UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended December
31, 2019
OR
☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission file number 001-35770
CONTANGO ORE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
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27-3431051
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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3700 BUFFALO SPEEDWAY, SUITE
925
HOUSTON, TEXAS
77098
(Address of
principal executive offices)
(Zip code)
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(713) 877-1311
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock, Par Value $0.01 per share
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CTGO
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OTCQB
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Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such
files). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large
accelerated filer”, “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.:
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company ☒
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Emerging growth
company ☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The total number of shares of common stock, par value $0.01 per
share, outstanding as of February 6, 2020 was 6,590,113.
CONTANGO ORE, INC.
TABLE OF CONTENTS
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Page
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PART I –
FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Condensed Consolidated Balance Sheets as of December 31,
2019 and June 30,
2019 (unaudited)
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3
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Condensed Consolidated Statements of Operations for the three and
six months ended December 31, 2019 and
2018 (unaudited)
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4
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Condensed Consolidated Statements of Cash Flows for the six months
ended December 31, 2019 and 2018 (unaudited)
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5
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Condensed Consolidated Statement of Shareholders’
Equity for the six months ended December 31, 2019 and
2018 (unaudited)
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6
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Notes to the Unaudited Condensed Consolidated Financial
Statements
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7
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Item 2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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16
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
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33
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Item 4.
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Controls and Procedures
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33
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PART II –
OTHER INFORMATION
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Item 1.
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Legal Proceedings
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34
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Item 1A.
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Risk Factors
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34
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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34
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Item 4.
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Mine Safety Disclosures
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34
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Item 5.
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Other Information
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34
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Item 6.
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Exhibits
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35
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All references in this Form 10-Q to the “Company”, “CORE”, “we”,
“us” or “our” are to Contango ORE, Inc.
CONTANGO ORE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Item
1 - Financial Statements
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December 31, 2019
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June 30, 2019
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ASSETS
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CURRENT ASSETS:
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Cash
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$ |
5,354,841 |
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$ |
8,600,658 |
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Prepaid expenses and other
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150,432 |
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161,195 |
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Total current assets
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5,505,273 |
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8,761,853 |
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OTHER ASSETS:
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Investment in Peak Gold, LLC (Note 4)
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— |
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— |
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Total other assets
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— |
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— |
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TOTAL ASSETS
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$ |
5,505,273 |
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$ |
8,761,853 |
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LIABILITIES AND SHAREHOLDERS’
EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$ |
164,127 |
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$ |
71,410 |
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Accrued liabilities
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155,125 |
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347,879 |
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Total current liabilities
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319,252 |
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419,289 |
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COMMITMENTS AND CONTINGENCIES (NOTE 11)
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SHAREHOLDERS’
EQUITY:
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Common Stock, $0.01 par value, 30,000,000 shares authorized;
6,515,113 shares issued and outstanding at December 31, 2019;
6,357,113 shares issued and outstanding at June 30,
2019
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65,151 |
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63,571 |
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Additional paid-in capital
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59,557,406 |
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57,935,663 |
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Accumulated deficit
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(54,436,536 |
)
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(49,656,670 |
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SHAREHOLDERS’
EQUITY
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5,186,021 |
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8,342,564 |
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
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$ |
5,505,273 |
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$ |
8,761,853 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONTANGO ORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended December 31,
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Six Months Ended December 31,
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2019
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2018
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2019
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2018
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EXPENSES:
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General and administrative expense
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$ |
(1,150,944 |
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$ |
(1,103,750 |
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$ |
(2,141,935 |
)
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$ |
(2,097,183 |
) |
Total expenses
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(1,150,944 |
)
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(1,103,750 |
)
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(2,141,935 |
)
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(2,097,183 |
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OTHER INCOME/(EXPENSE):
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Interest income
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22,412 |
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58,020 |
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62,069 |
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116,053 |
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Loss from equity investment in Peak Gold, LLC (Note 4)
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(1,800,000 |
)
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(840,000 |
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(2,700,000 |
)
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(2,790,000 |
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NET LOSS
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$ |
(2,928,532 |
)
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$ |
(1,885,730 |
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$ |
(4,779,866 |
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$ |
(4,771,130 |
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LOSS PER SHARE
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Basic and diluted
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$ |
(0.45 |
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$ |
(0.30 |
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$ |
(0.75 |
)
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$ |
(0.77 |
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
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Basic and diluted
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6,439,273 |
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6,260,796 |
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6,398,193 |
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6,209,042 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONTANGO ORE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended December 31,
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2019
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2018
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss
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$ |
(4,779,866 |
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$ |
(4,771,130 |
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Adjustments to reconcile net loss to net cash used in operating
activities:
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Stock-based compensation
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1,623,323 |
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1,530,967 |
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Loss
from equity investment in Peak Gold, LLC |
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2,700,000 |
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2,790,000 |
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Changes in operating assets and liabilities:
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Decrease in prepaid expenses and other
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10,763 |
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49,007 |
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Decrease in accounts payable and accrued
liabilities
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(100,037 |
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(191,417 |
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Net cash used in operating
activities
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(545,817 |
)
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(592,573 |
)
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Cash invested in Peak Gold, LLC |
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(2,700,000 |
) |
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(2,790,000 |
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Net cash used
in investing activities
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(2,700,000 |
) |
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(2,790,000 |
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NET DECREASE IN CASH AND CASH EQUIVALENTS |
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(3,245,817 |
) |
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(3,382,573 |
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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8,600,658 |
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13,810,805 |
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ |
5,354,841 |
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$ |
10,428,232 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONTANGO ORE, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’
EQUITY
(Unaudited)
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Common Stock
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Additional
Paid-In
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Accumulated
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Total
Shareholders’
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Shares
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Amount
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Capital
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Deficit |
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Equity
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Balance at June 30, 2019
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6,357,113 |
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$ |
63,571 |
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$ |
57,935,663 |
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$ |
(49,656,670 |
)
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$ |
8,342,564 |
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Stock-based compensation
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— |
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— |
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1,623,323 |
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— |
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1,623,323 |
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Restricted stock activity |
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158,000 |
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1,580 |
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(1,580 |
) |
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— |
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— |
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Net loss for the period
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— |
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— |
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— |
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(4,779,866 |
)
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(4,779,866 |
)
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Balance at December 31, 2019
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6,515,113 |
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$ |
65,151 |
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$ |
59,557,406 |
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$ |
(54,436,536 |
)
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$ |
5,186,021 |
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Shares
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Amount
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Capital
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Equity
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Balance at June 30, 2018
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|
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$ |
|
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$ |
54,949,370 |
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$ |
|
)
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$ |
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Stock-based
compensation
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1,530,967 |
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Restricted stock activity |
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184,334 |
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1,843 |
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(1,843 |
) |
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Stock option exercises |
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19,513 |
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|
195 |
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(195 |
) |
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Net loss for the
period
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|
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|
|
|
|
|
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|
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)
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) |
Balance at December
31, 2018
|
|
|
|
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|
$ |
|
|
|
$ |
|
|
|
$ |
|
)
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|
$ |
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
CONTANGO ORE, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. Organization
and Business
Contango ORE, Inc. (“CORE”
or the “Company”) is a Houston-based company that engages in the
exploration in Alaska for gold and associated minerals through a
joint venture company, Peak Gold, LLC (the “Joint Venture
Company”). The Company was formed on September 1,
2010 as a Delaware
corporation for the purpose of engaging in the exploration in the
State of Alaska for gold ore and associated minerals. CORE
participates in the Joint Venture Company through its wholly owned
subsidiary, CORE Alaska, LLC.
The Company is in
an exploration stage. The Company’s fiscal year end is
June 30.
On November 29,
2010, Contango
Mining Company (“Contango Mining”), a wholly-owned subsidiary of
Contango Oil & Gas Company (“Contango”), assigned its
properties and certain other assets and liabilities to Contango.
Contango contributed the properties and $3.5 million of
cash to the Company, in exchange for approximately
1.6 million shares
of the Company’s common stock, which were distributed to Contango’s
shareholders of record. The above transactions occurred among
companies under common control and were accounted for as
transactions among entities under common control, in accordance
with Accounting Standards Codification (“ASC”) 805, “Business
Combinations” whereby the acquired assets and liabilities were
recognized in the financial statements at their carrying
amounts.
The properties contributed by Contango included: (i) a
100% leasehold
interest in an estimated 675,000 acres (the
“Tetlin
Lease”) from the Tetlin Village Council, the council formed by the
governing body for the Native Village of Tetlin, an Alaska Native
Tribe (the “Tetlin Village Council”); and (ii) approximately
18,021 acres in
unpatented mining claims from the state of Alaska for the
exploration of gold ore and associated minerals. Juneau
Exploration, L.P. (“JEX”) initially retained a 3.0% production
royalty on contributed properties. On
September 29,
2014, JEX sold its 3.0% production
royalty to Royal Gold, Inc. (“Royal Gold”). See Note
9 - Related
Party Transactions. If any of the properties are placed
into commercial production, the Joint Venture Company would be
obligated to pay a 3.0% production
royalty to Royal Gold.
In September 2012,
the Company and JEX entered into an Advisory Agreement in which JEX
assisted the Company in acquiring 474 unpatented
state of Alaska mining claims consisting of 71,896 acres for
the exploration of gold ore and associated minerals in exchange for
a 2.0% production
royalty on properties acquired after July 1,
2012. On September 29,
2014, JEX sold its 2.0% production
royalty to Royal Gold and the Company terminated its Advisory
Agreement with JEX. See Note 9 - Related
Party Transactions. If any properties acquired after July
1,
2012 are
placed into commercial production, the Joint Venture Company will
be obligated to pay Royal Gold a 2.0%
production royalty relating to those properties.
On September 29,
2014, the Company
entered into a Master Agreement (the “Master Agreement”) with Royal
Gold, pursuant to which the parties agreed, subject to the
satisfaction of various closing conditions, to form a joint venture
to advance exploration and development of the Peak Gold Joint
Venture Property (defined below), prospective for gold ore and
associated minerals (the “Transactions”). The Transactions closed
on January 8, 2015
(the “Closing”).
In connection with the Closing, the Company contributed its Tetlin
Lease and state of Alaska mining claims near Tok, Alaska (the “Peak
Gold Joint Venture Property”), together with other property, to the
Joint Venture Company, a newly formed limited liability
company. The Joint Venture Company is managed according
to a Limited Liability Company Agreement (the “JV LLCA”) between
subsidiaries of Royal Gold and the Company. At the Closing, Royal
Gold made an initial investment of $5 million to fund exploration
activity. The initial $5 million did not give Royal Gold an
equity stake in the Joint Venture Company. Royal Gold had the
option to obtain up to 40% interest in the Joint Venture Company by
investing up to $30 million (inclusive of the initial $5 million
investment) prior to October 2018. As of December 31, 2019,
Royal Gold has contributed approximately $36.3 million to the Joint
Venture Company and has earned a cumulative economic interest
of 40.0%. Now that Royal Gold has funded $30 million,
the Company and Royal Gold have an obligation to fund jointly the
joint venture operations in proportion to their interests in the
Joint Venture Company in order to maintain their respective
percentage ownership interests in the Joint Venture Company.
The proceeds from the investments are used for additional
exploration of the Peak Gold Joint Venture Property. Pursuant to
the JV LLCA, Royal Gold serves as the Manager of the Joint
Venture Company and manages, directs, and controls operations of
the Joint Venture Company.
On November 10, 2017, subsidiaries of Royal Gold and the
Company entered into Amendment No. 1 to the JV LLCA, which, among
other things, amended the JV LLCA to add certain claims, previously
purchased by the Joint Venture Company. The claims that were
added consist of 541 unpatented state of Alaska mining
claims over 84,840 acres for the exploration of gold ore and
associated minerals (the “New Properties”). In return for
locating the New Properties and incurring all related expenses, the
Joint Venture Company granted to a subsidiary of Royal Gold a
3.0% production royalty on the New Properties and any additional
properties contributed to the Joint Venture Company (all such
properties subject to the 3.0% production royalty, “Additional
Properties”).
On January 18, 2019, CORE Alaska, LLC and Royal Alaska, LLC,
wholly-owned subsidiaries of the Company and Royal Gold,
respectively, entered into Amendment No. 2 (the “Amendment”) to the
JV LLCA to outline rights of the parties in a joint sale process by
the Company and Royal Gold and make certain other clarifying
changes. The Amendment, among other things, (i) defined certain
project areas and a resource area in reference to properties owned
or controlled by the Joint Venture Company; (ii) allowed CORE
Alaska, LLC and Royal Alaska, LLC to agree to sell their respective
interests in the Joint Venture Company in respect of fewer than all
such project areas in a joint sale process by the Company and Royal
Gold; (iii) in connection with the joint sale process by the
Company and Royal Gold, created (a) a tag right on a transfer by
either CORE Alaska, LLC or Royal Alaska, LLC of any portion of its
interest in the resource area; and (b) a drag right in a transfer
by Royal Alaska, LLC of its entire interest in the resource area
and, if the drag right is not exercised as to the resource area in
a transfer of that area, then the drag right may be incorporated
into the surviving entities that would hold certain other
properties owned by the Joint Venture Company that were not
transferred. The joint sale process has concluded without entering
into a definitive change of control transaction. As a
result, the tag right and drag right created in connection with the
joint sale process specifically with respect to the resource
area also terminated.
The Company has completed ten years of exploration efforts on
the Peak Gold Joint Venture Property, which has resulted in
identifying two mineral deposits (Peak and North Peak)
and several other gold, silver, and copper prospects. The
Joint Venture Company completed the 2019 exploration program in
October of 2019. A total of 3,073 meters of drilling was
completed during the program.
In June of 2018, the Company retained Petrie Partners,
LLC and Cantor Fitzgerald and Co. to advise on its strategic
options. The Company is continuing to work with its
advisors to evaluate strategic options while advancing the
Peak Gold Joint Venture Property through exploration and baseline
data collection for project permitting requirements. The Company’s
60% interest in the Joint Venture Company plus cash on hand
constitute substantially all of the Company’s assets. The
Company has no borrowings.
2. Basis of
Presentation
The accompanying unaudited consolidated financial statements
have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”) for
interim financial information, pursuant to the rules and
regulations of the Securities and Exchange Commission (“SEC”),
including instructions to Form 10-Q and
Article 8 of Regulation
S-X. Accordingly,
they do not include all
the information and footnotes required by GAAP for complete annual
consolidated financial statements. In the opinion of management,
all adjustments considered necessary for a fair statement of the
consolidated financial statements have been included. All such
adjustments are of a normal recurring nature. The consolidated
financial statements should be read in conjunction with the audited
financial statements and notes included in the Company’s
Form 10-K for the
fiscal year ended June 30,
2019. The results
of operations for the three and six
months ended December 31,
2019 are not necessarily
indicative of the results that may be
expected for the fiscal year ending June 30,
2020.
3. Summary of
Significant Accounting Policies
The Company’s
significant accounting policies are described
below.
Management Estimates. The
preparation of consolidated financial statements in conformity with
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Cash Equivalents. Cash
equivalents are considered to be highly liquid securities having an
original maturity of 90 days or less at
the date of acquisition.
Stock-Based Compensation.
The Company applies the fair value method of accounting for
stock-based compensation. Under this method, compensation cost is
measured at the grant date based on the fair value of the award and
is recognized over the award vesting period. The Company classifies
the benefits of tax deductions in excess of the compensation cost
recognized for the options (excess tax benefit) as financing cash
flows. The fair value of each option award is estimated as of the
date of grant using the Black-Scholes option-pricing model.
The fair value of each restricted stock award is equal to the
Company’s stock price on the date the award is
granted.
Income Taxes. The
Company follows the liability method of accounting for income taxes
under which deferred tax assets and liabilities are recognized for
the future tax consequences of (i) temporary differences
between the tax basis of assets and liabilities and their reported
amounts in the consolidated financial statements and
(ii) operating loss and tax credit carry-forwards for tax
purposes. Deferred tax assets are reduced by a valuation allowance
when, based upon management’s estimates, it is more likely than
not that a portion
of the deferred tax assets will not be
realized in a future period. The Company recognized a full
valuation allowance as of December 31, 2019
and June 30,
2019 and has not recognized any
tax provision or benefit for any of the periods. The Company
reviews its tax positions quarterly for tax uncertainties. The
Company did not have any
uncertain tax positions as of December 31,
2019 or June 30,
2019. The Tax Cuts and Jobs Act was signed into law
on December 22,
2017, and enacts significant changes to U.S.
income tax and related laws. Among other things, the Tax Cuts and
Jobs Act reduces the top U.S. corporate income tax rate from
35.0% to
21.0%, and makes
changes to certain other business-related exclusions, deductions
and credits. The
Company has assessed the impact of the tax bill on the financial
statements as of December 31,
2019. Due to the Company’s full valuation
allowance, the changes to the income tax provision as a result of
the bill are not expected to
have a consolidated financial statement
impact.
Investment in the Joint Venture Company. The
Company’s consolidated financial statements include the investment
in the Joint Venture Company which is accounted for under the
equity method. The Company has designated one of the
three members of
the Management Committee and on December 31, 2019 held a
60.0% ownership
interest in the Joint Venture Company. Royal Gold currently serves
as the Manager of the Joint Venture Company and will manage,
direct, and control operations of the Joint Venture Company. The
Company recorded its investment at the historical cost of the
assets contributed. The cumulative losses of the Joint Venture
Company exceed the historical cost of the assets contributed to the
Joint Venture Company; therefore the Company’s investment in the
Joint Venture Company as of December 31, 2019
and June 30,
2019 is zero. The portion of the cumulative loss
that exceeds the Company’s investment will be suspended and
recognized against earnings, if any, from the investment in the
Joint Venture Company in future periods.
Recently
Issued Accounting Pronouncements. In February
2016, the FASB issued ASU 2016-02, Leases (Topic 842),
which requires recognition of right-of-use assets and lease payment
liabilities on the balance sheet by lessees for all leases with
terms greater than twelve months. Classification of leases as
either a finance or operating lease will determine the recognition,
measurement and presentation of expenses. ASU 2016-02
also requires certain quantitative and qualitative disclosures
about leasing arrangements. The Joint Venture Company owns
the Tetlin lease and any impact of the new standard related to that
lease will be evaluated at the Joint Venture Company level.
The new standard was adopted in July 2019. Adopting this
standard did not have an impact on the Company's
financials.
The Company has evaluated all other recent accounting
pronouncements and believes that none of them
will have a significant effect on the Company’s consolidated
financial statements.
4.
Investment in the Joint Venture Company
The Company recorded its investment at the historical book value of
the assets contributed to the Joint Venture Company, which was
approximately $1.4 million. As
of December 31, 2019,
Royal Gold has contributed approximately $36.3 million
to the Joint Venture Company, and earned a cumulative economic
interest of 40.0%.
As of
December 31, 2019,
the Company held a 60.0% economic
interest in the Joint Venture Company.
The following table is a roll-forward of our investment in the
Joint Venture Company from January 8, 2015
(inception) to December 31,
2019:
|
|
Investment
|
|
|
|
in Peak Gold, LLC
|
|
Investment balance at June 30, 2014
|
|
$ |
— |
|
Investment in Peak Gold, LLC, at inception January 8, 2015
|
|
|
1,433,886 |
|
Loss from equity investment in Peak Gold, LLC
|
|
|
(1,433,886 |
)
|
Investment balance at June 30, 2015
|
|
$ |
— |
|
Investment in Peak Gold, LLC
|
|
|
— |
|
Loss from equity investment in Peak Gold, LLC
|
|
|
— |
|
Investment balance at June 30, 2016
|
|
$ |
— |
|
Investment in Peak Gold, LLC
|
|
|
— |
|
Loss from equity investment in Peak Gold, LLC
|
|
|
— |
|
Investment balance at June 30, 2017 |
|
$ |
— |
|
Investment in Peak Gold, LLC |
|
|
2,580,000 |
|
Loss from equity investment in Peak Gold, LLC |
|
|
(2,580,000 |
) |
Investment balance as June 30, 2018 |
|
$ |
— |
|
Investment in Peak Gold, LLC |
|
|
4,140,000 |
|
Loss
from equity investment in Peak Gold, LLC |
|
|
(4,140,000 |
) |
Investment balance at June 30, 2019
|
|
$ |
— |
|
Investment in Peak Gold, LLC |
|
|
2,700,000 |
|
Loss
from equity investment in Peak Gold, LLC |
|
|
(2,700,000 |
) |
Investment balance at December 31, 2019
|
|
$ |
— |
|
The following table presents the condensed balance sheet for the
Joint Venture Company as of December 31,
2019 and June 30, 2019:
|
|
December 31, 2019
|
|
|
June 30, 2019
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
139,136
|
|
|
$ |
473,056 |
|
Mineral
properties
|
|
|
1,433,886 |
|
|
|
1,433,886 |
|
Other assets |
|
|
130,148 |
|
|
|
57,538 |
|
TOTAL ASSETS
|
|
$ |
1,703,170 |
|
|
$ |
1,964,480 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND MEMBERS’ EQUITY |
|
|
|
|
|
|
|
|
Accounts
payable and other liabilities
|
|
$ |
512,860 |
|
|
$ |
927,424 |
|
TOTAL LIABILITIES
|
|
|
512,860 |
|
|
|
927,424 |
|
MEMBERS’ EQUITY/(DEFICIT)
|
|
|
1,190,310 |
|
|
|
1,037,056 |
|
TOTAL LIABILITIES AND MEMBERS’ EQUITY
|
|
$ |
1,703,170 |
|
|
$ |
1,964,480 |
|
The Company’s share of the Joint Venture Company’s results
of operations for the three and six
months ended December 31, 2019
was a loss of approximately $0.9 million
and $2.6 million, respectively. The Company’s
share in the results of operations for the three and six
months ended December 31, 2018 was a
loss of approximately $0.5 million and $3.3 million,
respectively. The
Joint Venture Company loss does not include
any provisions related to income taxes as the Joint Venture Company
is treated as a partnership for income tax purposes. As of
December 31,
2019 and June 30, 2019, the
Company’s share of the Joint Venture Company’s inception-to-date
cumulative loss of approximately $34.1 million
and $31.5 million,
respectively, exceeded the historical book value of our investment
in the Joint Venture Company, of $1.4
million. Therefore, the investment in the Joint Venture Company had
a balance of zero as
of each December 31,
2019 and June 30, 2019. The
Company is currently obligated to make additional capital
contributions to the Joint Venture Company in proportion to
its percentage interest in the Joint Venture Company in order to
maintain its ownership in the Joint Venture Company to be
diluted. Therefore, the Company only records losses up
to the point of its cumulative investment, which was
approximately $10.9 million
as of December 31, 2019. The portion of the cumulative loss that
exceeds the Company’s investment will be suspended and recognized
against earnings, if any, from the Company’s investment in the
Joint Venture Company in future periods. The suspended
losses for the period from inception to
December 31,
2019 are approximately $23.2 million.
The following table presents the condensed results of operations
for the Joint Venture Company for the three
and six month periods ended
December 31,
2019 and 2018, and for the
period from inception through December 31, 2019:
|
|
Three Months Ended
|
|
Six Months Ended |
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
Period from Inception January 8, 2015 to |
|
|
|
December 31, 2019
|
|
December 31, 2019 |
|
|
December 31, 2018
|
|
|
December 31, 2018 |
|
|
December 31, 2019 |
|
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration expense
|
|
$ |
1,121,694 |
|
$ |
3,305,979 |
|
|
$ |
675,796 |
|
|
$ |
4,230,592 |
|
|
$ |
37,487,050 |
|
General and administrative
|
|
|
467,578 |
|
|
1,040,770 |
|
|
|
208,871 |
|
|
|
1,239,406 |
|
|
|
8,470,416 |
|
Total expenses
|
|
|
1,589,272 |
|
|
4,346,749 |
|
|
|
884,667 |
|
|
|
5,469,998 |
|
|
|
45,957,466 |
|
NET LOSS
|
|
$ |
1,589,272 |
|
$ |
4,346,749 |
|
|
$ |
884,667 |
|
|
$ |
5,469,998 |
|
|
$ |
45,957,466 |
|
5. Prepaid
Expenses and other
The Company has prepaid expenses of $150,432 and
$161,195 as of
December 31,
2019 and
June 30,
2019,
respectively. Prepaid expenses primarily relate to prepaid
insurance and management fees.
6. Loss Per
Share
A reconciliation of the components of basic and diluted net loss
per share of common stock is presented below:
|
|
Three Months Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Loss
|
|
|
Weighted Average Shares
|
|
|
Loss Per
Share
|
|
|
Loss
|
|
|
Weighted Average Shares
|
|
|
Loss Per
Share
|
|
Basic Loss per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stock
|
|
$ |
(2,928,532 |
)
|
|
|
6,439,273 |
|
|
$ |
(0.45 |
)
|
|
$ |
(1,885,730 |
) |
|
|
6,260,796 |
|
|
$ |
(0.30 |
)
|
Diluted Loss per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stock
|
|
$ |
(2,928,532 |
)
|
|
|
6,439,273 |
|
|
$ |
(0.45 |
)
|
|
$ |
(1,885,730 |
)
|
|
|
6,260,796 |
|
|
$ |
(0.30 |
)
|
|
|
Six Months Ended
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
Loss
|
|
|
Weighted Average
Shares
|
|
|
Loss Per
|
|
|
Loss
|
|
|
Weighted Average
Shares
|
|
|
Loss Per
Share
|
|
Basic Loss per
Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to
common stock
|
|
|
|
)
|
|
|
|
|
|
|
|
)
|
|
|
|
|
|
|
|
|
|
|
|
)
|
Diluted Loss per
Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to
common stock
|
|
|
|
)
|
|
|
|
|
|
|
|
)
|
|
|
|
)
|
|
|
|
|
|
|
|
)
|
No options or warrants to purchase shares of common stock
were outstanding as of December 31, 2019 or December 31,
2018.
In connection with the appointment of Rick Van Nieuwenhuyse as the
President and Chief Executive Officer of the Company, on January 6,
2020, the Company granted to Mr. Van Nieuwenhuyse options to
purchase 100,000 shares of common stock of the Company, with an
exercise price per share equal to the closing price on January 6,
2020, the day on which he began employment with the Company. The
options will vest in two equal installments, half on the first
anniversary of Mr. Van Nieuwenhuyse’s employment with the Company
and half on the second anniversary of his employment with the
Company, subject to acceleration upon a change of control of
the Company.
7.
Shareholders’
Equity
The Company’s
authorized capital stock consists of 30,000,000 shares of common stock and
15,000,000 shares of preferred stock. As
of December 31, 2019,
we had
6,515,113 shares of common stock outstanding,
including
614,666 shares of unvested
restricted stock. No shares of preferred stock have been
issued. The remaining restricted stock outstanding will vest
between January 2020 and January
2022.
In September 2016,
the Company distributed a
Private Placement Memorandum to its warrant holders to give them
the opportunity to exercise their warrants at a reduced exercise
price and receive shares of common stock, par value
$0.01 per share of the Company by paying the
reduced exercise price in cash and surrendering the original
warrants.
The offering applied to warrant holders with an exercise price
of $10.00 per share originally issued in
March 2013. The offering gave the warrant holders
the opportunity to exercise the warrants for
$9.00 per share. The offer expired on
November 15, 2016.
In conjunction with the
offering, a total of 587,500 warrants were exercised resulting in
total cash to the Company of $5.3 million. Of the total warrants
exercised, 83,334 were exercised by entities controlled
by Mr. Brad Juneau, who was serving as the Company’s Chairman,
President and Chief Executive Officer at the time of exercise of
the warrants. Proceeds from the exercise of the warrants will be
used for working capital purposes and for funding future
obligations to the Joint Venture Company.
On October 13, 2017,
the Company distributed a Private Placement Memorandum to its
warrant holders to give them the opportunity to exercise their
warrants at a reduced exercise price and receive shares of common
stock, par value $0.01 per
share of the Company by paying the reduced exercise price in
cash and surrendering the original warrants. The offering
applied to warrant holders with an exercise price
of $10.00 per
share originally issued in March 2013. The
offering gave the warrant holders the opportunity to exercise
the warrants for $9.50 per
share. The offer expired on November 10,
2017. In conjunction with the offering a total of
124,999 warrants
were exercised resulting in total cash to the Company of
$1.2
million. Proceeds from the exercise of the warrants will be
used for working capital purposes and for funding future
obligations to the Joint Venture Company.
In connection with the exercise offer, the Company entered into a
Registration Rights Agreement dated as of
November 10, 2017,
with each investor who exercised warrants in the offering. The
Company agreed to file up to two demand
registration statements with
the SEC at any time after expiration of the offer but before
three years after
expiration of the offer in order to register the resale of shares
of common stock, issued in the offer. In addition, the Registration
Rights Agreement granted certain piggyback rights to the
investors.
During
fiscal year 2018,
580,999 warrants
were exercised resulting in the issuance of 404,923 shares of
common stock and total cash to the Company of $2.3 million.
All of the outstanding warrants have been exercised.
On October 23, 2017,
the Company completed the issuance and sale of an aggregate of
553,672 shares of
common stock, par value $0.01 per share,
of the Company at a purchase price of $19.00 per share
of common stock,
in a private placement (the “Private Placement”) to certain
purchasers (the “Purchasers”) pursuant to a Stock Purchase
Agreement dated as of October 23, 2017
(the “Purchase Agreement”), by and among the Company and each
Purchaser. The Private Placement resulted in approximately
$10.5 million of
gross proceeds and approximately $10.0
million of net proceeds. The Company will use the net proceeds from
the Private Placement for working capital purposes and for
funding future obligations to the Joint Venture Company.
Petrie Partners Securities, LLC (“Petrie”) acted as sole placement
agent in connection with the Private Placement and received a
placement agent fee equal to 6.50%, which was
reduced to 3.25% for
existing stockholders and other Purchasers referred by those
existing stockholders, or a total of $0.5 million
in placement agent fees. Juneau Exploration, L.P., which is
controlled by Brad Juneau, the Company’s
President and Chief Executive Officer at the time of the Private
Placement, purchased 13,200 shares of
common stock in the Private Placement for a price of
$250,800 and on
the same terms and conditions as all other
Purchasers.
The shares sold in the Private Placement were issued in reliance on
an exemption from registration under the Securities Act of
1933, as amended,
pursuant
to Section 4(2) thereof.
The bases for the availability of this exemption include the facts
that the issuance was a private transaction which did
not involve a
public offering and the shares were offered and sold to a limited
number of purchasers.
Pursuant to a Registration Rights Agreement dated as of
October 23, 2017
(the “Registration Rights Agreement”), by and among the
Company and the Purchasers, the Company agreed to file up to
two demand
registration statements with the Securities and Exchange
Commission at any time after one year after the
Private Placement but before three years after
the Private Placement in order to register the resale of the shares
of common stock. In addition, the Registration Rights
Agreement granted certain piggyback rights to the
Purchasers.
Rights Plan
On December 19,
2012, the Company
adopted a Rights Plan, which was amended on
March 21, 2013,
September 29,
2014, December 18,
2014, November 11,
2015, April 22, 2018, and November 20,
2019.
Under
the terms of the amended Rights Plan, each right (a “Right”) will
entitle the holder to purchase 1/100 of
a share of Series A Junior Preferred Stock of the Company (the
“Preferred Stock”) at an exercise price of $80 per
share. The Rights will be exercisable and will trade separately
from the shares of common stock if a person, or group,
acquires beneficial ownership of 15% or more
of the Company’s common stock. Under the terms of
the Rights Plan, Rights have been distributed as a dividend at the
rate of one Right
for each share of common stock that was held as of the close of
business on December 20,
2012. Stockholders
will not receive
certificates for the Rights, but the Rights will become part of
each share of common stock. An additional Right will be issued
along with each share of common stock that is issued or sold
by the Company after December 20, 2012.
The Rights are scheduled to expire on December 31,
2021.
8. Formation of
Joint Venture Company
On January 8, 2015,
the Company and Royal Gold, through their wholly-owned
subsidiaries, consummated the Transactions contemplated under the
Master Agreement, including the formation of a joint venture to
advance exploration and development of the Peak
Gold Joint Venture Property, for gold ore and associated minerals
prospects.
In connection with the Closing of the Transactions, the Company
formed the Joint Venture Company. The Company contributed to the
Joint Venture Company its Peak Gold Joint Venture
Property near Tok, Alaska, together with other property (the
“Contributed Assets”) with a historical book value of
$1.4 million and
an agreed fair value of $45.7 million (the
“Contributed Assets Value”). At the Closing, the Company and Royal
Gold, through their wholly-owned subsidiaries, entered into the JV
LLCA.
Royal Gold serves as manager of the Joint Venture Company (the
“Manager”) and manages, directs, and controls the operations of the
Joint Venture Company.
As a condition to the Closing, the Company and the Tetlin Village
Council entered into a Stability Agreement dated
October 2, 2014,
pursuant to which the Company and the Tetlin Village Council, among
other things, acknowledged the continued validity of the Tetlin
Lease and all its terms notwithstanding any future change in the
status of the Tetlin Village Council or the property subject to the
Tetlin Lease.
At Closing, Royal Gold, as an initial contribution to the Joint
Venture Company, contributed $5 million (the
“Royal Gold Initial Contribution”). The Royal Gold Initial
Contribution did not entitle Royal
Gold to a percentage interest in the Joint Venture Company.
Therefore, at Closing, Royal Gold’s
percentage interest in the Joint Venture Company equaled
0% and the
Company’s percentage interest in the Joint Venture Company equaled
100%. In addition,
as part of the Closing, Royal Gold paid the Company
$750,000, which
was utilized to partially reimburse the Company for costs and
expenses incurred in the Transactions and is included as an expense
reimbursement on our consolidated statements of
operations.
The JV LLCA gave Royal Gold the right, but
not the
obligation, to earn a percentage interest in the Joint Venture
Company (up to a maximum of 40%) by making
additional contributions of capital to the Joint Venture Company of
up to $30 million
(inclusive of the Royal Gold Initial Contribution of
$5 million) during
the period beginning on the Closing and ending on
October 31, 2018.
On April 26, 2018, Royal Gold funded its full
$30 million
investment and earned a percentage interest of
40% in the Joint
Venture Company, with the Company retaining a percentage interest
of 60% in the Joint
Venture Company. Once Royal Gold earned a 40% interest in the Joint
Venture Company, the Company and Royal Gold began to contribute
funds in proportion to their respective percentage interests in the
Joint Venture Company. From inception
through December 31, 2019,
Royal Gold has contributed approximately $36.3 million
(inclusive of the Royal Gold Initial Contribution of
$5 million) and
the Company has contributed approximately $9.4 million in cash and
$1.4 million in properties to the Joint Venture
Company.
The
proceeds from the investments are used for additional
exploration of the Peak Gold Joint Venture
Property.
Pursuant to the terms of the JV LLCA, the members contribute funds
to approved programs and budgets in proportion to their respective
percentage interests in the Joint Venture Company. If a member
elects not to contribute to an approved program and budget or
contributes less than its proportionate interest, its percentage
interest will be recalculated by dividing (i) the sum of (a) the
value of its initial contribution plus (b) the total of all of its
capital contributions plus (c) the amount of the capital
contribution it elects to fund, by (ii) the sum of (a), (b) and (c)
above for both members, and multiplying by
100.
The Company and Royal Gold have the right to transfer their
respective percentage interests in the Joint Venture Company to a
third party, subject to certain terms and conditions set forth in
the JV LLCA. If either member intends to transfer all or part of
its percentage interest to a bona fide third party purchaser, the
other member has the right to require the transferring member to
include in the intended transfer the other member’s proportionate
share of its percentage interests at the same purchase price and
terms and conditions. Now that Royal Gold has earned a 40% interest
in the Joint Venture Company, it has the additional right to
require the Company to sell up to 20% of the interest in the Joint
Venture Company in a sale of Royal Gold’s entire 40% interest in
the Joint Venture Company. If Royal Gold exercises this
right, the Company will be obligated to sell 20% of the membership
interest to a bona fide third party purchaser on the same terms and
conditions as the interest being sold by Royal Gold.
On January 18, 2019, CORE Alaska, LLC and Royal Alaska, LLC,
wholly-owned subsidiaries of the Company and Royal Gold,
respectively, entered into an Amendment No. 2 (the “Amendment”) to
the JV LLCA to outline rights of the parties in a joint sale
process by the Company and Royal Gold and make certain other
clarifying changes. The Amendment, among other things, (i) defined
certain project areas and a resource area in reference to
properties owned or controlled by the Joint Venture Company; (ii)
allowed CORE Alaska, LLC and Royal Alaska, LLC to agree to sell
their respective interests in the Joint Venture Company in respect
of fewer than all such project areas in a joint sale process by the
Company and Royal Gold; (iii) in connection with the joint sale
process by the Company and Royal Gold, created (a) a tag right on a
transfer by either CORE Alaska, LLC or Royal Alaska, LLC of any
portion of its interest in the resource area; and (b) a drag right
in a transfer by Royal Alaska, LLC of its entire interest in the
resource area and, if the drag right is not exercised as to the
resource area in a transfer of that area, then the drag right may
be incorporated into the surviving entities that would hold certain
other properties owned by the Joint Venture Company that were not
transferred. The joint sale process has concluded without entering
into a definitive change of control transaction. As a
result, the tag right and drag right created in connection with the
joint sale process specifically with respect to the resource area
also terminated.
The Joint Venture Company is a variable interest entity as defined
by FASB ASU No.
2015-02,
Consolidation
(Topic 810): Amendments
to the Consolidation Analysis. The Company is
not the primary
beneficiary since it does not currently have
the power to direct the activities of the Joint Venture Company.
The Company’s ownership interest in the Joint Venture Company is
therefore accounted under the equity method.
9. Related
Party Transactions
Mr. Brad Juneau, who served as
the Company’s Chairman, President and Chief Executive
Officer, until January 6, 2020, and serves as the the
Company's Executive Chairman effective January 6, 2020, is also the
sole manager of JEX, a private company involved in the exploration
and production of oil and natural gas. JEX was responsible for
securing and negotiating the Tetlin Lease and assisting in
obtaining other properties and initially engaged Avalon Development
Corporation (“Avalon”) to conduct mineral exploration activities on
the Tetlin Lease. In agreeing to transfer its interests in such
properties to Contango Mining, a predecessor of the Company, JEX
retained a 3.0%
overriding
royalty interest in the properties transferred.
In September 2012,
the Company and JEX entered into an Advisory Agreement in which JEX
provided assistance in acquiring additional properties in Alaska in
exchange for an overriding royalty of 2.0%
on
properties acquired after July 1,
2012.
On September 29,
2014, pursuant to a Royalty Purchase Agreement between JEX and
Royal Gold (the “Royalty Purchase Agreement”), JEX sold its entire
overriding royalty interest in the Peak Gold Joint Venture Property
to Royal Gold. On the same date, the Company terminated its
Advisory Agreement with JEX.
On November 20, 2019, the Company entered into an Amended
and Restated Management Services Agreement (the “A&R MSA”),
with JEX, which amends and restates the Management Services
Agreement between the Company and JEX dated as of October 1, 2016.
Pursuant to the A&R MSA, JEX will continue, subject to the
direction of the board of directors of the Company, to
manage the business and affairs of the Company and its
interest in Joint Venture Company. The services provided to the
Company by JEX include corporate finance, accounting, budget,
reporting, risk management, operations and stockholder relation
functions of the Company. Pursuant to the A&R MSA, the Company
will pay to JEX a monthly fee of $47,000, which includes an
allocation of approximately $6,900 for office space and equipment.
JEX will also be reimbursed for its reasonable and necessary costs
and expenses of third parties incurred for the
Company. No part of the fee payable to JEX pursuant to
the A&R MSA is allocated for compensation of Brad Juneau who is
compensated separately as determined by the independent directors
of the Company. In addition, executives of
JEX may be granted restricted stock, stock options
or other forms of compensation by the independent directors of the
Company. The amount of time and expertise required to
effectively manage and administer the business and affairs of the
Company will continue to be monitored by the board of directors of
the Company for necessary adjustments or modifications depending
upon the amount of time required to be spent on the business and
affairs of the Company by the executives and the progress of the
Joint Venture Company in its exploratory programs in Alaska.
On October 23, 2017,
the Company completed the Private Placement described in Note
7 - Shareholders' Equity.
JEX, which is controlled by Brad Juneau, the
Company’s
then-President and Chief Executive Officer, purchased
13,200 shares of
common stock, in the Private Placement for a price of
$250,800 and on
the same terms and conditions as all other
Purchasers.
On April 16, 2018, Royal Gold
filed a Schedule 13D with the Securities and
Exchange Commission to reflect Royal Gold’s acquisition from an
existing stockholder of 13.6% of the Company’s
outstanding common stock at a price of $26 per share,
subject to certain adjustments. Royal Gold also filed amendments to
its Schedule 13D on June 29, 2018, October 4, 2018, January
22, 2019, and August 2, 2019. As of August 2, 2019 Royal
Gold reported beneficial ownership of approximately 12.7% of
the Company’s outstanding common stock. Royal Gold is the
parent company of Royal Alaska LLC, CORE’s joint venture partner in
the Joint Venture Company.
In June of 2018, the Company retained Petrie Partners, LLC and
Cantor Fitzgerald and Co. to advise on its strategic
options, including in connection with a joint sale process
with its joint venture partner, Royal Gold. Royal
Gold retained Scotia Capital Inc. to conduct a joint process
for the sale directly or indirectly of the Joint Venture Company’s
properties in Alaska. The process concluded with no change of
control transaction. The Company is continuing to work with
its advisors to evaluate strategic options while advancing the
Peak Gold Joint Venture Property through exploration and baseline
data collection for project permitting requirements. The Company’s
60% interest in the Joint Venture Company plus cash on hand
constitute substantially all of the Company’s assets. The
Company has no borrowings.
10. Stock-Based
Compensation
On September 15,
2010, the
Company’s Board of Directors (the “Board”) adopted the Contango
ORE, Inc. Equity Compensation Plan (the “2010
Plan”). On November 14, 2017,
the Stockholders of the Company approved and adopted the Contango
ORE, Inc. Amended and Restated 2010 Equity
Compensation Plan (the “Amended Equity Plan”). The amendments to
the 2010 Plan included
(a) increasing the number of shares of common stock that the
Company may issue under
the plan by 500,000 shares;
(b) extending the term of the plan until
September 15,
2027; and (c) allowing the Company to withhold shares to
satisfy the Company’s
tax withholding obligations with respect to grants paid in Company
Stock.
On November 13, 2019, the Stockholders of the Company approved and
adopted the First Amendment (the “Amendment”) to the Contango ORE,
Inc. Amended and Restated 2010 Equity Compensation Plan (as
amended, the “Equity Plan”) which increases the number of shares of
common stock that the Company may issue under the Equity Plan by
500,000 shares. Under
the Equity Plan, the Board may issue up
to 2,000,000 shares
of common stock and options to officers, directors, employees or
consultants of the Company. Awards made under the Equity Plan are
subject to such restrictions, terms and conditions, including
forfeitures, if any, as may be determined
by the Board. As of December 31, 2019,
there were 614,666 shares of
unvested restricted common stock outstanding and zero options to
purchase shares of common stock outstanding issued under
the Equity Plan. Stock-based compensation expense for the
three and six
months ended December 31, 2019 and
2018 was $882,881 and $1,623,323.
Stock-based compensation expense for the three and six
months ended December 31, 2018 was
$785,999 and
$1,530,967, respectively. The
amount of compensation expense recognized does not reflect cash
compensation actually received by the individuals during the
current period, but rather represents the amount of expense
recognized by the Company in accordance with GAAP.
All restricted stock grants are expensed over
the applicable vesting period based on the fair value at the
date the stock is granted. The grant date fair value
may differ
from the fair value on the date the individual’s restricted stock
actually vests.
Restricted Stock. In November
2017, the Company granted 155,000
restricted shares of common stock to its executives and
non-executive directors. As of
December 31, 2019,
there were 155,000 shares of
such restricted stock that remained unvested. All 155,000
shares of restricted stock vested on January 1, 2020.
In November 2018, the
Company granted 155,000 restricted
shares of common stock to its executives and non-executive
directors. The restricted stock granted vests in
January 2021. As
of December 31, 2019,
there were 155,000 shares of
such restricted stock that remained unvested.
In December 2018, the Company cancelled 117,332 shares of
unvested restricted stock held by two of its executives and the
non-executive directors that were set to vest on January 1,
2019. The Company also granted 146,666 restricted shares
of common stock to two of its executives and non-executive
directors. The restricted shares cancellation and the
subsequent new grants were accounted for as modification to
the original restricted stock grants. The incremental fair
value will be recognized over the vesting period. The impact
of the modification to the current quarter was immaterial.
All of the restricted stock granted in December 2018 vest in
January 2021. As of December 31, 2019, there were 146,666
shares of such restricted stock that remained unvested.
In November 2019, the
Company granted 158,000 restricted
shares of common stock to its executives and non-executive
directors. The restricted stock granted vests in
January 2022. As
of December 31, 2019,
there were 158,000 shares of
such restricted stock that remained unvested.
As of December 31,
2019,
the total compensation cost related to unvested awards
not yet recognized
was $3,640,887. The
remaining costs will be recognized over the remaining vesting
period of the awards. Neither Brad Juneau, the
Company’s former Chairman, President and Chief Executive Officer
and current Executive Chairman, nor any of the Company’s
non-executive directors have ever been paid a salary or cash
compensation by the Company.
There were
no stock option exercises during the
three or six months ended December 31,
2019. During the six
months ended December 31, 2018 the Company's current and
former executives, directors, and consultants cashless
exercised 35,625 stock options resulting in the issuance of
19,513 shares of common stock to the exercising parties and no
proceeds to the Company.
The Company applies the fair value method to account for stock
option expense. Under this method, cash flows from the exercise of
stock options resulting from tax benefits in excess of recognized
cumulative compensation cost (excess tax benefits) are
classified as financing cash flows. See Note 3
–
Summary of Significant Accounting Policies. All employee stock
option grants are expensed over the stock option’s vesting period
based on the fair value at the date the options are granted. The
fair value of each option is estimated as of the date of grant
using the Black-Scholes options-pricing model. As of
December 31, 2019,
there were no stock options outstanding. The total
compensation cost related to these options has been fully
recognized as all of the options are fully vested.
Subsequent to December 31, 2019, in connection with the appointment
of Rick Van Nieuwenhuyse as the President and Chief Executive
Officer of the Company, on January 6, 2020, the Company granted to
Mr. Van Nieuwenhuyse options to purchase 100,000 shares of common
stock of the Company, with an exercise price per share equal to the
closing price on January 6, 2020, the day on which he began
employment with the Company. On January 9, 2020, the Company issued
75,000 shares of restricted stock to Mr. Van Nieuwenhuyse. The
options and shares of restricted stock each will vest in two equal
installments, half on the first anniversary of Mr. Van
Nieuwenhuyse’s employment with the Company and half on the second
anniversary of his employment with the Company, subject to
acceleration upon a change of control of the Company.
11. Commitments
and Contingencies
Tetlin Lease.
The Tetlin Lease had an initial ten year
term beginning July 2008 which
was extended for an additional ten years to
July 15, 2028, and
for so long thereafter as the Joint Venture Company initiates and
continues to conduct mining operations on the Tetlin
Lease.
Pursuant to the terms of the Tetlin Lease, the Joint Venture
Company was required to spend $350,000 per year
until July 15,
2018 in
exploration costs. The Company’s exploration expenditures through
the 2011 exploration
program have satisfied this requirement because exploration funds
spent in any year in excess of $350,000 are
credited toward future years’ exploration cost requirements.
Additionally, should the Joint Venture Company derive revenues from
the properties covered under the Tetlin Lease, the Joint Venture
Company is required to pay the Tetlin Tribal Council a production
royalty ranging from 2.0% to
5.0%, depending on
the type of metal produced and the year of production. As of
December 31, 2019,
the Company had paid the Tetlin Tribal Council $225,000 in
exchange for reducing the production royalty payable to them by
0.75%. These
payments lowered the production royalty to a range of
1.25% to
4.25%. On or
before July 15, 2020, the
Tetlin Tribal Council has the option to increase their production
royalty by (i) 0.25% by payment
to the Joint Venture Company of $150,000,
(ii) 0.50% by payment
to the Joint Venture Company of $300,000, or
(iii) 0.75% by payment
to the Joint Venture Company of $450,000.
Until such time as production royalties begin, the Joint Venture
Company must pay the Tetlin Tribal Council an advance minimum
royalty of $50,000 per year.
On July 15,
2012, the advance
minimum royalty increased to $75,000 per year,
and subsequent years are escalated by an inflation
adjustment.
Gold Exploration. The
Joint Venture Company’s Triple Z, Tok/Tetlin, Eagle, Bush, West
Fork, and Noah claims are all located on state of Alaska
lands. The annual claim rentals on these projects vary based on the
age of the claims, and are due and payable in full by
November 30 of each
year. Annual claims rentals for the 2019-2020 assessment
year totaled $323,248. The
Joint Venture Company has met the annual labor requirements for the
state of Alaska acreage for the next four years,
which is the maximum time allowable by Alaska law.
Royal Gold Royalties.
The Joint Venture Company is obligated to pay Royal Gold (i) an
overriding royalty of 3.0% should the
Joint Venture Company derive revenues from the Tetlin Lease, the
Additional Properties and certain other properties and (ii) an
overriding royalty of 2.0% should the
Joint Venture Company derive revenues from certain
other properties.
Retention Agreements. In February 2019, the Company entered
into Retention Agreements with its then Chief Executive Officer,
Brad Juneau, its Chief Financial Officer, Leah Gaines, and one
other employee providing for payments in an aggregate amount
of $1,500,000 upon the occurrence of certain
conditions. The Retention Agreements are triggered upon a
change of control (as defined in the applicable Retention
Agreement) that takes place prior to August 6, 2020, provided that
the recipient is employed by the Company when the change of control
occurs. Mr. Juneau and Ms. Gaines will receive a payment
of $1,000,000 and $250,000, respectively, upon a change of
control.
12. Subsequent Events
On January 1, 2020, 155,000 shares of common stock vested related
to the November 2017 stock grant.
Effective as of January 6, 2020, Rick Van Nieuwenhuyse was
appointed to serve as President and Chief Executive Officer of the
Company. Brad Juneau will continue to be active in the
Company as Executive Chairman. Mr. Van Nieuwenhuyse will
perform the functions of the Company’s principal executive
officer. Also, effective on January 6, 2020, the size of the
Board was increased from four to five directors with Mr. Van
Nieuwenhuyse appointed to the Board to fill the vacancy created by
the increase.
Pursuant to his Offer Letter, Mr. Van Nieuwenhuyse will receive a
base salary of $350,000 per annum. On January 6, 2020, pursuant to
an Incentive Stock Option Agreement, the Company granted to Mr. Van
Nieuwenhuyse options to purchase 100,000 shares of common
stock of the Company, with an exercise price per share equal
to the closing price on January 6, 2020, the day on which he began
employment with the Company. On January 9, 2020, the Company issued
75,000 shares of restricted stock to Mr. Van Nieuwenhuyse pursuant
to a Restricted Stock Award Agreement. The options and shares of
restricted stock each will vest in two equal installments, half on
the first anniversary of Mr. Van Nieuwenhuyse’s employment with the
Company and half on the second anniversary of his employment with
the Company, subject to acceleration upon a change of control of
the Company. Mr. Van Nieuwenhuyse will be entitled to receive
short-term incentive plan and long-term incentive plan bonuses that
will be paid in the form of a combination of cash, restricted stock
and options, which is set forth in plans and agreements to be
adopted by the Board. He will also receive one year of
severance in the event that his employment is terminated other than
for cause after the second anniversary of his employment with the
Company.
Available Information
General information about the Company can be found on the
Company’s website at 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
we file or furnish them to the Securities and Exchange Commission
(“SEC”).
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
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 elsewhere in this Form 10-Q
and in our Form 10-K for the fiscal year ended
June 30,
2019, 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 of 1933, 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:
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The Company’s financial position;
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Business strategy, including outsourcing;
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Meeting Company forecasts and budgets;
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Anticipated capital expenditures;
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Prices of gold and associated minerals;
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Timing and amount of future discoveries (if any) and production of
natural resources on our Peak Gold Joint Venture Property;
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Operating costs and other expenses;
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Cash flow and anticipated liquidity;
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The Company's ability to fund its business with current cash
reserves based on currently planned activities; |
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Prospect development;
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Operating and legal risks; and |
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New governmental laws and regulations.
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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 I, Item 2. Risk
Factors, of this report and Part I, Item 1A. Risk Factors, in our
Annual Report on Form 10-K for the year ended June 30, 2019, these
factors include among others:
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Ability to raise capital to fund capital expenditures;
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Ability to retain or maintain our relative ownership interest
in the Joint Venture Company; |
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Ability to influence management of the Joint Venture
Company; |
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Operational constraints and delays;
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The risks associated with exploring in the mining industry;
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The timing and successful discovery of natural resources;
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Availability of capital and the ability to repay indebtedness when
due;
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Declines and variations in the price of gold and associated
minerals;
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Price volatility for natural resources;
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Availability of operating equipment;
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Operating hazards attendant to the mining industry;
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The ability to find and retain skilled personnel;
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Restrictions on mining activities;
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Legislation that may regulate mining activities;
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Impact of new and potential legislative and regulatory changes on
mining operating and safety standards;
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Uncertainties of any estimates and projections relating to any
future production, costs and expenses;
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Timely and full receipt of sale proceeds from the sale of any of
our mined products (if any);
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Stock price and interest rate volatility;
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Federal and state regulatory developments and approvals;
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Availability and cost of material and equipment;
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Actions or inactions of third-parties;
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Potential mechanical failure or under-performance of facilities and
equipment;
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Strength and financial resources of competitors;
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Worldwide economic conditions;
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Expanded rigorous monitoring and testing requirements;
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Ability to obtain insurance coverage on commercially reasonable
terms;
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Competition generally and the increasing competitive nature of our
industry;
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Risks related to title to properties;
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Ability to consummate strategic
transactions. |
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, we undertake 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.
See the information under the heading “Risk Factors” in this Form
10-Q for some of the important factors that could affect our
financial performance or could cause actual results to differ
materially from estimates contained in forward-looking
statements.
Overview
The Company is a Houston-based
company, whose primary business is the participation in a
joint venture to explore in the State of Alaska for gold ore and
associated minerals. On January 8, 2015, the Company and Royal
Gold, Inc. (“Royal
Gold”), through their wholly-owned subsidiaries, consummated the
transactions (the “Transactions”) contemplated under the Master
Agreement, dated as of September 29, 2014 (the “Master Agreement”),
including the formation of the Joint Venture Company, to advance
exploration of the Peak Gold Joint Venture Property (as
defined below), which is prospective for gold and associated
minerals. As of December 31, 2019, the Joint Venture Company leased
or controlled over an estimated 860,000 acres for the exploration
of gold ore and associated minerals.
Background
Contango Mining Company (“Contango
Mining”), a wholly owned subsidiary of Contango Oil & Gas
Company (“Contango”), was formed for the purpose of mineral
exploration in the State of Alaska. The Company was formed on
September 1, 2010 as a Delaware corporation and on
November 29, 2010, Contango Mining assigned all its properties
and certain other assets and liabilities to Contango. Contango
contributed the properties and $3.5 million of cash to the Company,
pursuant to the terms of a Contribution Agreement (the
“Contribution Agreement”), in exchange for approximately
1.6 million shares of the Company’s common stock. The
transactions occurred between companies under common control.
Contango then distributed all of the Company’s common stock to
Contango’s stockholders of record as of October 15, 2010,
promptly after the effective date of the Company’s Registration
Statement Form 10 on the basis of one share of common stock for
each ten (10) shares of Contango’s common stock then
outstanding.
Contango Mining acquired an interest in properties from Juneau
Exploration, L.P., (“JEX”) in exchange for $1 million and a 3.0%
overriding royalty interest in the properties granted to JEX.
JEX assisted the Company in acquiring additional properties
in Alaska pursuant to an Advisory Agreement dated September 6,
2012, and the Company granted to JEX a 2% overriding royalty
interest in the additional properties acquired. On September 29,
2014, pursuant to a Royalty Purchase Agreement between JEX and
Royal Gold, JEX sold its entire overriding royalty interest in the
properties to Royal Gold. On the same date, the Company terminated
the Advisory Agreement with JEX. In connection with the
closing of the Transactions with Royal Gold (the “Closing”),
the Company formed Peak Gold, LLC (the “Joint Venture Company”) and
contributed to the Joint Venture Company the Peak Gold Joint
Venture Property near Tok, Alaska, together with other personal
property (the “Contributed Assets”) with a historical cost of $1.4
million and an agreed value of $45.7 million (the “Contributed
Assets Value”). At the Closing, the Company and Royal Gold, through
their wholly-owned subsidiaries, entered into a Limited Liability
Company Agreement for the Joint Venture Company (the “JV
LLCA”).
Upon Closing, Royal Gold initially contributed $5.0 million to fund
exploration activity of the Joint Venture Company. The initial
$5.0 million did not give Royal Gold an equity stake in the
Joint Venture Company. In connection with the initial contribution,
Royal Gold received an option to earn up to a 40% interest in the
Joint Venture Company by investing up to $30.0 million (inclusive
of the initial $5.0 million investment) prior to October
2018. As of December 31, 2019, Royal Gold has
contributed $35.1 million (including its initial $5.0 million
investment) to the Joint Venture Company and earned a 40.0%
interest in the Joint Venture Company. Now that Royal Gold has
funded $30 million to the Joint Venture Company, pursuant to the
terms of the JV LLCA, the Company and Royal Gold are obligated to
jointly fund the joint venture operations in proportion to their
interests in the Joint Venture Company in order to maintain their
respective percentage interests in the Joint Venture Company.
The proceeds of the investment are used for additional
exploration of the property it controls. If a member elects
not to contribute to an approved program and budget or contributes
less than its proportionate interest, its percentage interest will
be reduced. As of December 31, 2019, the Company had
approximately $5.4 million of cash, cash equivalents, and short
term investments. A capital budget of $6.9 million
was approved for the calendar 2019 exploration program for the
Joint Venture Company, of which the Company’s share
was approximately $4.1 million. The program was
completed in October 2019 below budget. A total of 3,073
meters of drilling was completed. As of December 31, 2019,
actual expenditures by the Joint Venture Company for the 2019
exploration program were $6.4 million. The Company
contributed $4.1 million to the Joint Venture Company during
calendar year 2019 related to both the 2019 and the 2018
exploration programs. The Company currently holds a 60.0%
interest in the Joint Venture Company.
Properties
Since 2009, the Company’s primary focus has been the
exploration of a mineral lease with the Native Village of Tetlin
whose governmental entity is the Tetlin Tribal Council (“Tetlin
Tribal Council”) for the exploration of minerals near Tok, Alaska
on a currently estimated 675,000 acres (the “Tetlin Lease”) and
almost all of the Company’s resources have been directed to that
end. All significant work presently conducted by the Company has
been directed at exploration of the Tetlin Lease and increasing
understanding of the characteristics of, and economics of, any
mineralization. There are no known quantifiable mineral reserves on
the Tetlin Lease or any of the Company’s other properties as
defined by the SEC Industry Guide 7.
The Tetlin Lease originally had a ten year term beginning July
2008, which was extended for an additional ten years to July 15,
2028. If the properties under the Tetlin Lease are placed into
commercial production, the Tetlin Lease will be held throughout
production and the Company would be obligated to pay a production
royalty to the Tetlin Tribal Council, which varies from 2.0% to
5.0%, depending on the type of metal produced and the year of
production. In June 2011, the Company paid the Tetlin Tribal
Council $75,000 in exchange for reducing the production royalty
payable to them by 0.25%. In July 2011, the Company paid the Tetlin
Tribal Council an additional $150,000 in exchange for further
reducing the production royalty by 0.50%. These payments lowered
the production royalty to a range of 1.25% to 4.25%, depending on
the type of metal produced and the year of production. On or before
July 15, 2020, the Tetlin Tribal Council has the option to increase
its production royalty by (i) 0.25% by payment to the Joint Venture
Company of $150,000, (ii) 0.50% by payment to the Joint Venture
Company of $300,000, or (iii) 0.75% by payment to the Joint Venture
Company of $450,000.
The Joint Venture Company also holds certain State of Alaska
unpatented mining claims for the exploration of gold ore and
associated minerals. The Company believes that the Joint Venture
Company holds good title to its properties, in accordance with
standards generally accepted in the mineral industry. As is
customary in the mineral industry, the Company conducted only
a preliminary title examination at the time it acquired the
Tetlin Lease. The Joint Venture Company conducted a title
examination prior to the assignment of the Tetlin Lease to the
Joint Venture Company and performed certain curative title
work. Before the Joint Venture Company begins any mine
development work, however, the Joint Venture Company is expected to
again conduct a full title review and perform curative work on any
defects that it deems significant. A significant amount of
additional work is likely required in the exploration of the
properties before any determination as to the economic feasibility
of a mining venture can be made.
The following table summarizes the Tetlin Lease and unpatented
mining claims (the “Peak Gold Joint Venture Property”) held by the
Joint Venture Company as of December 31, 2019:
Property
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Location
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Commodities
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Claims
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Estimated Acres
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Type
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Tetlin-Tok
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Eastern Interior
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Gold, Copper, Silver
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131
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10,900
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State Mining Claims
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Eagle
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Eastern Interior
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Gold, Copper, Silver
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428
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65,900
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State Mining Claims
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Bush
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Eastern Interior
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Gold, Copper, Silver
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48
|
|
7,700
|
|
|
State Mining Claims
|
West Fork
|
|
Eastern Interior
|
|
Gold, Copper, Silver
|
|
48
|
|
7,700
|
|
|
State Mining Claims
|
Triple Z
|
|
Eastern Interior
|
|
Gold, Copper, Silver
|
|
108
|
|
15,800
|
|
|
State Mining Claims
|
Noah |
|
Eastern
Interior |
|
Gold,
Copper, Silver |
|
482 |
|
75,400 |
|
|
State
Mining Claims |
Tetlin-Village
|
|
Eastern Interior
|
|
Gold, Copper, Silver
|
|
-
|
|
675,000
|
|
|
Lease
|
|
|
TOTALS:
|
|
|
|
1,245
|
|
858,400
|
|
|
|
Strategy
Partnering with strategic industry participants to expand future
exploration work. In
connection with an evaluation of the Company’s strategic options
conducted by the Board of Directors and its financial advisor in
2014, the Company determined to continue its exploration activities
on the Peak Gold Joint Venture Property through a joint venture
with an experienced industry participant. As a result, the Company
formed the Joint Venture Company pursuant to the JV LLCA with
Royal Gold. Under the JV LLCA, Royal Gold is appointed as the
manager of the Joint Venture Company (the “Manager”), initially,
with overall management responsibility for operations of the Joint
Venture Company through October 31, 2018, and, thereafter, provided
Royal Gold earns at least a forty percent (40%) percentage interest
by October 31, 2018. As of December 31, 2019, Royal Gold has earned
a 40% interest in the Joint Venture Company, and therefore
continues to serve as its Manager. Royal Gold may resign as
Manager and can be removed as Manager for a material breach of the
JV LLCA, a material failure to perform its obligations as the
Manager, a failure to conduct the Joint Venture Company operations
in accordance with industry standards and applicable laws, and
other limited circumstances. The Manager will manage and
direct the operation of the Joint Venture Company, and will
discharge its duties, in accordance with approved programs and
budgets. The Manager will implement the decisions of the Management
Committee of the Joint Venture Company (the “Management Committee”)
and will carry out the day-to-day operations of the Joint Venture
Company. Except as expressly delegated to the Manager, the JV LLCA
provides that the Management Committee has exclusive authority to
determine all management matters related to the Company. The
Management Committee currently consists of one appointee designated
by the Company and two appointees designated by Royal Gold. Each
designate on the Management Committee is entitled to one vote.
Except for the list of specific actions set forth in the JV LLCA
Agreement, the affirmative vote by a majority of designates is
required for action.
Effective as of January 6, 2020, Rick Van Nieuwenhuyse was
appointed to serve as President and Chief Executive Officer of the
Company. Brad Juneau will continue to be active in the
Company as Executive Chairman. Mr. Van Nieuwenhuyse
will perform the functions of the Company’s principal executive
officer. Also, effective on January 6, 2020, the size of the
Board was increased from four to five directors with Mr. Van
Nieuwenhuyse appointed to the Board to fill the vacancy
created by the increase. Mr. Van Nieuwenhuyse, 64, previously
served as President and Chief Executive Officer of Trilogy Metals
Inc. from January 2012. Between May 1999 and January of 2012, he
served as the President and Chief Executive Officer of NOVAGOLD
Resources, Inc.
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. As of December 31, 2019, the Company’s directors
and executives beneficially own approximately 18.6% of
the Company’s common stock. An additional 12.1% of the Company’s
common stock is beneficially owned by the Marital Trust of Mr.
Kenneth R. Peak, the Company’s former Chairman, who passed away on
April 19, 2013.
Restricted Stock; Options. In November 2017, the
Company granted 155,000 restricted shares of common stock to its
executives and non-executive directors. The restricted stock
granted vests in January 2020. As of December 31, 2019, there
were 155,000 shares of such restricted stock that remained
unvested.
In November 2018, the
Company granted 155,000 restricted
shares of common stock to its executives and non-executive
directors. The restricted stock granted vests in
January 2021. As
of December 31, 2019,
there were 155,000 shares of
such restricted stock that remained unvested.
In December 2018, the Company cancelled 117,332 shares of
unvested restricted stock held by two of its executives and the
non-executive directors that were set to vest on January 1,
2019. The Company also granted 146,666 restricted shares
of common stock to two of its executives and non-executive
directors. The restricted shares cancellation and the
subsequent new grants were accounted for as modification to
the original restricted stock grants. The incremental fair
value will be recognized over the vesting period. The impact
of the modification to the current quarter was immaterial.
All of the restricted stock granted in December 2018 vest in
January 2021. As of December 31, 2019, there were 146,666
shares of such restricted stock that remained unvested.
In November 2019, the
Company granted 158,000 restricted
shares of common stock to its executives and non-executive
directors. The restricted stock granted vests in
January 2022. As
of December 31, 2019,
there were 158,000 shares of
such restricted stock that remained unvested.
As of December 31, 2019, the total compensation cost related
to unvested awards not yet recognized was $3,640,887.
The remaining costs will be recognized over the remaining vesting
period of the awards. Neither Brad Juneau, the Company’s
former Chairman, President and Chief Executive Officer and current
Executive Chairman, nor any of the Company’s non-executive
directors have ever been paid a salary or cash compensation by the
Company.
There were
no stock option exercises during the
three and six months ended December 31,
2019. During the six
months ended December 31, 2018 the Company's current and former
executives, directors, and consultants cashless exercised
35,625 stock options resulting in the issuance of 19,513
shares of common stock to the exercising parties and no
proceeds to the Company.
In connection with the appointment of Rick Van Nieuwenhuyse as the
President and Chief Executive Officer of the Company, on January 6,
2020 the Company granted to Mr. Van Nieuwenhuyse options to
purchase 100,000 shares of common stock of the Company, with an
exercise price per share equal to the closing price on January 6,
2020, the day on which he began employment with the Company. On
January 9, 2020, the Company issued 75,000 shares of restricted
stock to Mr. Van Nieuwenhuyse. The options and shares of restricted
stock each will vest in two equal installments, half on the first
anniversary of Mr. Van Nieuwenhuyse’s employment with the Company
and half on the second anniversary of his employment with the
Company, subject to acceleration upon a change of control of the
Company.
Exploration and Mining Property
Exploration and mining rights in Alaska may be acquired in the
following manner: public lands, private fee lands, unpatented
Federal or State of Alaska mining claims, patented mining claims,
and tribal lands. The primary sources for acquisition of these
lands are the United States government, through the Bureau of Land
Management and the United States Forest Service, the Alaskan state
government, tribal governments, and individuals or entities who
currently hold title to or lease government and private lands.
Tribal lands are those lands that are under control by sovereign
Native American tribes, such as land constituting the Tetlin Lease
or Alaska Native corporations established by the Alaska Native
Claims Settlement Act of 1971. Areas that show promise for
exploration and mining can be leased from or joint ventured with
the tribe controlling the land, including land constituting the
Tetlin Lease.
The State of Alaska government owns public lands. Mineral resource
exploration, development and production are administered primarily
by the State Department of Natural Resources. Ownership of the
subsurface mineral estate, including alluvial and lode mineral
rights, can be acquired by staking a 40 -acre or 160 -acre mining
claim, which right is granted under Alaska Statute Sec. 38.05.185
to 38.05.275, as amended. The State of Alaska government continues
to own the surface estate, subject to certain rights of ingress and
egress owned by the claimant, even though the subsurface can be
controlled by a claimant with a right to extract through claim
staking. A mining claim is subject to annual assessment work
requirements, the payment of annual rental fees and royalties due
to the State of Alaska after commencement of commercial production.
Both private fee-land and unpatented mining claims and related
rights, including rights to use the surface, are subject to
permitting requirements of federal, state, tribal and local
governments.
Gold Exploration
The Joint Venture Company controls approximately an estimated
860,000 acres consisting of the Tetlin Lease and State of Alaska
mining claims for the exploration of gold and associated minerals.
To date, our gold exploration has concentrated on the Tetlin Lease,
with only a limited amount of work performed on the Tok, Eagle,
Bush, West Fork, Triple Z, and Noah claims.
The Joint Venture Company initiated its exploration efforts
with a summer 2015 exploration program on the Tetlin Lease.
The work program anticipated spending $5 million with a possible
expansion of the work program in early fall if drilling results
warranted further work. The drilling
program included exploration targets that were helicopter-supported
at the Tors, Saddle, North Saddle and Saddle Skarn targets and
road-supported work at the Peak Zone area. Most of the initial work
program (Phase I) was completed by early August with assay results
received by early September. On August 31, 2015, the Joint Venture
Company approved a budget of up to approximately $4 million for
additional exploration work to be completed before the drilling
season ended in October 2015 and incurred aggregate cost of
approximately $6.8 million for the calendar 2015 exploration
program.
The Joint Venture Company initiated a calendar 2016 Phase I
exploration program consisting of drilling the North Peak target
area which
began in February 2016 on the Tetlin Lease with an approved
budget of $4.4 million. An additional budget was approved for
spending up to an additional $6.8 million during the remainder of
calendar 2016. The Joint Venture Company initiated a 2016 Phase II
exploration drilling program in May, which was completed in
September. A Phase III exploration drilling program was initiated
in October and completed in November. The
project incurred an aggregate cost in calendar 2016 of
approximately $10.6 million.
The Joint Venture Company initiated a calendar 2017
Phase I exploration program consisting of drilling the North Peak
target area and testing the True Blue Moon target area which
began in February 2017 on the Tetlin Lease with an
approved budget of $5.3 million. The 2017 Phase I program was
completed in April. The Joint Venture Company initiated a
2017 Phase II exploration drilling and reconnaissance program in
May, which was completed in July 2017. The Joint
Venture Company initiated Phase III of the 2017 drilling program,
which consisted of exploration drilling in the West Peak, West Peak
Extension, 7 O’clock,
Forks, and North Peak areas in September 2017. Phase III was
completed in October 2017. The calendar 2017 Phase I, Phase
II, and Phase III programs and associated technical work incurred
an aggregate cost through December 31, 2017 of approximately
$12.2 million.
The Joint Venture Management initiated a calendar year 2018
exploration program with an approved budget of $10.7 million,
of
which the Company’s share was approximately
$6.1 million. The
2018 exploration program was completed in October 2018. The
Company contributed $5.4 million to the Joint Venture Company
during calendar year 2018. The budget
included an extensive 74 line kilometers of ground geophysics
program utilizing both Induced Polarization (“IP”) and Titan EM
techniques. Surveys were carried out on targets within an
8-kilometer radius of Main Peak to identify targets similar to Main
and North Peak and two targets in the southeastern part of the
Tetlin Lease, Copper Hill and Taixtsalda. Titan EM surveys
were carried out on three targets identified from airborne
magnetics surveys as porphyry type signatures. The program
drill tested a number of targets within an 8-kilometer radius of
the Main Peak deposit. In addition to the exploration work,
during the 2018 exploration program, the Joint Venture
conducted engineering studies along with metallurgical testing
to support the completion of a Preliminary Economic Assessment of
the Company’s Main Peak and North Peak resource areas near Tok,
Alaska.
The Joint Venture approved an exploration budget for calendar 2019
of $6.9 million, of which the Company's share was
approximately $4.1 million. The program was completed in
October 2019 below budget. The program included ground
geophysics utilizing IP and soil samples within the greater Chief
Danny area. A further program of reconnaissance work, drilling and
airborne Versatile Time Domain Electromagnetics (VTEM) survey was
completed in the Hona and Eagle claims blocks to follow up stream
sediment sampling work completed in 2017. Also included was
soil sampling and ground geophysics work on the Triple Z target.
The program drill tested targets adjacent to the Main Peak deposit,
on the Hona claims and a target in the North Saddle area. The
budget also included funding to initiate a program of surface
and groundwater characterization to support future permitting
efforts. The Company funded a total of $4.1 million
to the Joint Venture Company during calendar year 2019, which
related to both the 2019 and 2018 exploration
programs. The Joint Venture Company has not approved a final
exploration budget for calendar year 2020. The Company's
ability to contribute funds to the Joint Venture Company in
proportion to its 60% interest in the Joint Venture Company will
depend on its ability to raise capital. If the Company is
unable to fund its contribution to the approved programs and
budgets for the Joint Venture Company, its interest in the Joint
Venture Company will be diluted.
From inception to December 31, 2019, the Joint Venture Company has
incurred $46.0 million in exploration program expenditures. As of
December 31, 2019, Royal Gold had funded a total of $36.3 million
(including the initial investment of $5 million) and earned a 40.0%
interest in the Joint Venture Company.
Hona Prospect Area
The Hona Prospect area is located on Alaska State mining claims
approximately 25 kilometers west of the Main Peak deposit. A
reconnaissance program was carried out on the Hona claim block in
2017, which consisted of 363 pan concentrate and 364 stream
sediment samples. Anomalous gold and copper values were found
during the 2017 program and in 2019 follow-up reconnaissance
work was completed. This effort consisted of taking 615 rock
chip samples and surface mapping. The two programs identified
three target areas Hona 1, Hona 2 and Hona 3. Exploration
drilling in 2019, consisting of two core holes, totaling
1,301 meters, tested a portion of the Hona 2 target. As part
of the 2019 program, 1,006 line-km of helicopter-borne magnetic and
VTEM survey was completed over a portion of the Hona Prospect.
The map below depicts the location of the two core holes drilled at
the Hona 2 target along with rock chip sampling results and surface
geology.
Significant Drill Intercepts from the 2019 Program. Sample
intervals are calculated using 0.5 grams per tonne (gpt) lower cut
off for gold with no internal waste less than cutoff grade that is
greater than 3 meters in thickness. Intercepts shown are drill
intercept lengths. True width of mineralization is unknown. The
grade cutoff for gold (Au) is 0.5 gpt; for silver (Ag) is 10 gpt;
and for copper (Cu) is 0.1%. The following table summarizes the
significant drilling results obtained for the complete 2019
Program:
DrillHole
|
Zone
|
From (meters)
|
To (meters)
|
Interval (meters)
|
Au_gpt
|
Au_opt
|
Ag_gpt
|
Cu %
|
HN19001
|
Hona 2
|
32.00
|
35.05
|
3.05
|
1.01
|
0.029
|
1.4
|
0.027
|
HN19001
|
Hona 2
|
436.17
|
440.89
|
4.72
|
0.80
|
0.023
|
-
|
0.025
|
HN19001
|
Hona 2
|
452.78
|
460.71
|
7.93
|
0.88
|
0.026
|
0.4
|
0.034
|
HN19002
|
Hona 2
|
224.33
|
227.38
|
3.05
|
0.59
|
0.017
|
-
|
0.012
|
HN19002
|
Hona 2
|
339.09
|
342.29
|
3.20
|
1.23
|
0.036
|
1.3
|
0.046
|
HN19002
|
Hona 2
|
369.27
|
373.56
|
4.29
|
0.55
|
0.016
|
-
|
0.028
|
HN19002
|
Hona 2
|
396.85
|
399.04
|
2.19
|
0.93
|
0.027
|
1.7
|
0.024
|
HN19002
|
Hona 2
|
445.24
|
446.53
|
1.29
|
3.05
|
0.089
|
0.8
|
0.029
|
HN19002
|
Hona 2
|
612.65
|
629.67
|
17.02
|
0.41
|
0.012
|
5.4
|
0.333
|
The exploration
effort on the Tetlin Lease has resulted in identifying two mineral
deposits (Peak and North Peak) and several other gold and
copper
prospects following drilling programs starting in 2011. Surface,
bedrock, and stream sediment data on the Tetlin Lease as well as on
the Eagle, Noah and Tok state of Alaska claims adjacent to the
Tetlin Lease have been gathered during the summer exploration
programs. There was no exploration program in 2014. None of the
exploration targets are known to host quantifiable
commercial mineral reserves and none are near or adjacent to other
known significant gold or copper deposits. There has been no
recorded past placer or lode mining on Peak Gold Joint Venture
Property, and the Company and the Joint Venture Company are the
only entities known to have conducted drilling operations on the
Joint Venture Property.
Chief Danny Prospect Area
The Chief Danny Prospect Area currently is the most advanced
exploration target on the Tetlin Lease and is comprised of several
distinct mineralized areas: Main Peak Zone, Discovery Zone, West
Peak Zone, North Peak Zone, Saddle Zone and
the 7 O’clock area. The Chief Danny prospect was discovered during
rock, stream sediment and pan concentrate sampling in 2009 and
since then has been explored using top of bedrock soil auger
sampling, trenching, ground IP geophysics, airborne magnetic and
resistivity surveys and core drilling. Results from this work
indicate the presence of a zoned metal-bearing system consisting of
a gold-copper-iron enriched core covering six square miles at Chief
Danny South (includes Main Peak, Discovery, West Peak, and North
Peak) and a fault-offset arsenic-gold enriched zone to the north
covering three square miles at the Saddle Zone. The Company has
conducted extensive drilling on the Main Peak, North Peak, and West
Peak Zones. The Company has also conducted some environmental base
line studies on the areas surrounding the Chief Danny prospect, as
well as airborne magnetic and resistivity programs. From 2009
through December 31, 2019, the Company conducted field-related
exploration work at the Chief Danny Prospect, including collecting
the following samples:
Year
|
|
Program
|
|
Core
Samples
|
|
Rock
Samples
|
|
Soil
Samples
|
|
Pan Con
Samples
|
|
Stream Silt
Samples
|
|
Core (feet)
|
|
IP/Geophysics
(kilometers)
|
|
Trenching
(feet)
|
2009
|
|
Chief Danny
|
|
—
|
|
|
958
|
|
|
33
|
|
|
94
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
2,330
|
|
2010
|
|
Chief Danny
|
|
—
|
|
|
613
|
|
|
760
|
|
|
668
|
|
|
795
|
|
|
—
|
|
|
14
|
|
|
—
|
|
2011
|
|
Chief Danny
|
|
1,267
|
|
|
20
|
|
|
688
|
|
|
—
|
|
|
—
|
|
|
8,057
|
|
|
3,957
|
|
|
—
|
|
2012
|
|
Chief Danny
|
|
5,223
|
|
|
82
|
|
|
1,029
|
|
|
—
|
|
|
—
|
|
|
36,006
|
|
|
—
|
|
|
—
|
|
2013
|
|
Chief Danny
|
|
8,970
|
|
|
14
|
|
|
1,406
|
|
|
85
|
|
|
278
|
|
|
47,081
|
|
|
2,414
|
|
|
—
|
|
2014
|
|
Chief Danny
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
2015
|
|
Chief Danny
|
|
8,352
|
|
|
133
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
46,128
|
|
|
—
|
|
|
—
|
|
2016
|
|
Chief Danny
|
|
10,450
|
|
|
21
|
|
|
694
|
|
|
—
|
|
|
—
|
|
|
67,336
|
|
|
24
|
|
|
—
|
|
2017 |
|
Chief Danny |
|
11,864 |
|
|
112 |
|
|
975 |
|
|
408 |
|
|
408 |
|
|
59,347 |
|
|
48 |
|
|
— |
|
2018 |
|
Chief Danny |
|
2,973 |
|
|
402 |
|
|
63 |
|
|
45 |
|
|
9 |
|
|
20,307 |
|
|
80 |
|
|
— |
|
2019 |
|
Chief Danny |
|
1,575 |
|
|
839 |
|
|
1,563 |
|
|
18 |
|
|
— |
|
|
10,079 |
|
|
1,049 |
|
|
|
|
|
|
Total
|
|
50,674
|
|
|
3,194
|
|
|
7,211
|
|
|
1,318
|
|
|
1,501
|
|
|
294,341
|
|
|
7,586
|
|
|
2,330
|
|
The map below depicts the grade times thickness in the Main Peak,
North Peak, and West Peak zones:
2019 Exploration Program. During the quarter
ended December 31, 2019 the Joint Venture Company spent
an estimated $1.6 million on program activities, including
metallurgical testing, geochemical data analyses, geophysical
surveys landholding fees and other related expenses.
During the quarter ended September 30, 2019 the Joint Venture
Company spent an estimated $2.8 million on program activities,
including 7.6 line kilometers of IP geophysical surveys and 125
soil auger sampling and 146 rock chip samples within the Chief
Danny area. Exploration drilling consisted of 1,771
meters in four holes, which included three holes for 1,117 meters
in the East Peak area and one hole of 654 meters at the North
Saddle.
The map below depicts the location of the core holes drilled in the
East Peak and North Saddle zones.

Significant Drill Intercepts from the 2019
Program. Sample intervals are calculated using 0.5 grams
per tonne (gpt) lower cut off for gold with no internal waste less
than cutoff grade that is greater than 3 meters in thickness.
Intercepts shown are drill intercept lengths. True width of
mineralization is unknown. The grade cutoff for gold (Au) is 0.5
gpt; for silver (Ag) is 10 gpt; and for copper (Cu) is 0.1%. The
following table summarizes the significant drilling results
obtained for the complete 2019 Program:
DrillHole
|
Zone
|
From (meters)
|
To (meters)
|
Interval (meters)
|
Au_gpt
|
Au_opt
|
Ag_gpt
|
Cu %
|
TET19446
|
East Peak
|
213.52
|
215.00
|
1.48
|
1.11
|
0.032
|
64.8
|
0.046
|
TET19447
|
East Peak
|
148.44
|
151.49
|
3.05
|
0.99
|
0.029
|
31.0
|
0.022
|
TET19447
|
East Peak
|
303.70
|
306.29
|
2.59
|
1.70
|
0.050
|
61.8
|
0.116
|
TET19447
|
East Peak
|
326.04
|
327.17
|
1.13
|
1.70
|
0.050
|
5.1
|
0.076
|
TET19447
|
East Peak
|
339.85
|
342.14
|
2.29
|
1.79
|
0.052
|
3.1
|
0.108
|
TET19447
|
East Peak
|
407.21
|
408.52
|
1.31
|
9.18
|
0.268
|
1.9
|
0.049
|
TET19448
|
East Peak
|
326.77
|
329.34
|
2.57
|
2.37
|
0.069
|
1.3
|
0.015
|
2019 Exploration Program – continued. During the
quarter ended June 30, 2019 the Joint Venture Company spent an
estimated $1.7 million on program activities, including 23.3
line kilometers of IP geophysical surveys and 1,363 soil auger
sampling within the Chief Danny area. Drill targets were
assessed and initial drilling to test East Peak and North
Saddle started in mid-August. In addition, seven monitor
wells were installed in and around the deposit area to initiate
groundwater characterized to support baseline date
collection.
During the quarter ended March 31, 2019, the Joint Venture
Company spent an estimated $0.3 million on program activities,
including metallurgical testing, geochemical data analyses,
landholding fees and other related expenses.
2018 Exploration Program - Phase I. During the
quarter ending December 31, 2018, 3.5 line-kilometers of IP
surveys, 35.0 line-kilometers of Titan DCIP/MT surveys and 4,427
meters of core drilling were completed. The Joint Venture Company
spent an estimated $4.6 million, during the quarter, on program
activities, including drilling, geochemical analyses, landholding
fees and other related expenses. Exploration drilling consisted of
2,177 meters in six holes in the North Saddle Area, 1,403 meters in
six holes in Copper Hill, 207 meters in two holes in 2 O’clock, 261
meters in one hole in 8 O’clock, 180 meters in one hole in Main
Peak and 200 meters in one northeast of North Peak. In the
2018 field season, 6,189 meters of drilling in 28 holes were
completed.
Metallurgical testing of 19 composite samples from the Main Peak
deposit were completed and showed good metallurgical response to
direct cyanidation. The Main Peak testing along with
previously completed metallurgical testing on North Peak were used
as the basis for the Preliminary Economic Assessment completed in
September 2018.
The map below depicts the location of the core holes drilled in the
8 O'clock, 2 O'clock, Main Peak and North Saddle zones:

Significant Drill Intercepts from the 2018 Phase I
Program. Sample intervals are calculated using 0.5 grams
per tonne (gpt) lower cut off for gold with no internal waste less
than cutoff grade that is greater than 3 meters in thickness.
Intercepts shown are drill intercept lengths. True width of
mineralization is unknown. The grade cutoff for gold (Au) is 0.5
gpt; for silver (Ag) is 10 gpt; and for copper (Cu) is 0.1%. The
following table summarizes the significant drilling results
obtained for the complete Phase I of the 2018 Program:
Drillhole
|
Zone
|
From (meters)
|
To (meters)
|
Interval (meters)
|
Au g/t
|
Au_opt |
Ag g/t
|
Cu %
|
TET18421
|
Two O'clock
|
41.14
|
42.86
|
1.72
|
1.18
|
.034 |
39.7
|
0.025
|
TET18430
|
Eight O'clock
|
124.05
|
124.66
|
0.61
|
3.11
|
.091 |
38.3
|
0.213
|
TET18433
|
Copper Hill
|
112.00
|
113.77
|
1.77
|
8.08
|
.236 |
5.4
|
0.036
|
TET18440
|
North Saddle
|
179.88
|
181.52
|
1.64
|
1.48
|
.043 |
0.6
|
0.003
|
TET18440
|
North Saddle
|
231.46
|
233.58
|
2.12
|
0.95
|
.028 |
2.6
|
0.014
|
TET18440
|
North Saddle
|
307.40
|
310.47
|
3.07
|
0.69
|
.020 |
15.8
|
0.013
|
TET18443
|
North Saddle
|
84.92
|
88.26
|
3.34
|
0.87
|
.025 |
15.8
|
0.021
|
TET18443
|
North Saddle
|
96.92
|
98.43
|
1.51
|
1.11
|
.032 |
18.7
|
0.023
|
TET18443
|
North Saddle
|
196.04
|
199.4
|
3.36
|
1.13
|
.033 |
142.3
|
0.139
|
TET18443
|
North Saddle
|
285.86
|
288.75
|
2.89
|
0.83
|
.024 |
22.5
|
0.060
|
TET18443
|
North Saddle
|
353.11
|
355.18
|
2.07
|
0.95
|
.028 |
15.8
|
0.062
|
TET18443
|
North Saddle
|
422.58
|
425.23
|
2.65
|
0.73
|
.021 |
3.9
|
0.017
|
TET18445
|
Main Peak
|
83.60
|
162.73
|
79.13
|
0.59
|
.017 |
45.8
|
0.938
|
Including
|
Main Peak
|
103.07
|
115.46
|
12.39
|
3.14
|
.092 |
16.4
|
0.475
|
2018 Exploration Program - Phase I (continued). During
the quarter ending June 30, 2018, 30.6 line-kilometers of IP
surveys, 10.6 line-kilometers of Titan DCIP/MT surveys and 1,762
meters of core drilling were completed. The Joint Venture Company
spent an estimated $4.0 million, during the quarter, on program
activities, including drilling, geochemical analyses, landholding
fees and other related expenses. Exploration drilling consisted of
1,518 meters in ten holes in the 2 O’clock area and 244 meters in
two holes in the 8 O’clock area. To date, the Joint Venture
Company has also completed 1,370 meters of core drilling at Copper
Hill, and has drilled the North Saddle Zone for porphyry
prospects.
Nineteen composite samples from the Main Peak orebody and 19
composite samples from the North Peak orebody were the subject of
ongoing metallurgical testing in support of the Preliminary
Economic Evaluation completed in September. Test results
support the economic processing of Main and North Peak materials in
a conventional gold processing plant using traditional mining
methods.
The map below depicts the location of the core holes drilled in the
8 O'clock, 2 O'clock, and North Saddle zones during the 2018 Phase
I Program:
The map below depicts the location of the core holes drilled in the
Copper Hill zone during the 2018 Phase I Program:
Significant Drill Intercepts from the 2018 Phase I
Program. Sample intervals are calculated using 0.5
grams per tonne (gpt) lower cut off for gold with no internal waste
less than cutoff grade that is greater than 3 meters in thickness.
Intercepts shown are drill intercept lengths. True width of
mineralization is unknown. The grade cutoff for gold (Au) is 0.5
gpt; for silver (Ag) is 10 gpt; and for copper (Cu) is 0.1%. For
the 2018 exploration program, no significant intervals were
encountered in the drilling.
Consulting Services provided by Avalon Development
Corporation
Until January 8, 2015, the Company was a party to a Professional
Services Agreement (“PSA”) with Avalon to provide certain
geological consulting services and exploration activities with
respect to the Peak Gold Joint Venture Property. Pursuant to the
PSA, Avalon provided geological consulting services and exploration
activities, including all field work at the Tetlin
Lease. In connection with the Transactions, the Company
terminated the PSA with Avalon, and Avalon is now providing
services to the Joint Venture Company. Avalon will cease to
provide services to the Joint Venture Company on February 28,
2020.
Avalon is a Fairbanks, Alaska based mineral exploration consulting
firm, which has conducted mineral exploration in Alaska since 1985.
The President of Avalon is Curtis J. Freeman who graduated from the
College of Wooster, Ohio, with a B.A. degree in Geology (1978) and
graduated from the University of Alaska with an M.S. degree in
Economic Geology (1980). From 1980 to the present Mr. Freeman has
been actively employed in various capacities in the mining industry
in numerous locations in North America, Central America, South
America, New Zealand and Africa. Avalon’s team of engineers and
geoscientists combined with its geographic information systems
(“GIS”) database allows Avalon to synthesize existing geological,
geochemical and geophysical data and identify specific target areas
for ground evaluation and/or acquisition. Avalon’s
exploration team has identified or conducted discovery drilling on
several gold deposits in Alaska and has completed digital GIS
compilations of the Tintina Gold Belt, a regional-scale mineral
province stretching from southwest Alaska to the southern Yukon
Territory. Avalon also has experience exploring for copper, nickel
and platinum group elements (“Cu-Ni-PGE”) deposits and also created
a comprehensive GIS compilation of Cu-Ni-PGE prospects in Alaska,
an internally-owned database that contains data on over 200 PGE
occurrences in Alaska.
Services Provided by Tetlin Village Members
Since
the start of the term of our Tetlin Lease, the Company has worked
closely with the Tetlin Tribal Council to train and employ Tetlin
residents during Peak Gold Joint Venture project exploration
programs. During the Company’s exploration programs, there were 10
to 15 Tetlin residents working on the Peak Gold Joint Venture
project employed on a seasonal basis through Avalon. Their duties
included reconnaissance soil, stream sediment and pan concentrate
sampling, diamond drill core processing, drill pad construction and
related tasks, expediting services, food services, database
management, vehicle transportation and maintenance services,
reclamation activities, and project management tasks.
Community Affairs
In April 2015, the Joint Venture Company entered into a
Community Support Agreement (as amended, the “Support Agreement”)
with the Tetlin Village for a one year period, which has been
extended for an additional two year period under the same terms.
Under the extended Support Agreement the Joint Venture Company
provided payments to the Tetlin Village four times during the
year for an aggregate amount of $110,000 through January 1, 2017
and an additional $100,000 through January 1, 2018. The
Support Agreement was extended a second time for an additional
two-year period under the same terms.
Under the second extension, the Joint Venture Company
provided payments to the village four times during the year
for an aggregate amount of $100,000 through January 1, 2019 and an
additional $100,000 through January 1, 2020. The
Support Agreement defines agreed uses for the funds and auditing
rights regarding use of funds. In addition, the Joint Venture
Company supports the Tetlin Village in maintenance of the village
access road, which is used by the Joint Venture Company.
Adverse Climate Conditions
Weather conditions affect the Joint Venture Company’s ability to
conduct exploration activities and mine any ore from the Peak Gold
Joint Venture Property in Alaska. While the Company believes
exploration, development work and any subsequent mining may be
conducted year-round, the arctic climate limits many exploration
and mining activities during certain seasons.
Competition
The Company currently faces strong competition for the
acquisition of any new exploration-stage properties as well as
extraction of any minerals in Alaska. Numerous larger mining
companies actively seek out and bid for mining prospects as well as
for the services of third party providers and supplies, such as
mining equipment and transportation equipment. The Company’s
competitors in the exploration, development, acquisition and mining
business will include major integrated mining companies as well as
numerous smaller mining companies, almost all of which have
significantly greater financial resources and in-house technical
expertise. In addition, the Company will compete with others in
efforts to obtain financing to explore our mineral properties.
Off-Balance Sheet Arrangements
None.
Contractual Obligations
The Tetlin Lease had an initial ten year term beginning July 2008
which was extended for an additional ten years to July 15, 2028, or
so long as the Joint Venture Company initiates and continues to
conduct mining operations on the Tetlin Lease. The Joint Venture
Company was required to spend $350,000 per year annually until
July 15,
2018 in exploration costs pursuant to the Tetlin Lease. Exploration
expenditures to date under the Tetlin Lease have satisfied
this work commitment requirement for the full lease term, through
2028, because exploration funds spent in any year in excess of
$350,000 are credited toward future years’ exploration cost
requirements. The Tetlin Lease also provides that the Joint Venture
Company will pay the Tetlin Tribal Council a production royalty
ranging from 2.0% to 5.0% should the Joint Venture Company deliver
to a purchaser on a commercial basis precious or non-precious
metals derived from the properties under the Tetlin Lease. As of
December 31, 2019, the Company had paid the Tetlin Tribal Council
$225,000 in exchange for reducing the production royalty payable to
them by 0.75%. These payments lowered the production royalty to a
range of 1.25% to 4.25%. On or before July 15, 2020, the
Tetlin Tribal Council has the option to increase its production
royalty by (i) 0.25% by payment to the Joint Venture Company
of $150,000, (ii) 0.50% by payment to the Joint Venture
Company of $300,000, or (iii) 0.75% by payment to the Joint
Venture Company of $450,000.
On January 8, 2015, the Company assigned the Tetlin Lease to the
Joint Venture Company in connection with the Transactions.
Until such time as production royalties begin, the Joint Venture
Company will pay the Tetlin Tribal Council an advance minimum
royalty of approximately $75,000 per year, plus an inflation
adjustment. Additionally, the Joint Venture Company will pay Royal
Gold an overriding royalty of 3.0% should it deliver to a purchaser
on a commercial basis gold or associated minerals derived from the
Tetlin Lease, Additional Properties and certain other properties,
and an overriding royalty of 2.0% should it deliver to a purchaser
on a commercial basis precious metals, non-precious metals or
hydrocarbons derived from any other properties. The Joint Venture
Company pays claim rentals on state of Alaska mining claims which
vary based on the ages of the claims. For the 2019-2020 assessment
year, claims rentals totaled $323,248. Also, if the minimum work
requirement is not performed on the property, additional minimum
labor payments are due on certain state of Alaska acreage.
In February 2019, the Company entered into Retention Agreements
with its then-Chief Executive Officer, Brad Juneau, its Chief
Financial Officer, Leah Gaines, and one other employee providing
for payments in an aggregate amount of $1,500,000 upon the
occurrence of certain conditions. The Retention Agreements are
triggered upon a change of control (as defined in the applicable
Retention Agreement), that takes place prior to August 6, 2020,
provided that the recipient is employed by the Company when the
change of control occurs. Mr. Juneau and Ms. Gaines will
receive a payment of $1,000,000 and $250,000, respectively, upon a
change of control.
Application of Critical Accounting Policies and
Management’s
Estimates
The discussion and analysis of the Company’s
financial condition and results of operations is based upon the
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these consolidated financial
statements requires the Company to make estimates and judgments
that affect the reported amounts of assets, liabilities, revenues
and expenses. We have identified below the policies that are of
particular importance to the portrayal of our financial position
and results of operations and which require the application of
significant judgment by management. The Company analyzes its
estimates, including those related to its mineral reserve
estimates, on a periodic basis and bases its estimates on
historical experience, independent third party engineers and
various other assumptions that management believes to be reasonable
under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The Company
believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of the
Company’s consolidated financial statements:
Stock-Based Compensation. The
Company applies the fair value method of accounting for stock-based
compensation. Under this method, the Company measures and
recognizes compensation expense for all stock-based payments at
fair value at the date of grant and amortize the amount over the
employee’s service period. Management is required to make
assumptions including stock price volatility and employee turnover
that are utilized to measure compensation expense.
Investment in the Joint Venture Company. The
Company’s consolidated financial statements include the investment
in the Joint Venture Company, which is accounted for under the
equity method. The Company has designated one of the three members
of the Management Committee and on December 31, 2019 held
a 60.0% ownership interest in the Joint Venture Company. Royal
Gold serves as the Manager of the Joint Venture Company and
manages, directs, and controls operations of the Joint Venture
Company. The Company recorded its investment at the historical cost
of the assets contributed. The cumulative losses of the Joint
Venture Company exceed the historical cost of the assets
contributed to the Joint Venture Company; therefore, the Company’s
investment in the Joint Venture Company as of December 31,
2019 is zero. The portion of the cumulative loss that exceeds the
Company’s investment will be suspended and recognized against
earnings, if any, from the investment in the Joint Venture Company
in future periods.
Results of Operations
Neither the Company nor the Joint Venture Company has commenced
mining or producing commercially marketable minerals. To date,
neither the Company nor the Joint Venture Company
has generated any revenue from mineral sales or operations.
Neither the Company nor the Joint Venture Company has any recurring
source of revenue and other than Royal Gold’s
contributions in connection with the Transactions, the Company’s
ability to continue as a going concern is dependent on our ability
to raise capital to fund our future exploration and working capital
requirements. In the future, the Joint Venture Company may generate
revenue from a combination of mineral sales and other payments
resulting from any commercially recoverable minerals from the Peak
Gold Joint Venture Property. We do not expect the Joint
Venture Company to generate revenue from mineral sales in the
foreseeable future. If the Peak Gold Joint Venture Property
fails to contain any proven reserves, our ability to generate
future revenue, and our results of operations and financial
position, would be materially adversely affected. Other potential
sources of cash, or relief of demand for cash, include external
debt, the sale of shares of our stock, joint ventures, or
alternative methods such as mergers or sale of our assets. No
assurances can be given, however, that we will be able to obtain
any of these potential sources of cash. We will need to generate
significant revenues to achieve profitability and we may never do
so.
Three Months Ended December 31, 2019 Compared
to Three Months Ended December 31, 2018
General and Administrative Expense. General
and administrative expense for the three months ended December 31,
2019 and 2018 were $1,150,944 and $1,103,750, respectively.
Current year general and administrative expenses primarily relate
to audit fees, legal fees, management fees, and stock-based
compensation expense. We recognized $882,881 of stock-based
compensation expense for the three months ended December 31,
2019, related to restricted stock granted to our officers and
directors in November 2019, December 2018, November 2018, November
2017, August 2016, September 2015 and November 2014, all pursuant
to the Company’s 2010 Equity Compensation
Plan. We recognized $785,999 of stock-based
compensation expense for the three months ended December
31, 2018, related to restricted stock granted to our officers and
directors in November 2018, November 2017, November 2016, August
2016, September 2015, and November 2014, all pursuant to the
Company’s 2010 Equity Compensation Plan.
Loss from Equity Investment in the Joint Venture
Company. The loss from the Company’s equity
investment in the Joint Venture Company for the three
months ended December 31, 2019 and
2018 was $1,800,000 and $840,000,
respectively. Pursuant to the terms of the JV LLCA, the
Company and Royal Gold are required to jointly fund the joint
venture operations in proportion to their interests in the Joint
Venture Company to avoid dilution. The Company invested
$1,800,000 in the Joint Venture Company during the three months
ended December 31, 2019, and $840,000 during the three months
ended December 31, 2018. The portion of the
cumulative loss that exceeds the Company’s cumulative investment
will be suspended and recognized against earnings, if any, from the
Company’s investment in the Joint Venture Company in future
periods. The suspended losses for the period from inception
to December 31, 2019 are $23.2 million.
Six Months Ended December 31, 2019 Compared to Six Months
Ended December 31, 2018
General and Administrative Expense. General and
administrative expense for the six months ended December 31,
2019 and 2018 were $2,141,935 and $2,097,183,
respectively. Current year general and administrative expenses
primarily relate to audit fees, legal fees, management fees, and
stock-based compensation expense. We recognized $1,623,323 of
stock-based compensation expense for the six months
ended December 31, 2019, related to restricted stock granted
to our officers and directors in November 2019, December 2018,
November 2018, November 2017, November 2016, August 2016, September
2015 and November 2014, all pursuant to the Company’s 2010 Equity
Compensation Plan. We recognized $1,530,967 of
stock-based compensation expense for the six months
ended December 31, 2018, related to restricted stock granted
to our officers and directors in December 2018, November 2018,
November 2017, November 2016, August 2016, September 2015 and
November 2014, all pursuant to the Company’s 2010 Equity
Compensation Plan.
Loss from Equity Investment in the Joint Venture
Company. The loss from the Company’s equity
investment in the Joint Venture Company for the six
months ended December 31, 2019 and 2018 was
$2,700,000 and $2,790,000, respectively. Pursuant to the
terms of the JV LLCA, the Company and Royal Gold are required to
jointly fund the joint venture operations in proportion to their
interests in the Joint Venture Company to avoid dilution. The
Company invested $2,700,000 million in the Joint Venture
Company during the six months ended December 31, 2019,
and $2,790,000 during the six months ended December
31, 2018. The portion of the cumulative loss that
exceeds the Company's cumulative investment will be suspended and
recognized against earnings, if any, from the Company's investment
in the Joint Venture Company in future periods. The suspended
losses for the period from inception to December 31,
2019 are $23.2 million.
Liquidity
Prior to the Closing, the Company’s primary cash requirements were
for exploration-related expenses. Since
the Closing, the Company’s primary cash requirements have been for
general and administrative expenses and capital calls from the
Joint Venture Company. The Company’s sources of cash have
been from common stock offerings. The Peak Gold Joint Venture
Property is still in the initial stages of exploration,
and the longer term liquidity of the Company will be impaired to
the extent the Joint Venture Company’s exploration efforts are not
successful in generating commercially viable mineral deposits on
the Peak Gold Joint Venture Property.
As
of December 31, 2019, the Company had approximately $5.4
million of cash, cash equivalents, and short term
investments. A capital budget of $6.9 million was
approved for the calendar 2019 Exploration Program for the
Joint Venture Company, of which the Company’s share was
approximately $4.1 million. The 2019 program was
completed in October below budget. The
Company funded a total of $4.1 million to the Joint Venture
Company, which related to both the 2019 and
2018 exploration programs.
The Company believes that its current cash balances will be
sufficient to meet its working capital requirements for the next
twelve months.
In
September 2016, the Company distributed a Private Placement
Memorandum to its warrant holders to give them the opportunity to
exercise their warrants at a reduced exercise price and receive
shares of common stock, par value $0.01 per share of the Company by
paying the reduced exercise price in cash and surrendering the
original warrants. The offering applied to warrant holders
with an exercise price of $10.00 per share originally issued in
March 2013. The offering gave the warrant holders the opportunity
to exercise the warrants for $9.00 per share. The offer expired on
November 15, 2016. In conjunction with the offering a total of
587,500 warrants were exercised resulting in total cash to the
Company of $5.3 million. On October 13,
2017, the Company distributed a Private Placement Memorandum to its
warrant holders to give them the opportunity to exercise their
warrants at a reduced exercise price and receive shares of common
stock, par value $0.01 per
share of Contango ORE, Inc. by paying the reduced exercise price in
cash and surrendering the original warrants. The offering
applied to warrant holders with an exercise price
of $10.00 per share originally issued in March 2013. The
offering gave the warrant holders the opportunity to exercise
the warrants for $9.50 per share. The offer expired
on November 10, 2017. In conjunction with the offering a
total of 124,999 warrants were exercised resulting in total cash to
the Company of $1.2 million. Proceeds from the exercise of
the warrants will be used for working capital purposes and for
funding future obligations to the Joint Venture
Company.
On October 23, 2017, the Company completed the issuance and
sale of an aggregate of 553,672 shares of common stock, par value
$0.01 per share, of the Company at a purchase price of $19.00 per
share of common stock,
in a private placement to certain purchasers pursuant to a
Stock Purchase Agreement dated as of October 23, 2017, by and among
the Company and each purchaser named therein. Brad Juneau,
who was serving as the Company’s President and Chief Executive
Officer at the time of the offering, purchased 13,200 shares of
common stock, at an aggregate purchase price of $250,800, in the
Private Placement on the same terms and conditions as all other
purchasers. The Private Placement resulted in approximately
$10.5 million of gross proceeds and approximately $10.0 million of
net proceeds. The Company will use the net proceeds from the
Private Placement to fund its exploration and development program
and for general corporate purposes. Petrie acted as sole
placement agent in connection with the Private Placement and
received a placement agent fee equal to 6.50%, which was reduced to
3.25% for existing stockholders and other purchasers referred
by those existing stockholders, or a total of $0.5 million in
placement agent fees.
On January 8, 2015, Royal Gold
invested $5 million to fund exploration activity, and had the
option to earn up to a 40% interest in the Joint Venture Company by
investing up to $30 million (inclusive of the initial $5 million
investment) prior to October 31, 2018. As of December 31, 2019,
Royal Gold had funded approximately $35.1 million (including the
initial investment of $5 million) and earned a 40.0% interest
in the Joint Venture Company. The
proceeds of Royal Gold’s investment were used for additional
exploration of the Peak Gold Joint Venture Property. For additional
information regarding the Joint Venture Company’s capital budget
and expenditures, see the “Gold Exploration” section
above.
Pursuant to the terms of the JV LLCA,
the Company and Royal Gold are required to jointly fund the joint
venture operations in proportion to their interests in the Joint
Venture Company. If a member elects not to contribute to an
approved program and budget or contributes less than its
proportionate interest, its percentage interest will be reduced.
The capital costs of developing a large gold mining facility could
exceed $1 billion. The Company’s ability to contribute funds
sufficient to retain its membership interests in the Joint Venture
Company may be limited. To date, neither the Company nor the Joint
Venture Company has generated any revenue from mineral sales or
operations. In the future, the Joint Venture Company may generate
revenue from a combination of mineral sales and other payments
resulting from any commercially recoverable minerals from the Peak
Gold Joint Venture Property. The Company does not expect the
Joint Venture Company to generate revenue from mineral sales in the
foreseeable future. Further, neither the Company nor the Joint
Venture Company has any recurring source of revenue other than
Royal Gold’s contributions in connection with the Transactions. As
a result, the Company’s ability to contribute funds to the Joint
Venture Company and retain its interest will depend on its ability
to raise capital. The Company has limited financial resources and
the ability of the Company to arrange additional financing in the
future will depend, in part, on the prevailing capital market
conditions, the exploration results achieved at the Peak Gold Joint
Venture Property, as well as the market price of metals. The
Company cannot be certain that financing will be available to the
Company on acceptable terms, if at all. If the Company were unable
to fund its contributions to the approved programs and budgets for
the Joint Venture Company, its interest in the Joint Venture
Company would be diluted. Now that Royal Gold has
earned a 40% interest in the Joint Venture Company, it has the
additional right to require the Company to sell up to 20% of the
interest in the Joint Venture Company in a sale of Royal Gold’s
entire 40% interest in the Joint Venture Company. If Royal Gold
exercises this right, the Company will be obligated to sell 20% of
the membership interest to a bona fide third party purchaser
on the same terms and conditions as the interest being sold by
Royal Gold.
Further financing by the Company may include issuances of equity,
instruments convertible into equity (such as warrants) or various
forms of debt. The Company believes that it is likely that it will
raise capital through the issuance of additional equity securities
in the next six months for purposes of funding its proportionate
share of future Joint Venture Company exploration and for the
Company’s operating costs. 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. Any additional issuances of common stock
or securities convertible into, or exercisable or exchangeable for,
common stock may ultimately result in dilution to the holders of
common stock, dilution in any future earnings per share of the
Company and may have a material adverse effect upon the market
price of the common stock of the Company.
Risk Factors
In addition to the risk factor set forth below and the
other information set forth elsewhere in this Form 10-Q,
you
should carefully consider the risks discussed in our Annual Report
on Form 10-K for the year ended June 30, 2019, under the headings
“Item 1. Business — Adverse Climate Conditions,” “—Competition,” “—
Government Regulation” and “— Environmental Regulation,” “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 June 30, 2019, other than updating the risk factors
below. The risks described in our Annual Report on Form 10-K for
the year ended June 30, 2019 are not the only risks we face.
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. The updated risk factors are as
follows:
The Company’s common stock is thinly traded.
As of December 31, 2019, there were approximately 6.5 million
shares of the Company’s common stock outstanding, with directors
and officers beneficially owning approximately 18.6% of the
common stock and the Marital Trust of Mr. Kenneth R. Peak, the
Company’s former Chairman, beneficially owning approximately 12.1%
of our common stock. As of August 2, 2019, Royal Gold
reported beneficial ownership of approximately 12.7% of our common
stock. Our common stock is quoted on the OTCQB tier of the
OTC Markets Group Inc. under the symbol “CTGO”. Although our common
stock is quoted on the OTCQB, trading has been irregular and with
low volumes and therefore the market price of our common stock may
be difficult to ascertain. Since the Company's common stock is
thinly traded (average trading volume of 598 shares of common
stock per day for fiscal year 2019), the purchase or sale
of relatively small common stock positions may result in
disproportionately large increases or decreases in the price of the
Company's common stock.
The Company's interest in the Joint Venture Company may be
reduced.
Pursuant to the JV LLCA, now that Royal Gold has earned a 40.0%
interest in the Joint Venture Company, the members will
contribute funds to approved programs and budgets in proportion to
their respective percentage interests in the Joint Venture Company.
If a member elects not to contribute to an approved program and
budget or contributes less than its proportionate interest, its
percentage interest will be recalculated by dividing (i) the sum of
(a) the value of its initial contribution plus (b) the total of all
of its capital contributions plus (c) the amount of the capital
contribution it elects to fund, by (ii) the sum of (a), (b) and (c)
above for both members multiplied by 100. Going forward, the
Company’s ability to contribute funds sufficient to maintain the
current level of its membership interests in the Joint Venture
Company will depend on its ability to raise capital and may be
limited. The ability of the Company to arrange additional
financing in the future will depend, in part, on the prevailing
capital market conditions, the exploration results achieved at the
Peak Gold Joint Venture Property, as well as the market price of
metals. Further financing by the Company may include
issuances of equity instruments convertible into equity (such as
warrants) or various forms of debt. The Joint Venture Company
has not approved a final exploration budget for calendar year
2020. If the Company ever elects not to, or is unable to
contribute its proportionate share of future approved exploration
budgets, its interest in the Joint Venture Company will be
reduced.
In addition, now that Royal Gold has earned a percentage interest
of 40.0% in the Joint Venture Company, the Company’s interest in
the Joint Venture Company may also be reduced if Royal Gold
exercises its right to require the Company to sell up to 20.0%
of the interest in the Joint Venture Company in a sale by
Royal Gold of its entire percentage interest in the Joint Venture
Company.
If the Company does not successfully manage the transition
associated with the appointment of its new Chief Executive Officer,
it could have an adverse impact on the Company’s business.
Effective January 6, 2020, the Company’s board of directors
appointed Rick Van Nieuwenhuyse to serve as President and Chief
Executive Officer of the Company. Brad Juneau will continue
to be active in the Company as Executive
Chairman. Although Mr. Juneau will continue to serve the
Company in his capacity as Executive Chairman and will be working
closely with Mr. Van Nieuwenhuyse, leadership transitions can be
inherently difficult to manage, and an inadequate transition to new
Chief Executive Officer may cause disruption to the Company’s
business. This may also make it more difficult for the Company to
retain and hire key management and other team members.
Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
As a “smaller reporting company”, we are not required to provide
this information.
Item 4.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures. As
required by Rule 13a-15(b) of the Exchange Act, we have evaluated,
under the supervision and with the participation of our 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 we file or submit
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 December 31, 2019 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.
PART II—OTHER
INFORMATION
Item 1.
Legal Proceedings
From time to time, we are party to litigation or other legal and
administrative proceedings that we consider to be a part of the
ordinary course of business. As of the date of this Form 10-Q, we
are not a party to any material legal proceedings and we are not
aware of any material proceedings contemplated against us, that
could individually or in the aggregate, reasonably be expected to
have a material adverse effect on our financial condition, cash
flows or results of operations.
Item 1A.
Risk Factors
As a “smaller reporting company”, we are not required to provide
this information. See Part I, Item 2,
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” which identifies and discloses certain
risks and uncertainties including, without limitation, certain
“Risk Factors.”
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item 4.
Mine Safety Disclosures
None.
Item 5.
Other Information
None.
Item 6.
Exhibits
The following is a list of exhibits filed as part of this Form
10-Q. Where so indicated by a footnote, exhibits, which were
previously filed, are incorporated herein by reference.
Exhibit
Number
|
|
Description
|
|
|
3.1
|
|
Certificate of Incorporation of
Contango ORE, Inc.
(1)
|
|
|
3.2
|
|
Bylaws of Contango ORE, Inc.
(1)
|
|
|
4.1
|
|
Form of Certificate of Contango ORE,
Inc. Common Stock.
(6)
|
|
|
|
4.2
|
|
Certificate of Designation of
Series A
Junior Preferred Stock of Contango ORE, Inc.
(4)
|
|
|
|
4.3
|
|
Rights Agreement, dated as of
December 20, 2012, between Contango ORE, Inc. and Computershare
Trust Company, N.A., as Rights Agent.
(4)
|
|
|
|
4.4
|
|
Amendment No. 1 to Rights Agreement,
dated as of March 21, 2013, between Contango ORE, Inc. and
Computershare Trust Company, N.A., as Rights Agent.
(5)
|
|
|
4.5
|
|
Amendment No. 2 to Rights Agreement,
dated as of September 29, 2014, between Contango ORE, Inc. and
Computershare Trust Company, N.A., as Rights Agent.
(7)
|
|
|
|
4.6
|
|
Amendment No. 3 to Rights Agreement,
dated as of December 18,
2014, between Contango ORE, Inc. and Computershare Trust Company,
N.A., as Rights Agent.
(8)
|
|
|
|
4.7
|
|
Amendment No. 4 to Rights Agreement,
dated as of November 11, 2015, between
Contango ORE, Inc. and Computershare Trust Company, N.A., as Rights
Agent. (9)
|
|
|
|
4.8 |
|
Amendment No. 5 to Rights Agreement,
dated as of April 22, 2018, between Contango ORE, Inc. and
Computershare Trust Company, N.A., as Rights Agent.
(12) |
|
|
|
4.9 |
|
Amendment No. 6 to Rights Agreement,
dated as of November 20, 2019, between Contango ORE, Inc.and
Computershare Trust Company, N.A., as Rights Agent.
(14) |
|
|
|
4.10 |
|
Registration Rights Agreement dated
October 23, 2017, among Contango ORE, Inc. and the Purchasers named
therein.(10) |
|
|
|
4.11 |
|
Registration Rights Agreement dated
November 10, 2017, among Contango ORE, Inc. and the Purchasers
named therein.(11) |
|
|
|
10.1
|
|
Contribution Agreement, dated as of
November 1, 2010, between Contango Oil & Gas Company and
Contango ORE, Inc.
(1)
|
*
|
Filed herewith.
|
|
|
† |
Management contract or compensatory plan or agreement. |
|
|
1.
|
Filed as an exhibit to the Company’s
report on Amendment No. 2 to Registration Statement on Form 10, as
filed with the Securities and Exchange Commission on November 26,
2010.
|
|
|
2.
|
Filed as an exhibit to the Company’s
annual report on Form 10-K for the fiscal year ended June 30, 2011,
as filed with the Securities and Exchange Commission on September
19, 2011.
|
|
|
3.
|
Filed as an exhibit to the Company’s
report on Form 10-Q for the three months ended December 31, 2011,
as filed with the Securities and Exchange Commission on February 6,
2012.
|
|
|
4.
|
Filed as an exhibit to the Company’s
report on Form 8-K, as filed with the Securities and Exchange
Commission on December 21, 2012.
|
|
|
5.
|
Filed as an exhibit to the Company’s
report on Form 8-K, as filed with the Securities and Exchange
Commission on March 25, 2013.
|
|
|
6.
|
Filed as an exhibit to the Company’s
report on Form 10-Q for the three months ended December 31, 2013,
as filed with the Securities and Exchange Commission on November
14, 2013.
|
|
|
7.
|
Filed as an exhibit to the Company’s
report on Form 8-K, as filed with the Securities and Exchange
Commission on October 2, 2014.
|
|
|
8.
|
Filed as an exhibit to the Company’s
report on Form 8-K, as filed with the Securities and Exchange
Commission on December 18, 2014.
|
|
|
9.
|
Filed as an exhibit to the Company’s
report on Form 10-Q for the three months ended December 31, 2015,
as filed with the Securities and Exchange Commission on November
12, 2015.
|
|
|
10. |
Filed as an exhibit to the Company’s
report on Form 8-K, as filed with the Securities and Exchange
Commission on October 26, 2017.
|
|
|
11. |
Filed as an exhibit to the Company’s report on Form 8-K, as filed
with the Securities and Exchange Commission on November 16,
2017. |
|
|
12. |
Filed as an exhibit to the Company’s report on Form 8-K, as filed
with the Securities and Exchange Commission on April 25, 2018. |
|
|
13. |
Filed as an exhibit to the Company’s report on Form 8-K, as filed
with the Securities and Exchange Commission on November 20,
2019. |
|
|
14. |
Filed as an exhibit to the Company’s report on Form 8-K, as filed
with the Securities and Exchange Commission on November 21,
2019. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
|
|
|
|
CONTANGO ORE, INC.
|
|
|
|
|
Date: February 6, 2020
|
|
|
|
By:
|
|
/s/
RICK VAN NIEUWENHUYSE
|
|
|
|
|
|
|
Rick Van Nieuwenhuyse
|
|
|
|
|
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
|
Date: February 6, 2020
|
|
|
|
By:
|
|
/s/
LEAH GAINES
|
|
|
|
|
|
|
Leah Gaines
|
|
|
|
|
|
|
Vice President, Chief Financial Officer, Chief Accounting Officer
and Controller
(Principal Financial and Accounting Officer)
|
|
|
|
|
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