration. On November 15, 2023, the Court granted the Peak Gold JV's motion to intervene. On January 15, 2024, the Peak Gold JV and DOT jointly moved for judgment on the pleadings and to stay all discovery. On May 14, 2024, the Court issued an Order denying the plaintiff's motion for preliminary injunction and staying discovery. On June 24, 2024, the Court issued an Order granting judgment on the pleadings as to three of the four claims for relief alleged in the Complaint and denying relief as to the claim for public nuisance. The Order further lifted the stay of discovery. On July 3, 2024, the DOT filed motion for reconsideration as to the Court's Order on the motion for judgment on the pleadings, which the Peak Gold JV joined. On September 13, 2024, the Court entered an Order denying this motion. On May 6, 2025, the plaintiff and the DOT agreed to dismiss without prejudice the only remaining claim for relief alleged in the Complaint. All claims in the matter were dismissed and the trial, which was set for August 11, 2025, and all pretrial deadlines were vacated by the Court.

Dot Lake Complaint

On July 1, 2024, the Village of Dot Lake, a federally recognized Indian Tribe, located approximately 50 miles from the Manh Choh mine on the ore haul route along the Alaska Highway ("Dot Lake"), filed a Complaint in the U.S. District Court for the District of Alaska against U.S. Army Corps of Engineers (the "Corps") and Lt. General Scott A. Spellmon, in his official capacity as Chief of Engineers and Commanding General of the Corps. The Complaint seeks declaratory and injunctive relief based on the Corps' alleged failure to consult with Dot Lake and to undertake an adequate environmental review with respect to the Corps' issuance in September 2022 of a wetlands disturbance permit in connection with the overall permitting of the Manh Choh mine as to approximately 5 acres of wetlands located on Tetlin Village land. The Peak Gold JV is not named as a defendant in the Complaint and, on August 20, 2024, the Peak Gold JV moved to intervene in the action, which Dot Lake opposed. On October 10, 2024, the Court granted intervention to the Peak Gold JV. On October 18, 2024, the Peak Gold JV joined the partial motion to dismiss that the Corps filed on August 23, 2024, which motion remains pending. On March 19, 2025, the Court entered an Order on Motion to Partially Dismiss, which Order dismissed three of the four claims asserted in the Complaint. On April 1, 2025, Dot Lake filed an Amended Complaint which seeks to reassert one of the claims that was dismissed without prejudice. On May 2, 2025, the Peak Gold JV moved to dismiss this reasserted claim, which motion remains pending.

Strategy

Partnering with strategic industry participants to expand future exploration work. As of October 1, 2020, in conjunction with the Kinross transactions that established the current ownership interests in the Peak Gold JV and the signing of the A&R JV LLCA, KG Mining became the manager of the Peak Gold JV (the “Manager”). KG Mining may resign as Manager and can be removed as Manager for a material breach of the A&R JV LLCA, a material failure to perform its obligations as the Manager, a failure to conduct the Peak Gold JV operations in accordance with industry standards and applicable laws, and other limited circumstances. Except as expressly delegated to the Manager, the A&R JV LLCA provides that the JV Management Committee has exclusive authority to determine all management matters related to the Company. The JV Management Committee currently consists of one appointee designated by the Company and two appointees designated by KG Mining. The Representatives designated by each member of the Peak Gold JV vote as a group, and in accordance with their respective membership interests in the Peak Gold JV. Except in the case of certain actions that require approval by unanimous vote of the Representatives, the affirmative vote of a majority of the membership interests in the Peak Gold JV constitutes the action of the JV Management Committee.

Structuring Incentives to Drive Behavior. The Company believes that equity ownership aligns the interests of the Company’s executives and directors with those of its stockholders. The Company has implemented an equity compensation program for its executive officers and directors (and other persons) that provides an incentive for such officers to achieve the Company’s long-term business objectives. The Company’s equity compensation program includes two forms of long-term incentives: restricted stock and stock options. As of March 31, 2025, the Company’s directors and executives beneficially own approximately 13.7% of the Company’s common stock.

Acquiring exploration properties. The Company anticipates from time to time acquiring additional properties in Alaska for exploration, subject to the availability of funds. The acquisitions may include leases or similar rights from Alaska Native corporations and/or staking Federal or State of Alaska mining claims. Acquiring additional properties will likely result in additional expense to the Company for minimum royalties, minimum rents and annual exploratory work requirements. The Company is open to strategic partnerships or alliances with other companies as a means to enhance its ability to fund new and existing exploration and development opportunities.

Off-Balance Sheet Arrangements

None.

Results of Operations

Three Months Ended March 31, 2025 Compared to Three Months Ended March 31, 2024

Claim Rentals Expense. Claim rental expense primarily consists of State of Alaska rental payments and costs incurred to record annual labor documents. For the three months ended March 31, 2025 and 2024, claim rental expense were $0.1 million and $0.1 million respectively.

Exploration Expense. Exploration expense for the three months ended March 31, 2025 was $0.5 million compared to $0.1 million for the three months ended March 31, 2024. Current period exploration expense primarily relates to the permitting process for the underground exploration drift and baseline environmental work at the Johnson Tract Project, which are part of the IA. The prior period exploration expense relates to care and maintenance work performed on the Lucky Shot Property.

General and Administrative Expense. General and administrative expense for the three months ended March 31, 2025 and 2024 was $2.4 million and $2.5 million, respectively. The Company’s general and administrative expense primarily relates to legal fees, regulatory fees, payroll and stock-based compensation expense.

Income / Loss from Equity Investment in the Peak Gold JV. The income from the Company’s equity investment in the Peak Gold JV for the three months ended March 31, 2025 was $22.3 million compared to a loss of $0.1 million for the same period in 2024. The Manh Choh Project commenced production in July 2024, which generated income for the second half of 2024. The capital contributions for the three months ended March 31, 2025 and 2024 were nil and $15.5 million, respectively. The capital contributions were higher for three months ended March 31, 2024 compared to March 31, 2025 as the Manh Choh Project was in the development stage in early 2024 and required capital for mine development and improvements as the Fort Knox mill facility. The Peak Gold JV issued a cash distribution of $24 million during the three month period ended March 31, 2025. No cash distributions were made during the same period in 2024. There were no suspended losses as of March 31, 2025. As of March 31, 2025, accounts payable includes $7.7 million owed to Peak Gold JV.

Interest Expense. For the three months ended March 31, 2025, interest expense was $2.7 million and primarily related to the Queen's Road Capital Investment, Ltd. Debenture (the "Debenture") and interest expense related to the Company’s cumulative $38.3 million draw-down on the Facility. Prior year interest expense of $2.0 million included interest expense related to the Debenture and interest expense related to the Company's cumulative $42.5 million draw-down on the Facility. See Note 13 - Debt.

Metal Sales. For the three months ended March 31, 2025, the gain on metal sales was $1.2 million and related to excess ounces that were purchased from the Peak Gold JV that were not delivered into the hedges and sold to the derivative counterparties. There were no metal sales for the three months ended March 31, 2024.

Loss on Derivative Contracts. Loss on derivative contracts for the three months ended March 31, 2025 was $40.5 million compared to $15.6 million for the three months ended March 31, 2024. The Company did not deliver gold ounces into the derivative contracts for the three-month period ended March 31, 2025 and 2024. Therefore, there was no realized loss for the periods and the $40.5 million and $15.6 million was a non-cash unrealized loss, respectively. (see Note 14 - Derivative and Hedging Activities).

Cash Cost on a By-Product Basis and All-In Sustaining Costs on a By-Product Basis (non-GAAP)

The table below presents reconciliations between the most comparable GAAP measure of total cost of sales to the non-GAAP measures of (i) Cash Cost on a By-product Basis and (ii) AISC on a By-product Basis for the Peak Gold JV operations (Manh Choh) for the three months ended March 31, 2025. No comparable period is provided as sales of gold at Manh Choh commenced in July 2024.

Cash Cost on a By-product Basis, per Ounce and AISC on a By-product Basis, per Ounce are measures developed by precious metals companies (including the Silver Institute and the World Gold Council) in an effort to provide a uniform standard for comparison purposes. There can be no assurance, however, that these non-GAAP measures as we report them are the same as those reported by other mining companies.

Cash Cost on a By-product Basis includes all direct and indirect operating cash costs related directly to the physical activities of producing gold, including mining, processing and other plant costs, third-party refining expense, on-site general and administrative costs, royalties and mining production taxes. The value of silver sold is deducted from the total production cost of sales as it is considered residual production, i.e. a by‐product.

AISC on a By-product Basis includes reclamation, sustaining capital, exploration and joint venture partner operator management costs.

Cash Cost on a By-product Basis, per Ounce is an important operating statistic that we utilize to measure a mine's operating performance. We use AISC on a By-product Basis, per Ounce as a measure of a mine's net cash flow after costs for reclamation and sustaining capital. This is similar to the Cash Cost on a By-product Basis, per Ounce measure we report, but also includes reclamation and sustaining capital costs. Current GAAP measures used in the mining industry, such as cost of goods sold, do not capture all the expenditures incurred to discover, develop and sustain gold production. Cash Cost on a By-product Basis, per Ounce and AISC on a By-product Basis, per Ounce also allow us to benchmark the performance of the Peak Gold JV versus those of our competitors. These statistics are useful in identifying acquisition and investment opportunities as they provide a common tool for measuring the financial performance of other mines with varying geologic, metallurgical and operating characteristics.

Cash Costs on a By-product Basis, per Ounce and AISC on a By-product Basis, per Ounce are calculated by adjusting production cost of sales, as reported on the interim condensed consolidated statements of operations, as follows:

Liquidity and Capital Resources

As of March 31, 2025, the Company had approximately $35.2 million of cash.

The Company’s primary cash requirements have been for general and administrative expenses, capital calls from the Peak Gold JV for the Manh Choh Property, repayment of principal and interest related to debt and exploration expenditures on the Johnson Tract Project and Lucky Shot Property. The Company’s sources of cash have been from common stock offerings, the issuance of the Debenture, distributions from the equity investment and the proceeds from the Facility (see Note 5 - Investment in the Peak Gold JV, Note 8 - Stockholders' Equity (Deficit) and Note 13 - Debt, for a discussion of the recent activity).

The Manh Choh Project began production early in the third quarter of 2024 and on July 8, 2024, the Peak Gold JV poured its first gold bar. The Manh Choh Project remains on schedule and ore mining continues along with stockpiling of ore at the Fort Knox facility.

Production from the Manh Choh Project has allowed the Peak Gold JV to operate from the cash flows generated from its operations and there are no future anticipated cash calls.

The Company’s cash needs going forward will primarily relate to exploration of the Contango Properties, repayment of debt and related interest and general and administrative expenses of the Company. In the third and fourth quarters of 2024, the Company received cash distributions from the Peak Gold JV relating to production at Manh Choh of $19.5 million and $21.0 million. In the first quarter of 2025, the Company received cash distributions totaling $24.0 million. Although there can be no guarantee that the Peak Gold JV will continue to make distributions to the Company, the Company believes that distributions are probable and that it will maintain sufficient liquidity to meet its working capital requirements, including repayment obligations of approximately $24.7 million on the Facility, for the next twelve months from the date of this report. The Company made a repayment of $13.8 million on the Facility in January 2025.

Further financing by the Company may include issuances of equity, instruments convertible into equity (such as warrants) or various forms of debt. The Company has issued common stock and other instruments convertible into equity in the past and cannot predict the size or price of any future issuances of common stock or other instruments convertible into equity, and the effect, if any, that such future issuances and sales will have on the market price of the Company’s securities.

Available Information

General information about the Company can be found on the Company’s website at www.contangoore.com (http://www.contangoore.com). Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after the Company files or furnishes them to the SEC.

Evaluation of Disclosure Controls and Procedures. As required by Rule 13a-15(b) of the Exchange Act, the Company has evaluated, under the supervision and with the participation of its management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that the Company files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Based upon the evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, 2025 at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

In addition to the risk factor set forth below and the other information set forth in this Form 10-Q, you should carefully consider the risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2024, under the headings “Item 1. Business — Adverse Climate Conditions,” “—Competition,” “— Government Regulation” and “Item 2. Properties— Environmental Regulation and Permitting,” “Item 1A. Risk Factors,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” which risks could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those described in our Annual Report on Form 10-K for the year ended December 31, 2024. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2024 are not the only risks the Company faces. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. An investment in the Company is subject to risks inherent in our business and involves a high degree of risk. The trading price of the shares of the Company is affected by the performance of our business relative to, among other things, competition, market conditions and general economic and industry conditions. The value of an investment in the Company may decrease, resulting in a loss.