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Contango ORE, Inc. - Quarter Report: 2016 December (Form 10-Q)

conta20170120_10q.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

   

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the quarterly period ended December 31, 2016

 

OR 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

   

For the transition period from            to  

          

Commission file number 001-35770

CONTANGO ORE, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE

 

27-3431051

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

3700 BUFFALO SPEEDWAY, SUITE 925

HOUSTON, TEXAS 77098

(Address of principal executive offices)

 

(713) 877-1311

(Registrant’s telephone number, including area code)

 

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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one): 

             

Large accelerated filer    

 

Accelerated filer    

  

Non-accelerated filer    

 

Smaller reporting company    

 

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 1, 2017 was 4,903,766.

 

1

 

 

CONTANGO ORE, INC.

 

TABLE OF CONTENTS

 

 
       

 

 

 

 

 

Page

 

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

 

 

Consolidated Balance Sheets (unaudited) as of December 31, 2016 and June 30, 2016

3

 

 

Consolidated Statements of Operations (unaudited) for the three and six months ended December 31, 2016 and 2015

4

 

 

Consolidated Statements of Cash Flows (unaudited) for the three and six months ended December 31, 2016 and 2015

5

 

 

Consolidated Statement of Shareholders’ Equity (unaudited) for the six months ended December 31, 2016

6

 

 

Notes to the Consolidated Financial Statements (unaudited)

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

43

 

Item 4.

Controls and Procedures

43

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

43

 

Item 1A.

Risk Factors

43

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

 

Item 4.

Mine Safety Disclosures

44

 

Item 5.

Other Information

44

 

Item 6.

Exhibits

45

 

 

All references in this Form 10-Q to the “Company”, “CORE”, “we”, “us” or “our” are to Contango ORE, Inc.

 

2

 

 

CONTANGO ORE, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 Item 1 - Financial Statements

   

December 31, 2016

   

June 30, 2016

 

ASSETS

               

CURRENT ASSETS:

               

Cash

  $ 5,792,453     $ 1,254,489  

Prepaid expenses and other

    120,082       58,165  

Total current assets

    5,912,535       1,312,654  

OTHER ASSETS:

               

Investment in Peak Gold, LLC (Note 4)

           

Total other assets

           
                 

TOTAL ASSETS

  $ 5,912,535     $ 1,312,654  
                 

LIABILITIES AND SHAREHOLDERS’ EQUITY

               

CURRENT LIABILITIES:

               

Accounts payable

  $ 40,138     $ 20,854  

Accrued liabilities

    145,281       92,884  

Total current liabilities

    185,419       113,738  

COMMITMENTS AND CONTINGENCIES (NOTE 12)

               

SHAREHOLDERS’ EQUITY:

               

Common Stock, $0.01 par value, 30,000,000 shares authorized; 4,910,951 shares issued and 4,903,766 outstanding at December 31, 2016; 3,958,540 shares issued and outstanding at June 30, 2016

    49,110       39,585  

Additional paid-in capital

    39,672,524       33,434,899  
Treasury shares at cost (7,185 shares at December 31, 2016; and 0 at June 30, 2016)     (171,158 )      

Accumulated deficit

    (33,823,360

)

    (32,275,568

)

SHAREHOLDERS’ EQUITY

    5,727,116       1,198,916  
                 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

  $ 5,912,535     $ 1,312,654  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

 

CONTANGO ORE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   

Three Months ended December 31,

    Six months ended December 31,  
   

2016

   

2015

    2016     2015  

EXPENSES:

 

Claim rentals and minimum royalties

  $           $     $ 14,425  

General and administrative expense

    592,142       318,158       1,547,792       754,225  

Total expenses

    592,142       318,158       1,547,792       768,650  

OTHER (INCOME)/EXPENSE

 

Loss from equity investment in Peak Gold, LLC (Note 4)

                       

NET LOSS

  $ (592,142

)

  $ (318,158

)

  $ (1,547,792
)
  $ (768,650
)

LOSS PER SHARE

 

Basic and diluted

  $ (0.13

)

  $ (0.08

)

  $ (0.36
)
  $ (0.20
)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

 

Basic and diluted

    4,640,034       3,917,727       4,315,444       3,889,103  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

CONTANGO ORE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Six Months Ended December 31,

 
   

2016

   

2015

 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net loss

  $ (1,547,792

)

  $ (768,650

)

Adjustments to reconcile net loss to net cash used in operating activities:

               

Stock-based compensation

    959,650       367,220  

Changes in operating assets and liabilities:

               

Increase in prepaid expenses

    (61,917
)
    (43,952
)

Increase/(decrease) in accounts payable and accrued liabilities

    71,681       (53,911
)

Net cash used in operating activities

    (578,378

)

    (499,293

)

                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Cash paid for shares withheld from employees for payroll tax withholding     (171,158
)
     
Cash from warrant exercises     5,287,500        
Net cash provided by financing activities     5,116,342        

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

    4,537,964       (499,293

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

    1,254,489       1,947,046  

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $ 5,792,453     $ 1,447,753  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

 

CONTANGO ORE, INC.

 

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

   

Common Stock

   

Additional

Paid-In

    Treasury    

Accumulated

   

Total

Shareholders

 
   

Shares

   

Amount

   

Capital

    Stock     Deficit    

Equity

 

Balance at June 30, 2016

    3,958,540     $ 39,585     $ 33,434,899     $     $ (32,275,568

)

  $ 1,198,916  

Stock-based compensation

                959,650                   959,650  

Restricted shares activity

    280,067       2,801       (2,801

)

                 
       Treasury shares withheld for employee taxes                       (171,158 )           (171,158 )

Stock option exercises

    52,174       522       (522

)

                 

Stock warrant exercises

    620,170       6,202       5,281,298                   5,287,500  

Net loss for the period

                            (1,547,792

)

    (1,547,792

)

Balance at December 31, 2016

    4,910,951     $ 49,110     $ 39,672,524     $ (171,158 )   $ (33,823,360

)

  $ 5,727,116  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 

 

CONTANGO ORE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Unaudited)

 

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 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. The Company currently has two wholly owned subsidiaries, AU CORE, Inc. and CORE Alaska, LLC. AU CORE, Inc. historically owned unpatented mining claims. Those claims were transferred to the Joint Venture Company in January 2015. CORE participates in the Joint Venture Company through its wholly owned subsidiary, CORE Alaska, LLC.

 

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 was 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 Company is still in an exploration stage.  The Company’s fiscal year end is June 30.

 

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"); (ii) approximately 18,021 acres in unpatented mining claims from the state of Alaska for the exploration of gold ore and associated minerals. If any of the properties are placed into commercial production, the Company would be obligated to pay a 3.0% production royalty to Royal Gold, Inc. ("Royal Gold"). On September 29, 2014, Juneau Exploration L.P. (“JEX”) sold its 3.0% production royalty to Royal Gold. See Note 10 - Related Party Transactions.

 

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. If any such properties are placed into commercial production, the Company would be obligated to pay JEX a 2.0% production royalty under the Advisory Agreement. 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 10 - Related Party Transactions.

 

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 Tetlin Properties (as 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 "Tetlin Property"), together with other property, to Peak Gold, LLC, a newly formed limited liability company (the “Joint Venture Company”).  The Joint Venture Company is managed according to a Limited Liability Company Agreement 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 has the option to obtain up to 40% economic interest in the joint venture by investing up to $30 million (inclusive of the initial $5 million investment) prior to October 2018. The proceeds of Royal Gold’s investment will be used by the Joint Venture Company for additional exploration of the Tetlin Property. Royal Gold serves as the Manager of the Joint Venture Company and initially manages, directs, and controls operations of the Joint Venture Company. As of December 31, 2016, Royal Gold has contributed approximately $17.0 million to the Joint Venture Company and has earned an economic interest of 20.6%.

 

The Company has completed seven years of exploration efforts on the Tetlin Properties, which has resulted in identifying two mineral deposits (Peak and North Peak) and several other gold and copper prospects. In 2016, three phases of exploration drilling were completed by the Joint Venture Company on the Tetlin Property. During the quarter ended December 31, 2016, the Joint Venture Company completed Phase III of the 2016 drilling program, which targeted three areas, North Peak, West Peak, and Connector Zones to better define the areas with known mineralization.  During the quarter the Joint Venture Company also acquired 224 unpatented state of Alaska mining claims, consisting of 34,400 acres.

 

7

 

 

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, 2016. The results of operations for the three and six months ended December 31, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2017.

 

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 award is estimated as of the date of grant using the Black-Scholes option-pricing model.

 

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, 2016 and June 30, 2016 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, 2016 or June 30, 2016.

 

Investment in the Joint Venture Company. The Company’s consolidated financial statements include the investment in Peak Gold, LLC 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, 2016 held a 79.4% ownership interest in Peak Gold. Royal Gold will initially serve 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 Peak Gold, LLC as of June 30, 2016 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 August 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update ("ASU") No. 2016-15: Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. The main objective of this update is to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The eight cash flow updates relate to the following issues: 1) debt prepayment or debt extinguishment costs; 2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; 3) contingent consideration payments made after a business combination; 4) proceeds from the settlement of insurance claims; 5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; 6) distributions received from equity method investees; 7) beneficial interest in securitization transactions; and 8) separately identifiable cash flows and application of the predominance principle. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company will continue to assess the impact this may have on its statement of cash flows.

8

 

In March 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update No. 2016-09: Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09). ASU 2016--09 is part of an initiative to reduce complexity in accounting standards. The areas of simplification in ASU 2016--09 involve several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU 2016-09 is effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years; early application is permitted. The Company adopted this ASU during the quarter ended December 31, 2016.  The adoption of the standard did not have a material impact on the financial statements.

 

In November 2015, the FASB issued ASU No. 2015-17: Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. ASU No. 2015-17 provides guidance on the presentation of deferred income taxes that requires deferred tax assets and liabilities, along with related valuation allowances, to be classified as non-current on the balance sheet. As a result, each tax jurisdiction will now only have one net non-current deferred tax asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. The new guidance is effective for the Company’s fiscal year beginning July 1, 2017 and will only result in a change in presentation of these deferred taxes on our consolidated balance sheets. Early adoption is permitted, and we are currently evaluating the impact of this guidance on our consolidated financial statements.

 

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 Peak Gold, LLC

 

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, 2016, Royal Gold has contributed approximately $17.0 million to the Joint Venture Company, and earned a cumulative economic interest of approximately 20.6%. Of the $17.0 million, $3.6 million was contributed during the quarter ended December 31, 2016. Therefore, as of December 31, 2016, the Company holds a 79.4% economic interest in the Joint Venture Company. As of June 30, 2016, the Company held an 89.0% economic interest in the Joint Venture Company. The Royal Gold Initial Contribution did not entitle Royal Gold to a percentage 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, 2016:

 

   

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 December 31, 2016

  $  

    

9

 

The following table presents the condensed balance sheet for Peak Gold, LLC as of December 31, 2016 and June 30, 2016:

 
   

December 31, 2016

   

June 30, 2016

ASSETS

             

Cash and cash equivalents

  $ 181,835     $ 990,698

Mineral properties

    1,433,886       1,433,886

TOTAL ASSETS

  $ 1,615,721     $ 2,424,584
               
LIABILITIES AND MEMBERS' EQUITY              

Accounts payable and other liabilities

  $ 618,068     $ 1,674,956

TOTAL LIABILITIES

    618,068       1,674,956

MEMBERS' EQUITY

    997,653

 

    749,628

TOTAL LIABILITIES AND MEMBERS' EQUITY

  $ 1,615,721     $ 2,424,584

 

    The Company's share of the Joint Venture Company's results of operations for the three and six months ended December 31, 2016 was a loss of $2.1 million and $5.0 million, respectively. The Company's share in the results of operations for the three and six months ended December 31, 2015 was a loss of $1.2 million and $4.5 million, respectively.  The Peak Gold, LLC loss does not include any provisions related to income taxes as Peak Gold, LLC is treated as a partnership for income tax purposes. As of December 31, 2016 and June 30, 2016, the Company's share of the Joint Venture Company's inception-to-date cumulative loss of $15.9 million and $10.9 million, exceeded the historical book value of our investment in Peak Gold, LLC, of $1.4 million. Therefore, the investment in Peak Gold, LLC had a balance of zero as of December 31, 2016 and June 30, 2016. The Company is currently not obligated to make additional capital contributions to the Joint Venture Company and therefore only records losses up to the point of the initial investment which was $1.4 million. 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, 2016 are $14.4 million. The following table presents the condensed results of operations for Peak Gold, LLC for the three and six month periods ended December 31, 2016 and 2015:

 

   

Three Months Ended

   

Three Months Ended

   

Six Months Ended

      Six Months Ended        Inception to Date 
   

December 31, 2016

   

December 31, 2015

   

December 31, 2016

      December 31, 2015        December 31, 2016 

EXPENSES:

                                     

Exploration expense

  $ 2,203,430     $ 919,576     $ 5,233,030     $ 3,944,230     $ 14,747,619

General and administrative

    395,852       265,147       818,945       554,803         2,638,614 

Total expenses

    2,599,282       1,184,723       6,051,975       4,499,033        17,386,233 

NET LOSS

  $ 2,599,282     $ 1,184,723     $ 6,051,975     $ 4,499,033       $ 17,386,233 

    

5. Costs Incurred

 

Costs incurred by the Company to acquire and explore our Tetlin Lease and other properties were as follows: 

   

Three Months Ended December 31,

    Six Months Ended December 31,
   

2016

   

2015

    2016     2015

Exploration costs, claim rentals, and minimum royalties

  $     $     $     $ 14,425

Total costs incurred

  $     $     $     $ 14,425

 

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 Company initiates and continues conducting mining operations on the Tetlin Lease. The prior year expense relates to the amortization of claim rental payments with August 2015 expirations. The Joint Venture Company is responsible for making all future claim rental and minimum royalty payments.

 

6. Prepaid Expenses

 

The Company has prepaid expenses of $120,082 and $58,165 as of December 31, 2016 and June 30, 2016, respectively. Prepaid expenses primarily relate to prepaid insurance costs.

 

10

 

7. 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,

 
   

2016

   

2015

 
   

Loss

   

Weighted Average Shares

   

Loss Per

Share

   

Loss

   

Weighted Average Shares

   

Loss Per
Share

 

Basic Loss per Share:

                                               

Net loss attributable to common stock

  $ (592,142

)

    4,640,034     $ (0.13

)

  $ (318,158

)

    3,917,727     $ (0.08

)

Diluted Loss per Share:

                                               

Net loss attributable to common stock

  $ (592,142

)

    4,640,034     $ (0.13

)

  $ (318,158

)

    3,917,727     $ (0.08

)

 

   

Six Months ended December 31,

 
   

2016

   

2015

 
   

Loss

   

Weighted Average Shares

   

Loss Per

Share

   

Loss

   

Weighted Average Shares

   

Loss Per
Share

 

Basic Loss per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stock

 

$

(1,547,792

)

   

4,315,444

   

$

(0.36

)

 

$

(768,650

)

   

3,889,103

   

$

(0.20

)

Diluted Loss per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stock

 

$

(1,547,792

)

   

4,315,444

   

$

(0.36

)

 

$

(768,650

)

   

3,889,103

   

$

(0.20

)

 

 

 Options and warrants to purchase 887,999 and 1,635,999 shares of common stock were outstanding as of December 31, 2016 and June 30,2016, respectively. These options and warrants were not included in the computation of diluted earnings per share for each of the three and six month periods ended December 31, 2016 and 2015 because they are anti-dilutive as a result of the Company’s net loss for all periods presented.

 

8. 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, 2016, we had 4,903,766 shares of common stock outstanding, including 208,997 shares of unvested restricted stock. The Company also has options and warrants to purchase 887,999 shares of common stock outstanding as of December 31, 2016. No shares of preferred stock have been issued. The remaining restricted stock outstanding will vest between January 2016 and January 2019.

 

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, the Company's Chairman, President and Chief Executive Officer. Proceeds from the exercise of the warrants will be used for working capital purposes and for funding future obligations to the Joint Venture Company.

 

 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, and on November 11, 2015. 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 only if a person or group, other than the Estate of Mr. Kenneth R. Peak and its affiliates, acquires beneficial ownership of 23% or more of the Company's common stock.

11

 

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 19, 2018.

 

9. 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 Company’s Tetlin Properties, 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 Tetlin properties 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 a Limited Liability Company Agreement for the Joint Venture Company (the “Joint Venture Company LLC Agreement”).

 

Royal Gold serves as manager of the Joint Venture Company ("the Manager") and will initially manage, direct, and control 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 Joint Venture Company's LLC Agreement provides Royal Gold with 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. If Royal Gold funds its full $30 million investment by October 31, 2018, it will receive a percentage interest of 40% in the Joint Venture Company, and the Company will retain a percentage interest of 60% in the Joint Venture Company. From inception through December 31, 2016, Royal Gold has contributed approximately $17.0 million (inclusive of the Royal Gold Initial Contribution of $5 million) to the Joint Venture Company and earned a percentage interest of 20.6%.

 

The proceeds of Royal Gold’s contributions to the Joint Venture Company (including the Royal Gold Initial Contribution) have been used by the Joint Venture Company to fund further exploration activities on the Tetlin Properties included in the Contributed Assets.

 

Both the Company and Royal Gold will have the right to transfer each of their respective percentage interests in the Joint Venture Company to a third party, subject to certain terms and conditions set forth in the Joint Venture Company's LLC Agreement. If either member intends to transfer all or part of its percentage interest to a bona fide third party purchaser, the other member will have 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. Once Royal Gold has earned a 40% interest in the Joint Venture Company, it will have the additional right to require the Company to sell up to 20% of the Company’s interest in the Joint Venture Company in a sale of Royal Gold’s entire 40% interest to a bona fide third party purchaser. If Royal Gold exercises this right, the Company will be obligated to sell the relevant portion of its percentage interest to a bona fide third party purchaser on the same terms and conditions as the interest being sold by Royal Gold.

 

After October 31, 2018, or such earlier time as Royal Gold has earned a 40% 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 elects to contribute 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.    

12

 

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.

 

      10. Related Party Transactions

 

Mr. Brad Juneau, the Company's Chairman, President and Chief Executive Officer, 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 Tetlin Property to Royal Gold. On the same date, the Company terminated its Advisory Agreement with JEX.

 

In September 2016, the Company and JEX entered into a Management Services Agreement effective October 1, 2016. Under the Management Services Agreement, JEX will manage the business and affairs of the Company and its interest in the Joint Venture Company, subject to the direction of the Board, including corporate finance, accounting, budget, SEC reporting, risk management, operations and stockholder relation functions of the Company for an initial term of one year for a monthly fee of $32,000 which includes an allocation of approximately $6,900 for office space and equipment. No part of the fee will be allocated for compensation of Brad Juneau who will be compensated separately as determined by the independent Directors of the Company. JEX will also be reimbursed for its reasonable and necessary costs and expenses of third parties incurred for 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 Company has adopted this management and compensation program because employees of JEX have historically spent significant time and effort in managing and administering the affairs of the Company. While the Company remains a small exploratory stage entity whose shares are publicly traded, the successful drilling program of the Joint Venture Company has required a significant additional allocation of time and effort to the business and affairs of the Company by the three part time executives, two of whom are officers 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 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.

 

11. 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”). Under the 2010 Plan, the Board may issue up to 1,000,000 shares of common stock and options to officers, directors, employees or consultants of the Company. Awards made under the 2010 Plan are subject to such restrictions, terms and conditions, including forfeitures, if any, as may be determined by the Board. As of December 31, 2016, there were 208,997 shares of unvested restricted common stock outstanding and options to purchase 307,000 shares of common stock outstanding issued under the 2010 Plan. Stock-based compensation expense for the three and six months ended December 31, 2016 was $331,306 and $959,650, respectively. Stock-based compensation expense for the three and six months ended December 31, 2015 was $146,597 and $367,220, 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 2010, the Company granted 70,429 restricted shares of common stock to its executives and directors and an additional 23,477 restricted shares to a former technical consultant. All of the restricted stock from this grant was fully vested as of December 31, 2016.

 

In December 2013, the Company's directors, executives, and a former technical consultant were granted an aggregate of 95,000 shares of restricted stock. The restricted stock was set to vest over two years, beginning with one-third vesting on the date of grant. As of December 31, 2016, all of the restricted stock granted in December 2013 was vested.

 

In November 2014, the Company granted 27,000 restricted shares of common stock to its executives. The restricted stock was originally set to vest over two years, beginning with one-third vesting on the date of grant. In September 2016, the restricted stock agreements were modified. The final one-third of the grant will now vest in January 2019. As of December 31, 2016, there were 9,000 shares of such restricted stock that remained unvested.

13

 

In January 2015, the Company granted an aggregate of 30,000 restricted shares of common stock to two of its non-executive directors, 10,000 shares vested immediately and the remaining two-thirds will vest equally over two years. In addition, the Company granted 10,000 restricted shares of common stock to a former technical consultant which vested immediately. The Compensation Committee also elected to immediately vest all of the stock options and restricted stock previously issued to the former technical consultant. As of December 31, 2016, there were 10,000 shares of such restricted stock that remained unvested.

 

In September 2015, the Company granted 85,000 restricted shares of common stock to its executives. The restricted stock was originally set to vest over two years, beginning with one-third vesting on the date of grant. In September 2016, the restricted stock agreements for two executives were modified such that the final one-third of their restricted stock grant will vest in January 2019. As of December 31, 2016, there were 28,332 shares of such restricted stock that remained unvested.

 

In December 2015, the Company granted 40,000 restricted shares of common stock to two of its non-executive directors. The restricted stock vests over two years, beginning with one-third vesting on the date of grant. As of December 31, 2016, there were 13,332 shares of such restricted stock that remained unvested.

 

In August 2016, the Company granted 100,000 restricted shares of common stock to its executives. A portion of the restricted stock granted vests over two years, beginning one-third on the date of grant. The remainder of the restricted stock granted vests in January 2019. As of December 31, 2016, there were 73,333 shares of such restricted stock that remained unvested.

 

 In November 2016, the Company granted 75,000 restricted shares of common stock to its non-executive directors. The restricted stock granted vests in January 2019. As of December 31, 2016, there were 75,000 shares of such restricted stock that remained unvested.

   

As of December 31, 2016, the total compensation cost related to unvested awards not yet recognized was $3,045,462. The remaining costs will be recognized over the remaining vesting period of the awards.

 

14

 

Stock Options. The option awards listed in the table below have been granted to directors, executives and consultants of the Company:

 

Option Awards

Period

Granted

 

Options

Granted

 

Weighted Average

Exercise Price

 

Vesting Period (7)

Expiration Date

September 2011 (1)

 

50,000

 

$13.13

 

Vests over two years, beginning with one-third on the grant date.

September 2016

July 2012 (2)

 

100,000

 

$10.25

 

Vests over two years, beginning with one-third on the grant date.

July 2017

December 2012 (3)

 

250,000

 

$10.20

 

Vests over two years, beginning with one-third on the grant date.

December 2017

June 2013 (4)

 

37,500

 

$10.00

 

Vested Immediately

June 2018

July 2013 (5)

 

5,000

 

$10.00

 

Vested Immediately

July 2018

September 2013 (6)

 

37,500

 

$10.01

 

Vested Immediately

September 2018

September 2013 (6)

 

15,000

 

$10.01

 

Vests over two years, beginning with one-third on the grant date.

September 2018

 

(1) The Company granted 40,000 stock options to its directors and executives and an additional 10,000 stock options to a former technical consultant, for services performed during fiscal year 2011. 

(2) The Company granted 75,000 stock options to its directors and executives and an additional 25,000 stock options to a former technical consultant for services performed during fiscal year 2012. Of the total options granted as a part of this grant, 25,000 were later forfeited. 

(3) The Company granted 175,000 stock options to its directors and executives and an additional 75,000 stock options to a former technical consultant for services performed during fiscal year 2013. Of the total options granted as a part of this grant, 50,000 were later forfeited. 

(4) The Company granted 37,500 stock options to its executives for services performed during fiscal year 2013. 

(5) The Company granted 5,000 stock options to an employee of Avalon for services performed during fiscal year 2013. 

(6) The Company granted 52,500 stock options to its executives for services performed during the first quarter of fiscal year 2014. 

(7) If at any time there occurs a change of control, as defined in the 2010 Plan, any options that are unvested at that time will immediately vest. The Company's Compensation Committee has determined that the Transactions do not constitute a change of control under the 2010 Plan.  

    

15

 

During the first and second quarter of fiscal year 2017, the Company's current and former executives, directors, and consultants cashless exercised 80,000 and 18,000 stock options, respectively, resulting in the issuance of 42,817 and 9,357 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, 2016, the stock options had a weighted-average remaining life of approximately 1 year. The total compensation cost related to these options had been fully recognized as of December 31, 2016 as all of the options are fully vested.

 

A summary of the status of stock options granted under the 2010 Plan as of December 31, 2016 and changes during the six months then ended, is presented in the table below: 

 

   

Six Months Ended
December 31, 2016

   

Shares Under

Options

   

Weighted

Average Exercise

Price

Outstanding, June 30, 2016

    405,000     $ 10.24

Granted

         

Exercised

    (98,000

)

  $ 10.98

Forfeited

         

Outstanding, December 31, 2016

    307,000     $ 10.00

Aggregate intrinsic value

  $ 2,793,250        

Exercisable, end of period

    307,000     $ 10.00

Aggregate intrinsic value

  $ 2,793,250        

Available for grant, end of period

    39,094        

 

12. 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 is required to spend $350,000 per year until July 15, 2018 in exploration costs. However, 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 June 30, 2012, the Company had paid the Tetlin Village 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 2015-2016 assessment year totaled $125,307. 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. Pursuant to the Royalty Purchase Agreement, the Joint Venture Company will pay Royal Gold an overriding royalty of 3.0% should the Joint Venture Company derive revenues from the Tetlin Lease and certain other properties and an overriding royalty of 2.0% should the Joint Venture Company derive revenues from any additional properties.

16

 

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, 2016, previously filed with the SEC.

17

 

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. These include such matters as:

 

 

The Company's financial position

 

Business strategy, including outsourcing

 

Meeting Company forecasts and budgets

 

Anticipated capital expenditures

 

Prices of gold and associated minerals

 

Timing and amount of future discoveries (if any) and production of natural resources on our Tetlin Property

 

Operating costs and other expenses

 

Cash flow and anticipated liquidity

 

Prospect development

 

New governmental laws and regulations

 

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 that may cause our actual results, performance or achievements to be materially different from future results expressed or implied by the forward-looking statements. These factors include among others:

 

Ability to raise capital to fund capital expenditures

 

Operational constraints and delays

 

The risks associated with exploring in the mining industry

 

The timing and successful discovery of natural resources

 

Availability of capital and the ability to repay indebtedness when due

 

Declines and variations in the price of gold and associated minerals

 

Price volatility for natural resources

 

Availability of operating equipment

 

Operating hazards attendant to the mining industry

 

Weather

 

The ability to find and retain skilled personnel

 

Restrictions on mining activities

 

Legislation that may regulate mining activities

 

Impact of new and potential legislative and regulatory changes on mining operating and safety standards

 

Uncertainties of any estimates and projections relating to any future production, costs and expenses.

 

Timely and full receipt of sale proceeds from the sale of any of our mined products (if any)

 

Stock price and interest rate volatility

 

Federal and state regulatory developments and approvals

 

Availability and cost of material and equipment

 

Actions or inactions of third-parties

 

Potential mechanical failure or under-performance of facilities and equipment

 

Environmental risks

 

Strength and financial resources of competitors

 

Worldwide economic conditions

 

Expanded rigorous monitoring and testing requirements

 

Ability to obtain insurance coverage on commercially reasonable terms

 

Competition generally and the increasing competitive nature of our industry

18

 

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 a joint venture, Peak Gold, LLC (the “Joint Venture Company”), to advance exploration of the Company's Tetlin Property, which is prospective for gold and associated minerals. As of December 31, 2016, the Joint Venture Company had leased or had control over an estimated 808,900 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. Contango Mining initially acquired a 50% interest in properties from Juneau Exploration, L.P., (“JEX”) in exchange for $1 million and a 1.0% overriding royalty interest in the properties under a Joint Exploration Agreement (the “Joint Exploration Agreement”). On September 15, 2010, Contango Mining acquired the remaining 50% interest in the properties by increasing the overriding royalty interest in the properties granted to JEX to 3.0% pursuant to an Amended and Restated Conveyance of Overriding Royalty Interest (the “Amended ORRI Agreement”), and JEX and Contango Mining terminated the Joint Exploration Agreement. 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 (the “Royalty Purchase Agreement”), 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.

 

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.

 

In connection with the closing of the Transactions with Royal Gold (the “Closing”), the Company formed Peak Gold, LLC and contributed to the Joint Venture Company its Tetlin 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 “Joint Venture Company LLC Agreement”).

 

Upon Closing, Royal Gold initially invested $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 has the option to earn up to a percentage interest of 40% 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, 2016, Royal Gold has contributed approximately $17.0 million (including the initial $5 million investment) to the Joint Venture Company and earned a percentage interest of 20.6%. The proceeds of Royal Gold’s investment have been and will be used by the Joint Venture Company for additional exploration of the Tetlin Property.

 

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 Securities and Exchange Commission ("SEC") Industry Guide 7.

19

 

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, 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 $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 has the option to increase its production royalty by (i) 0.25% by payment to the Joint Venture Company of $150,000, or (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 conducts only a preliminary title examination at the time it acquires a property. 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 "Tetlin Property") held by the Joint Venture Company as of December 31, 2016:

 

Property

 

Location

 

Commodities

 

Claims

 

Estimated Acres

 

Type

Tetlin-Tok

 

Eastern Interior

 

Gold, Copper

 

131

 

10,900

 

 

State Mining Claims

Eagle

 

Eastern Interior

 

Gold, Copper

 

428

 

66,000

 

 

State Mining Claims

Bush

 

Eastern Interior

 

Gold, Copper

 

48

 

7,700

 

 

State Mining Claims

West Fork

 

Eastern Interior

 

Gold, Copper

 

48

 

7,700

 

 

State Mining Claims

Triple Z

 

Eastern Interior

 

Gold, Copper

 

45

 

7,200

 

 

State Mining Claims

Noah   Eastern Interior   Gold, Copper   224   34,400     State Mining Claims

Tetlin-Village

 

Eastern Interior

 

Gold, Copper

 

-

 

675,000

 

 

Lease

 

 

TOTALS:

 

 

 

924

 

808,900

 

 

 

 

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, the Company determined to continue its exploration activities on the Tetlin Property through a joint venture with an experienced industry participant. As a result, the Company formed the Joint Venture Company pursuant to a Joint Venture Company's LLC Agreement with Royal Gold. Under the Joint Venture Company's LLC Agreement, 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. Royal Gold may resign as Manager and can be removed as Manager for a material breach of the Joint Venture Company LLC Agreement, 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 Joint Venture Company's LLC Agreement provides that the Management Committee has exclusive authority to determine all management matters related to the Company. Initially, the Management Committee 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 Joint Venture Company's LLC Agreement, the affirmative vote by a majority of designates is required for action.

 

Structuring Incentives to Drive Behavior. The Company believes that equity ownership aligns the interests of the Company's executives and directors with those of its stockholders. The Company’s directors and executives have not received cash compensation for their work for the Company. As of December 31, 2016, the Company's directors and executives beneficially own approximately 16.2% of the Company's common stock. An additional 16.8% of the Company's common stock is beneficially owned by the Estate of Mr. Kenneth R. Peak, the Company's former Chairman, who passed away on April 19, 2013.

20

 

Restricted Stock. In November 2010, the Company granted 70,429 restricted shares of common stock to its executives and directors and an additional 23,477 restricted shares to a former technical consultant. All of the restricted stock from this grant was fully vested as of December 31, 2016.

 

In December 2013, the Company's directors, executives, and a former technical consultant were granted an aggregate of 95,000 shares of restricted stock. The restricted stock vests over two years, beginning with one-third vesting on the date of grant. As of December 31, 2016, all of the restricted stock granted in December 2013 was vested.

 

In November 2014, the Company granted 27,000 restricted shares of common stock to its executives. The restricted stock was originally set to vest over two years, beginning with one-third vesting on the date of grant. In September 2016, the restricted stock agreements were modified. The final one-third of the grant will now vest in January 2019. As of December 31, 2016, there were 9,000 shares of such restricted stock that remained unvested.

 

  In January 2015, the Company granted an aggregate of 30,000 restricted shares of common stock to two of its non-executive directors, 10,000 shares vested immediately and the remaining two-thirds will vest equally over two years. In addition, the Company granted 10,000 restricted shares of common stock to a former technical consultant which vested immediately. The Compensation Committee also elected to immediately vest all of the stock options and restricted stock previously issued to the former technical consultant. As of December 31, 2016, there were10,000 shares of such restricted stock that remained unvested.

 

In September 2015, the Company granted 85,000 restricted shares of common stock to its executives. The restricted stock was originally set to vest over two years, beginning with one-third vesting on the date of grant. In September 2016, the restricted stock agreements for two executives were modified such that the final one-third of their restricted stock grant will vest in January 2019. As of December 31, 2016, there were 28,332 shares of such restricted stock that remained unvested.

 

In December 2015, the Company granted 40,000 restricted shares of common stock to two of its non-executive directors. The restricted stock vests over two years, beginning with one-third vesting on the date of grant. As of December 31, 2016, there were 13,332 shares of such restricted stock that remained unvested.

 

In August 2016, the Company granted 100,000 restricted shares of common stock to its executives. A portion of the restricted stock granted vests over two years, beginning one-third on the date of grant. The remainder of the restricted stock granted vests in January 2019. As of December 31, 2016, there were 73,333 shares of such restricted stock that remained unvested.

 

 In November 2016, the Company granted 75,000 restricted shares of common stock to its non-executive directors. The restricted stock granted vests in January 2019. As of December 31, 2016, there were 75,000 shares of such restricted stock that remained unvested.

21

 

Stock Options. As of the date of this report, the option awards listed in the table below have been granted to directors, officers, employees and consultants of the Company:

 

Option Awards

Period Granted

 

Options Granted

 

Weighted Average Exercise Price

 

Vesting Period (7)

Expiration Date

September 2011 (1)

 

50,000

 

$13.13

 

Vests over two years, beginning with one-third on the grant date.

September 2016

July 2012 (2)

 

100,000

 

$10.25

 

Vests over two years, beginning with one-third on the grant date.

July 2017

December 2012 (3)

 

250,000

 

$10.20

 

Vests over two years, beginning with one-third on the grant date.

December 2017

June 2013 (4)

 

37,500

 

$10.00

 

Vested Immediately

June 2018

July 2013 (5)

 

5,000

 

$10.00

 

Vested Immediately

July 2018

September 2013 (6)

 

37,500

 

$10.01

 

Vested Immediately

September 2018

September 2013 (6)

 

15,000

 

$10.01

 

Vests over two years, beginning with one-third on the grant date.

September 2018

 

(1) The Company granted 40,000 stock options to its directors and executives and an additional 10,000 stock options to its technical consultant, the owner of Avalon, for services performed during fiscal year 2011. 

(2) The Company granted 75,000 stock options to its directors and executives and an additional 25,000 stock options to its technical consultant for services performed during fiscal year 2012. Of the total options granted as a part of this grant, 25,000 were later forfeited. 

(3) The Company granted 175,000 stock options to its directors and executives and an additional 75,000 stock options to its technical consultant for services performed during fiscal year 2013. Of the total options granted as a part of this grant, 50,000 were later forfeited. 

(4) The Company granted 37,500 stock options to its executives for services performed during fiscal year 2013. 

(5) The Company granted 5,000 stock options to an employee of Avalon for services performed during fiscal year 2013. 

(6) The Company granted 52,500 stock options to its executives for services performed during the first quarter of fiscal year 2014. 

(7) If at any time there occurs a change of control, as defined in the 2010 Plan, any options that are unvested at that time will immediately vest. The Company's Compensation Committee has determined that the Transactions do not constitute a change in control under the 2010 Plan. 

      

During the first and second quarter of fiscal year 2017, the Company's current and former executives, directors, and consultants cashless exercised 80,000 and 18,000 stock options, respectively, resulting in the issuance of 42,817 and 9,357 shares of common stock to the exercising parties and no proceeds to the Company.

22

 

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 (ANSCA). Areas that show promise for exploration and mining can be leased 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 “Alaska Mining Law”). The State 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 an estimated 809,000 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 Fo, Triple Z, and Noah claims.

 

The Joint Venture Company initiated a summer of 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 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 has incurred an aggregate cost in calendar 2016 of approximately $10.6 million.

 

23

 

 

From inception to date, the Joint Venture Company has incurred $17.4 million in exploration program expenditures. As of December 31, 2016, Royal Gold has funded a total of $17.0 million (including the initial investment of $5 million) and earned a 20.6% interest in the Joint Venture Company.

 

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 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 Tetlin project, and the Company and the Joint Venture Company are the only entities known to have conducted drilling operations on the Tetlin project.

 

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: the Main Peak Zone, Discovery Zone, West Peak Zone, North Peak Zone, Connector Zone and the Saddle Zone. 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 induced polarization (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, North Peak/Blue Moon) 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 Connector 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 2016, 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

 

 

 

 

 

Total

 

34,262

 

 

1,841

 

 

4,610

 

 

847

 

 

1,084

 

 

204,607

 

 

6,409

 

 

2,330

 

 

2016 Exploration Program - Phase III. During the quarter ending December 31, 2016, exploration drilling was completed by the Joint Venture Company on the Tetlin Property totaling 3,883 meters (12,739 feet) in 37 holes. The Joint Venture Company spent an estimated $2.6 million, during the quarter, on program activities, including drilling, geochemical analyses, landholding fees and other related expenses. Drilling was all completed in the North Peak area with the objective of infilling the mineralized area to support a resource estimation.

 

24

 

The map below depicts the location of the core holes drilled during the 2016 Phase III program:

 

2016 PHASE III CORE HOLES DRILLED

 

 

 

Significant Drill Intercepts from the 2016 Phase III 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 III of the 2016 Program:

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16274

North Peak

10.65

18.67

8.02

5.56

0.162

73.5

0.297

Including

North Peak

17.37

18.67

1.30

23.90

0.697

82.5

0.146

TET16274

North Peak

32.62

39.09

6.47

0.99

0.029

42.9

0.241

TET16274

North Peak

46.40

46.78

0.38

4.56

0.133

65.4

0.475

TET16275

North Peak

33.07

36.88

3.81

0.90

0.026

19.1

0.321

TET16275

North Peak

70.76

71.84

1.08

2.04

0.060

9.4

0.226

TET16276

North Peak

30.30

34.80

4.50

1.21

0.035

13.3

0.048

TET16276

North Peak

38.99

55.00

16.01

3.23

0.094

51.1

0.046

Including

North Peak

45.57

46.10

0.53

12.35

0.360

39.5

0.066

and

North Peak

52.58

55.00

2.42

11.75

0.343

237.0

0.020

TET16276

North Peak

71.68

78.24

6.56

1.67

0.049

47.5

0.150

TET16276

North Peak

82.90

86.36

3.46

1.53

0.045

50.1

0.166

TET16276

North Peak

90.68

94.66

3.98

0.70

0.020

8.2

0.141

TET16276

North Peak

99.30

104.88

5.58

1.19

0.035

4.1

0.119

TET16277

North Peak

7.45

9.75

2.30

1.66

0.048

37.2

0.160

TET16277

North Peak

16.90

18.14

1.24

1.84

0.054

55.0

0.163

TET16277

North Peak

41.15

42.95

1.80

1.49

0.043

45.4

0.018

TET16277

North Peak

65.02

67.13

2.11

1.02

0.030

21.1

0.124

TET16277

North Peak

83.27

95.79

12.52

2.56

0.075

128.1

0.091

Including

North Peak

93.88

95.79

1.91

9.51

0.277

479.0

0.200

TET16277

North Peak

121.47

123.70

2.23

1.91

0.056

11.8

0.129

TET16277

North Peak

129.97

134.00

4.03

1.45

0.042

17.7

0.042

TET16278

North Peak

31.81

45.86

14.05

10.58

0.309

16.5

0.137

Including

North Peak

31.81

32.99

1.18

26.00

0.758

10.7

0.292

and

North Peak

38.73

39.88

1.15

30.60

0.893

42.6

0.239

and

North Peak

42.38

43.11

0.73

31.50

0.919

29.8

0.175

and

North Peak

44.42

45.86

1.44

30.00

0.875

38.4

0.163

TET16278

North Peak

55.81

59.03

3.22

1.56

0.046

11.3

0.076

TET16278

North Peak

73.02

83.97

10.95

3.08

0.090

26.5

0.025

TET16278

North Peak

104.62

105.77

1.15

1.46

0.042

66.5

0.982

TET16278

North Peak

119.33

120.33

1.00

1.90

0.055

57.7

0.880

TET16278

North Peak

142.97

148.53

5.56

2.78

0.081

19.1

0.060

TET16278

North Peak

156.32

157.87

1.55

2.14

0.062

43.7

0.136

TET16279

North Peak

129.88

134.47

4.59

1.75

0.051

5.6

0.022

TET16279

North Peak

160.22

163.75

3.53

1.52

0.044

2.9

0.014

TET16279

North Peak

169.94

173.50

3.56

5.06

0.148

17.6

0.027

Including

North Peak

172.88

173.50

0.62

17.60

0.513

93.8

0.138

TET16279

North Peak

176.61

178.79

2.18

5.40

0.158

28.3

0.025

TET16280

North Peak

141.16

143.23

2.07

1.07

0.031

10.8

0.017

TET16280

North Peak

165.74

167.70

1.96

1.15

0.034

94.0

0.220

TET16280

North Peak

198.15

200.08

1.93

1.96

0.057

5.9

0.032

TET16280

North Peak

205.20

205.70

0.50

5.95

0.174

3.1

0.004

TET16280

North Peak

210.98

212.89

1.91

0.91

0.027

3.6

0.010

TET16281

North Peak

14.33

22.86

8.53

22.01

0.642

63.0

0.060

Including

North Peak

17.37

19.51

2.14

43.90

1.280

96.5

0.055

and

North Peak

22.37

22.86

0.49

57.40

1.674

227.0

0.017

TET16285

North Peak

7.32

21.63

14.31

11.59

0.338

6.2

0.096

Including

North Peak

11.58

16.15

4.57

26.63

0.777

8.2

0.116

TET16286

North Peak

37.80

56.58

18.78

5.02

0.146

6.2

0.044

Including

North Peak

48.07

52.75

4.68

14.44

0.421

12.1

0.083

TET16287

North Peak

75.60

81.72

6.12

7.35

0.214

1.9

0.069

Including

North Peak

81.17

81.72

0.55

20.00

0.583

4.0

0.211

TET16288

North Peak

96.32

105.77

9.45

1.11

0.032

27.3

0.029

Including

North Peak

101.29

102.72

1.43

3.28

0.096

3.9

0.050

TET16289

North Peak

10.52

36.00

25.48

18.73

0.546

8.3

0.071

TET16289

North Peak

39.12

55.70

16.58

13.52

0.394

7.4

0.044

TET16291

North Peak

0.60

4.63

4.03

6.39

0.186

10.3

0.028

TET16291

North Peak

11.28

33.21

21.93

4.69

0.137

10.9

0.064

Including

North Peak

22.85

25.33

2.48

18.03

0.526

31.7

0.245

and

North Peak

26.52

26.92

0.40

28.40

0.828

28.9

0.178

TET16291

North Peak

42.30

44.98

2.68

2.05

0.060

3.5

0.016

Including

North Peak

44.33

44.98

0.65

7.00

0.204

8.8

0.044

TET16291

North Peak

50.90

53.27

2.37

5.48

0.160

11.7

0.056

TET16292

North Peak

5.79

21.18

15.39

1.58

0.046

22.3

0.108

Including

North Peak

8.53

10.97

2.44

5.55

0.162

55.3

0.215

TET16292

North Peak

24.63

28.80

4.17

0.83

0.024

22.9

0.034

TET16293

North Peak

7.11

11.89

4.78

1.26

0.037

50.5

0.133

Including

North Peak

11.48

11.89

0.41

5.15

0.150

66.6

0.073

TET16294

North Peak

9.10

16.71

7.61

6.56

0.191

86.2

0.233

Including

North Peak

12.03

12.60

0.57

17.05

0.497

141.0

0.051

TET16295

North Peak

5.66

20.65

14.99

11.67

0.340

11.5

0.111

Including

North Peak

7.94

10.35

2.41

32.40

0.945

14.1

0.317

TET16296

North Peak

6.13

9.80

3.67

1.78

0.052

40.7

0.267

TET16296

North Peak

24.13

26.28

2.15

0.87

0.025

45.3

0.059

TET16297

North Peak

6.91

30.09

23.18

3.72

0.109

10.9

0.196

Including

North Peak

16.06

17.78

1.72

9.51

0.277

10.3

0.139

and

North Peak

24.85

26.91

2.06

12.80

0.373

21.9

0.419

TET16297

North Peak

39.91

41.44

1.53

11.50

0.335

505.0

0.131

TET16298

North Peak

6.75

14.30

7.55

4.37

0.127

17.0

0.106

Including

North Peak

8.91

10.79

1.88

13.60

0.397

20.2

0.218

TET16298

North Peak

24.82

31.57

6.75

15.53

0.453

33.2

0.383

Including

North Peak

31.27

31.57

0.30

108.00

3.150

33.8

0.282

TET16298

North Peak

34.90

37.94

3.04

1.40

0.041

35.8

0.295

TET16298

North Peak

44.18

59.02

14.84

3.08

0.090

25.6

0.302

Including

North Peak

52.00

53.19

1.19

8.78

0.256

12.6

0.267

TET16299

North Peak

24.77

39.32

14.55

5.46

0.159

66.0

0.348

Including

North Peak

31.39

33.68

2.29

17.05

0.497

93.2

0.476

and

North Peak

39.05

39.32

0.27

60.00

1.750

428.0

0.964

TET16299

North Peak

47.85

50.90

3.05

9.83

0.287

156.0

0.062

TET16299

North Peak

53.95

54.71

0.76

9.49

0.277

120.0

0.093

TET16299

North Peak

59.74

65.46

5.72

2.14

0.062

59.1

0.159

Including

North Peak

64.95

65.46

0.51

13.95

0.407

301.0

0.741

TET16299

North Peak

81.38

84.43

3.05

7.82

0.228

53.0

0.095

TET16300

North Peak

0.00

1.52

1.52

1.08

0.032

10.4

0.073

TET16300

North Peak

16.63

21.41

4.78

0.90

0.026

16.8

0.289

TET16300

North Peak

24.73

39.78

15.05

5.15

0.150

62.7

0.299

Including

North Peak

36.27

38.79

2.52

22.10

0.645

175.0

0.060

TET16300

North Peak

44.81

47.70

2.89

2.90

0.085

64.5

0.030

TET16300

North Peak

51.00

67.00

16.00

3.43

0.100

64.8

0.141

Including

North Peak

51.51

53.96

2.45

10.57

0.308

61.1

0.032

and

North Peak

57.91

58.52

0.61

10.20

0.298

180.0

0.070

TET16300

North Peak

70.10

71.78

1.68

2.19

0.064

41.3

0.366

TET16301

North Peak

147.29

151.66

4.37

1.37

0.040

7.6

0.084

TET16302

North Peak

7.14

9.14

2.00

10.98

0.320

7.2

0.041

TET16302

North Peak

14.31

37.05

22.74

26.61

0.776

5.2

0.035

Including

North Peak

19.31

21.95

2.64

103.50

3.019

12.5

0.069

and

North Peak

27.09

29.20

2.11

58.70

1.712

9.2

0.075

TET16302

North Peak

44.36

48.44

4.08

7.78

0.227

3.4

0.065

Including

North Peak

45.67

46.36

0.69

22.90

0.668

6.3

0.070

TET16302

North Peak

52.54

57.60

5.06

1.05

0.031

6.2

0.049

Including

North Peak

52.54

53.64

1.10

3.40

0.099

19.7

0.143

TET16303

North Peak

59.45

60.96

1.51

1.64

0.048

28.5

0.041

TET16303

North Peak

91.95

97.70

5.75

1.03

0.030

0.2

0.009

Including

North Peak

91.95

92.27

0.32

3.92

0.114

0.9

0.012

TET16304

North Peak

16.31

37.51

21.20

11.86

0.346

3.9

0.044

Including

North Peak

24.26

26.12

1.86

35.40

1.033

8.1

0.123

and

North Peak

28.31

30.94

2.63

27.62

0.806

5.8

0.050

TET16304

North Peak

46.97

69.52

22.55

5.49

0.160

12.5

0.051

Including

North Peak

48.01

48.62

0.61

21.50

0.627

3.2

0.105

and

North Peak

64.31

65.42

1.11

19.05

0.556

3.8

0.078

and

North Peak

67.42

67.72

0.30

22.40

0.653

8.7

0.169

TET16304

North Peak

75.52

77.70

2.18

2.78

0.081

1.5

0.064

TET16304

North Peak

80.93

82.79

1.86

5.88

0.172

4.1

0.343

TET16304

North Peak

87.01

87.30

0.29

28.80

0.840

13.6

0.133

TET16305

North Peak

11.13

13.41

2.28

4.43

0.129

4.3

0.051

TET16305

North Peak

17.70

47.24

29.54

7.17

0.209

1.6

0.032

Including

North Peak

18.14

19.66

1.52

24.93

0.727

3.0

0.085

and

North Peak

21.34

22.86

1.52

36.76

1.072

5.9

0.061

and

North Peak

30.18

30.48

0.30

21.80

0.636

4.0

0.075

TET16306

North Peak

58.83

60.50

1.67

1.31

0.038

39.8

0.035

TET16306

North Peak

65.65

68.19

2.54

3.13

0.091

94.8

0.143

Including

North Peak

67.67

68.19

0.52

9.15

0.267

174.0

0.087

TET16306

North Peak

93.94

94.63

0.69

6.79

0.198

18.9

0.090

TET16306

North Peak

113.00

122.53

9.53

3.79

0.111

117.1

0.147

Including

North Peak

121.96

122.53

0.57

17.80

0.519

92.2

0.099

TET16307

North Peak

58.03

68.88

10.85

3.29

0.096

41.2

0.187

Including

North Peak

60.07

61.12

1.05

9.32

0.272

79.6

0.442

and

North Peak

64.58

65.32

0.74

9.00

0.263

82.3

0.091

TET16307

North Peak

139.64

141.31

1.67

1.23

0.036

60.6

0.237

TET16308

North Peak

41.68

51.36

9.68

1.79

0.052

20.3

0.055

TET16310

North Peak

38.56

43.40

4.84

1.88

0.055

0.4

0.013

Including

North Peak

38.56

39.10

0.54

13.80

0.403

3.7

0.055

 

 

2016 Exploration Program - Phase II. During the quarter ending September 30, 2016, exploration drilling was completed by the Joint Venture Company on the Tetlin Property totaling 6,498 meters (22,795 feet) in 30 holes, a continuation of the 2016 Phase II program, started in the prior quarter. The Phase II program, which was initiated in the quarter ended June 30, 2016, has completed 12,601 meters (41,342 ft) of exploration drilling in 63 holes. The Joint Venture Company spent an estimated $3.9 million, during the quarter, on program activities, including drilling, geochemical analyses, landholding fees and other related expenses. Drilling targeted three areas, North Peak, West Peak, and Connector Zones to better define the areas with known mineralization. During the full program, high grade-gold mineralization was drilled in the area that joins North Peak to the Connector Zone mineralization identified in the 2016 Phase I program. Several holes drilled revealed significant grade-thickness intervals of gold such as drill hole 16235 which intercepted 38.88 meters grading 51.62 gpt gold starting at 14.50 meters, drill hole 16237 which intercepted 14.19 meters grading 45.33 gpt gold starting at 9.75 meters, drill hole16271 which intercepted 17.12 meters grading 51.89 gpt gold starting at 24.08 meters, and drill hole 16256 which intercepted 13.20 meters grading 48.59 gpt gold starting at 7.92 meters.

 

25

 

 

The map below depicts the location of 63 core holes drilled during the 2016 Phase II program:

 

2016 PHASE II CORE HOLES DRILLED

 

 

Significant Drill Intercepts from the 2016 Phase II 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 II of the 2016 Program:

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16211

Connector

16.11

26.42

10.31

3.500

0.102

34.4

0.299

Including

Connector

20.57

21.00

0.43

13.650

0.398

45.6

0.199

TET16211

Connector

29.87

42.82

12.95

3.090

0.090

58.9

0.295

Including

Connector

41.61

42.82

1.21

14.350

0.419

251.0

0.681

TET16211

Connector

50.04

54.25

4.21

2.700

0.079

18.0

0.147

TET16211

Connector

114.76

121.05

6.29

1.440

0.042

66.3

0.09

TET16212

North Peak

52.88

55.85

2.97

0.900

0.026

2.5

0.151

TET16212

North Peak

142.22

144.57

2.35

1.560

0.046

0.028

TET16213

North Peak

115.98

127.84

11.86

0.610

0.018

1.0

0.042

TET16214

North Peak

54.67

56.49

1.82

1.400

0.041

5.6

0.025

 

 

26

 

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16214

North Peak

140.47

143.77

3.30

1.270

0.037

20.5

0.730

Including

North Peak

140.47

141.10

0.63

4.890

0.143

83.1

2.970

TET16215

North Peak

50.58

66.20

15.62

2.400

0.070

42.0

0.520

TET16215

North Peak

86.10

89.68

3.58

0.930

0.027

7.5

0.012

TET16216

North Peak

17.28

32.99

15.71

1.840

0.054

19.4

0.107

Including

North Peak

17.28

18.17

0.89

9.720

0.284

74.5

0.317

TET16216

North Peak

55.85

69.79

13.94

0.900

0.026

48.8

0.384

TET16216

North Peak

110.33

112.00

1.67

0.940

0.027

22.3

0.044

TET16217

West Peak

50.02

52.64

2.62

0.780

0.023

0.007

TET16217

West Peak

88.30

89.40

1.10

1.470

0.043

2.9

0.093

TET16218

West Peak

49.53

55.42

5.89

1.980

0.058

0.005

TET16218

West Peak

60.76

63.82

3.06

1.760

0.051

0.009

TET16218

West Peak

77.11

85.80

8.69

2.250

0.066

0.7

0.008

TET16218

West Peak

191.47

206.48

15.01

7.100

0.207

8.9

0.325

Including

West Peak

194.18

194.91

0.73

73.500

2.144

37.0

1.550

TET16218

West Peak

215.60

216.96

1.36

1.280

0.037

0.6

0.018

TET16219

West Peak

37.65

47.55

9.90

1.370

0.040

0.2

0.019

TET16219

West Peak

195.24

199.32

4.08

0.640

0.019

9.0

0.025

TET16219

West Peak

207.11

210.16

3.05

0.910

0.027

0.8

0.025

TET16220

North Peak

23.27

56.23

32.96

4.870

0.142

2.4

0.045

Including

North Peak

27.70

29.41

1.71

12.300

0.359

7.3

0.124

and

North Peak

32.96

33.99

1.03

15.150

0.442

4.5

0.138

and

North Peak

33.99

34.98

0.99

14.950

0.436

5.7

0.108

and

North Peak

42.72

44.37

1.65

12.900

0.376

5.3

0.040

and

North Peak

51.89

53.24

1.35

11.900

0.347

5.9

0.110

TET16220

North Peak

64.16

66.14

1.98

6.810

0.199

6.0

0.111

TET16220

North Peak

71.72

73.75

2.03

1.340

0.039

2.3

0.064

TET16221

North Peak

21.61

39.53

17.92

8.230

0.240

3.0

0.035

Including

North Peak

30.82

32.90

2.08

18.300

0.534

3.1

0.067

and

North Peak

37.50

39.53

2.03

17.150

0.500

5.0

0.063

TET16221

North Peak

74.07

92.63

18.56

2.910

0.085

3.3

0.023

Including

North Peak

74.07

77.27

3.20

9.730

0.284

2.8

0.019

TET16221

North Peak

97.82

99.86

2.04

3.060

0.089

11.7

0.127

TET16221

North Peak

105.71

117.65

11.94

2.740

0.080

10.3

0.035

TET16221

North Peak

125.10

129.54

4.44

4.430

0.129

3.3

0.051

TET16223

North Peak

56.44

57.63

1.19

2.670

.078

20.4

0.070

TET16223

North Peak

74.36

85.80

11.44

1.070

0.031

30.6

0.184

TET16223

North Peak

93.42

95.48

2.06

3.390

0.099

42.0

0.476

TET16223

North Peak

103.10

109.08

5.98

2.920

0.085

4.3

0.093

TET16224

North Peak

109.07

115.61

6.54

2.500

0.073

8.8

0.168

TET16225

North Peak

55.60

64.90

9.30

11.770

0.343

51.1

0.041

Including

North Peak

63.09

64.90

1.81

36.200

1.056

171.0

0.093

TET16225

North Peak

87.64

105.14

17.50

2.950

0.086

33.7

0.187

Including

North Peak

102.41

105.14

2.73

8.630

0.252

19.7

0.103

TET16226

North Peak

11.58

13.46

1.88

0.960

0.028

88.4

0.016

TET16226

North Peak

18.75

26.09

7.34

16.970

0.495

6.7

0.040

Including

North Peak

18.75

20.20

1.45

71.300

2.080

18.2

0.045

TET16226

North Peak

35.51

36.88

1.37

1.430

0.042

8.3

0.028

TET16226

North Peak

54.08

57.81

3.73

1.430

0.042

5.8

0.035

TET16227

North Peak

21.56

32.31

10.75

18.620

0.543

10.2

0.083

Including

North Peak

24.00

25.20

1.20

81.900

2.389

19.3

0.116

and

North Peak

25.20

26.14

0.94

43.400

1.266

15.0

0.140

TET16227

North Peak

88.11

90.22

2.11

1.320

0.039

0.6

0.002

 

27

 

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16228

North Peak

25.42

40.23

14.81

4.640

0.135

21.7

0.257

Including

North Peak

33.81

35.95

2.14

17.900

0.522

41.9

0.602

TET16228

North Peak

43.89

51.47

7.58

3.540

0.103

12.3

0.255

TET16228

North Peak

56.86

59.74

2.88

3.140

0.092

1.3

0.022

TET16228

North Peak

62.94

75.23

12.29

1.090

0.032

26.6

0.234

TET16230

North Peak

42.95

50.22

7.27

4.170

0.122

24.0

0.303

TET16231 North Peak 18.61 23.52 4.91 0.990 0.029 5.3 0.062

TET16231

North Peak

53.89

57.32

3.43

0.730

0.021

7.0

0.053

TET16231

North Peak

68.17

70.83

2.66

7.730

0.225

26.1

0.118

TET16231

North Peak

75.61

81.16

5.55

3.090

0.090

21.1

0.235

TET16231

North Peak

88.19

90.34

2.15

1.110

0.032

4.3

0.031

TET16231

North Peak

101.08

102.64

1.56

3.810

0.111

5.5

0.054

TET16231

North Peak

128.15

132.89

4.74

2.000

0.058

9.3

0.139

Including

North Peak

131.41

131.97

0.56

6.930

0.202

6.7

0.125

TET16232

North Peak

43.28

50.90

7.62

1.180

0.034

55.4

0.054

TET16232

North Peak

117.35

121.62

4.27

0.710

0.021

64.0

0.355

TET16232

North Peak

138.53

152.21

13.68

5.520

0.161

12.4

0.067

Including

North Peak

139.47

139.75

0.28

32.400

0.945

52.7

0.117

and

North Peak

142.29

143.89

1.60

18.400

0.537

12.8

0.260

and

North Peak

146.94

147.36

0.42

28.100

0.820

93.8

0.095

TET16233

North Peak

23.11

24.14

1.03

7.890

0.230

13.3

0.032

TET16233

North Peak

38.23

42.98

4.75

2.060

0.060

16.4

0.070

TET16233

North Peak

56.10

70.69

14.59

5.760

0.168

35.2

0.389

TET16234

North Peak

16.00

17.75

1.75

8.280

0.242

27.2

0.016

TET16234

North Peak

23.90

35.63

11.73

8.760

0.256

14.8

0.034

TET16234

North Peak

58.67

65.60

6.93

5.530

0.161

15.8

0.015

TET16235

North Peak

14.50

53.38

38.88

51.620

1.506

216.0

0.020

Including

North Peak

17.68

20.73

3.05

320.000

9.333

589.0

0.025

and

North Peak

23.93

24.47

0.54

371.000

10.821

3,210.0

0.006

and

North Peak

24.47

25.76

1.29

109.000

3.179

265.0

0.016

and

North Peak

28.85

29.34

0.49

116.000

3.383

151.0

0.003

and

North Peak

52.98

53.38

0.40

125.000

3.646

143.0

0.014

TET16235

North Peak

59.50

65.92

6.42

8.730

0.255

43.4

0.053

TET16235

North Peak

70.05

73.00

2.95

4.970

0.145

13.1

0.019

TET16236

North Peak

4.67

7.23

2.56

0.830

0.024

2.1

0.007

TET16236

North Peak

60.45

63.09

2.64

2.930

0.085

51.4

0.012

TET16237

North Peak

9.75

23.94

14.19

45.330

1.322

9.3

0.078

Including

North Peak

11.58

13.56

1.98

97.000

2.829

19.6

0.248

and

North Peak

13.56

14.80

1.24

166.000

4.842

14.3

0.019

TET16237

North Peak

28.81

33.23

4.42

2.170

0.063

4.7

0.014

TET16237

North Peak

41.15

42.95

1.80

6.720

0.196

1.9

0.021

TET16237

North Peak

50.90

53.82

2.92

1.550

0.045

0.003

TET16237

North Peak

57.38

61.18

3.80

1.660

0.048

0.9

0.014

TET16238

North Peak

68.42

74.68

6.26

4.980

0.145

34.3

0.099

TET16238

North Peak

77.90

93.57

15.67

3.170

0.092

3.1

0.023

Including

North Peak

79.92

81.35

1.43

18.200

0.531

3.1

0.034

TET16239

North Peak

35.66

38.45

2.79

1.230

0.036

5.1

0.005

TET16239

North Peak

50.79

54.72

3.93

7.760

0.226

23.3

0.023

Including

North Peak

50.79

51.27

0.48

26.800

0.782

104.0

0.129

TET16239

North Peak

109.41

116.13

6.72

1.420

0.041

9.6

0.071

TET16240

North Peak

119.33

132.85

13.52

1.590

0.046

1.7

0.020

TET16241

North Peak

56.43

56.79

0.36

11.450

0.334

172.0

0.066

TET16242

North Peak

19.38

25.45

6.07

2.720

0.079

70.5

0.236

TET16242

North Peak

31.04

34.41

3.37

5.720

0.167

64.4

0.541

 

28

 

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16242

North Peak

37.58

63.93

26.35

5.550

0.162

39.3

0.134

Including

North Peak

50.44

53.15

2.71

18.300

0.534

75.5

0.097

and

North Peak

58.18

63.09

4.91

12.050

0.351

38.8

0.149

TET16242

North Peak

151.88

152.58

0.70

3.860

0.113

56.7

0.070

TET16242

North Peak

156.00

157.25

1.25

3.170

0.092

66.5

0.376

TET16243

North Peak

10.93

12.30

1.37

14.950

0.436

28.8

0.105

TET16243

North Peak

15.85

21.55

5.70

4.300

0.125

47.6

0.247

TET16243

North Peak

25.82

34.29

8.47

3.990

0.116

49.6

0.391

TET16243

North Peak

39.68

57.19

17.51

4.970

0.145

61.2

0.116

TET16243

North Peak

99.42

104.70

5.28

2.600

0.076

18.7

0.210

TET16244

North Peak

35.08

51.00

15.92

11.740

0.342

51.1

0.183

TET16244

North Peak

62.14

67.55

5.41

2.050

0.060

34.6

0.152

TET16244

North Peak

76.60

87.06

10.46

2.580

0.075

4.9

0.035

TET16245

North Peak

43.11

46.02

2.91

0.630

0.018

2.5

0.022

TET16245

North Peak

50.36

52.65

2.29

1.210

0.035

12.0

0.047

TET16245

North Peak

63.55

71.74

8.19

2.160

0.063

30.0

0.161

TET16245

North Peak

83.27

86.11

2.84

2.600

0.076

26.5

0.030

TET16246

North Peak

90.80

92.49

1.69

2.180

0.064

26.1

0.113

TET16246

North Peak

126.39

128.51

2.12

0.900

0.026

2.2

0.010

TET16247

North Peak

14.31

16.56

2.25

1.560

0.046

88.5

0.064

TET16247

North Peak

61.30

66.74

5.44

3.970

0.116

12.6

0.104

TET16247

North Peak

71.78

74.18

2.40

0.670

0.020

18.1

0.094

TET16247

North Peak

77.39

83.97

6.58

1.220

0.036

23.2

0.127

TET16247

North Peak

107.49

108.58

1.09

3.180

0.093

38.1

0.080

TET16247

North Peak

137.78

145.02

7.24

1.970

0.057

0.5

0.003

TET16248

North Peak

9.38

10.75

1.37

9.290

0.271

25.2

0.063

TET16248

North Peak

13.83

22.89

9.06

5.020

0.146

6.1

0.035

Including

North Peak

18.36

19.35

0.99

13.400

0.391

5.8

0.054

TET16248

North Peak

30.78

36.56

5.78

1.790

0.052

4.4

0.081

TET16248

North Peak

43.22

45.96

2.74

10.620

0.310

3.8

0.052

TET16248

North Peak

52.75

57.73

4.98

5.530

0.161

5.7

0.037

Including

North Peak

52.75

53.95

1.20

17.100

0.499

5.9

0.045

TET16248

North Peak

61.23

72.02

10.79

4.050

0.118

13.0

0.042

Including

North Peak

67.80

70.55

2.75

10.400

0.303

32.5

0.042

and

North Peak

71.48

72.02

0.54

11.350

0.331

10.7

0.087

TET16251

North Peak

118.21

120.82

2.61

0.800

0.023

0.8

0.025

TET16252

North Peak

49.43

51.94

2.51

2.220

0.065

1.7

0.010

TET16253

North Peak

105.65

107.96

2.31

0.860

0.025

0.8

0.033

TET16255

North Peak

35.30

44.72

9.42

5.530

0.161

56.2

0.230

Including

North Peak

36.90

37.43

0.53

16.700

0.487

113.0

1.165

and

North Peak

43.35

44.72

1.37

19.200

0.560

80.6

0.071

TET16256

North Peak

7.92

21.12

13.20

48.590

1.417

112.2

0.053

Including

North Peak

8.55

10.66

2.11

222.000

6.475

316.0

0.021

TET16257

North Peak

73.82

74.33

0.51

3.300

0.096

526.0

0.080

TET16261

East Peak

215.78

216.57

0.79

3.940

0.115

11.7

0.004

TET16262

West Peak

35.05

35.72

0.67

4.040

0.118

35.8

0.084

TET16262

West Peak

60.22

63.09

2.87

1.730

0.050

0.6

0.029

TET16262

West Peak

151.08

159.61

8.53

5.750

0.168

37.6

0.136

Including

West Peak

151.65

152.57

0.92

16.500

0.481

55.4

0.260

and

West Peak

152.57

153.73

1.16

13.850

0.404

92.9

0.191

TET16262

West Peak

195.76

198.19

2.43

1.720

0.050

5.7

0.111

TET16262

West Peak

210.69

216.02

5.33

4.560

0.133

5.7

0.199

TET16262

West Peak

221.50

222.90

1.40

1.510

0.044

96.2

0.151

 

29

 

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16263

West Peak

52.20

54.07

1.87

5.540

0.162

0.8

0.036

TET16263

West Peak

180.50

182.03

1.53

10.650

0.311

12.7

0.099

TET16263

West Peak

197.21

199.77

2.56

2.040

0.060

1.0

0.027

TET16263

West Peak

204.00

216.64

12.64

1.280

0.037

0.3

0.010

TET16264

West Peak

237.78

244.53

6.75

0.630

0.018

2.2

0.100

TET16265

West Peak

77.02

78.04

1.02

4.200

0.123

2.2

0.421

TET16265

West Peak

84.42

86.45

2.03

0.990

0.029

1.5

0.446

TET16265

West Peak

245.97

247.01

1.04

1.720

0.050

7.9

0.271

TET16265

West Peak

255.43

257.19

1.76

1.440

0.042

22.5

0.395

TET16265

West Peak

270.23

279.30

9.07

1.590

0.046

1.1

0.028

TET16266

North Peak

115.58

118.77

3.19

0.660

0.019

6.7

0.035

TET16266

North Peak

143.21

147.31

4.10

0.530

0.015

7.1

0.193

TET16266

North Peak

155.94

158.81

2.87

10.010

0.292

11.5

0.091

TET16266

North Peak

166.76

184.16

17.40

1.060

0.031

22.1

0.061

Including

North Peak

166.76

167.22

0.46

6.760

0.197

2.3

0.008

TET16267

Main Peak

110.39

161.24

50.85

12.050

0.351

11.5

0.184

Including

Main Peak

110.39

113.38

2.99

148.500

4.331

39.6

0.474

and

Main Peak

136.02

136.25

0.23

32.400

0.945

17.7

0.232

and

Main Peak

154.32

154.59

0.27

31.400

0.916

179.0

3.320

TET16267

Main Peak

165.04

170.93

5.89

14.740

0.430

14.1

0.392

Including

Main Peak

165.04

165.28

0.24

70.200

2.048

99.1

2.360

TET16268

Main Peak

16.61

19.05

2.44

0.660

0.019

47.0

0.258

TET16268

Main Peak

49.37

49.92

0.55

4.350

0.127

3.4

0.102

TET16268

Main Peak

90.31

93.66

3.35

11.860

0.346

4.3

0.157

Including

Main Peak

91.88

92.53

0.65

37.500

1.094

12.5

0.497

TET16268

Main Peak

105.39

173.28

67.89

8.700

0.254

3.8

0.146

Including

Main Peak

118.97

127.41

8.44

22.520

0.657

5.5

0.246

and

Main Peak

134.53

137.55

3.02

20.540

0.599

4.9

0.192

TET16269

North Peak

25.30

42.93

17.63

2.270

0.066

1.3

0.026

Including

North Peak

27.43

30.18

2.75

8.020

0.234

2.7

0.072

TET16269

North Peak

47.93

56.47

8.54

2.000

0.058

1.6

0.032

Including

North Peak

50.42

52.17

1.75

6.670

0.195

2.8

0.058

TET16269

North Peak

60.66

74.56

13.90

13.970

0.407

2.6

0.048

Including

North Peak

69.39

71.27

1.88

61.320

1.789

7.9

0.144

TET16269

North Peak

91.90

94.92

3.02

8.840

0.258

2.3

0.095

TET16269

North Peak

108.27

125.65

17.38

9.700

0.283

2.2

0.127

Including

North Peak

118.39

120.24

1.85

36.000

1.050

2.6

0.107

TET16270

North Peak

78.03

93.60

15.57

8.560

0.250

2.3

0.097

Including

North Peak

88.68

91.09

2.41

21.500

0.627

3.1

0.085

TET16270

North Peak

105.30

111.06

5.76

11.240

0.328

2.4

0.071

TET16270

North Peak

119.09

122.73

3.64

1.430

0.042

3.9

0.078

TET16271

North Peak

24.08

41.20

17.12

51.890

1.513

23.7

0.088

Including

North Peak

31.50

34.31

2.81

181.920

5.306

49.8

0.133

TET16271

North Peak

44.73

53.92

9.19

41.020

1.196

18.1

0.043

Including

North Peak

51.51

53.15

1.64

151.500

4.419

37.5

0.070

TET16271

North Peak

57.25

71.20

13.95

24.280

0.708

20.5

0.058

Including

North Peak

67.43

69.62

2.19

62.900

1.835

49.4

0.146

TET16271

North Peak

82.32

85.63

3.31

4.470

0.130

1.9

0.041

TET16272

North Peak

1.83

4.88

3.05

0.840

0.025

0.9

0.004

TET16272

North Peak

14.33

16.76

2.43

7.040

0.205

11.7

0.008

Including

North Peak

16.16

16.76

0.60

19.150

0.559

33.8

0.006

TET16272

North Peak

23.13

32.96

9.83

49.010

1.429

146.7

0.015

Including

North Peak

29.99

30.38

0.39

345.000

10.063

735.0

0.006

 

30

 

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16272

North Peak

37.39

38.98

1.59

1.760

0.051

2.7

0.004

TET16272

North Peak

43.09

51.05

7.96

15.990

0.466

49.0

0.035

Including

North Peak

45.50

47.10

1.60

39.700

1.158

160.0

0.136

TET16272

North Peak

55.92

59.31

3.39

1.550

0.045

25.9

0.129

TET16272

North Peak

84.90

87.84

2.94

1.530

0.045

2.2

0.030

TET16273

West Peak

163.78

166.98

3.20

0.740

0.022

6.1

0.024

TET16273

West Peak

176.67

178.70

2.03

2.960

0.086

14.0

0.168

TET16273

West Peak

188.36

191.00

2.64

1.030

0.030

3.2

0.045

 

2016 Exploration Program - Phase I. During the first three months of calendar year 2016, exploration drilling was completed by the Joint Venture Company on the Tetlin Property totaling 4,040 meters (13,255 feet) in 19 holes, referred to as the 2016 Phase I program. The Joint Venture Company spent an estimated $1.9 million to complete the program including drilling, geochemical analyses, landholding fees and other related expenses. Drilling targeted two areas, North Peak and West Peak, with the objective of enhancing the understanding of mineralization geometry and geochemical variability. During the program, an area located between the Peak Zone and North Peak was tested, producing significant gold and copper assay intervals in a Connector Zone.

 

 

31

 

    

The map below depicts the location of 16 of the 19 core holes drilled during the 2016 Phase I program:

 

2016 PHASE I CORE HOLES DRILLED

 

    

 

 

32

 

 

Significant Drill Intercepts from the 2016 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 to date for Phase I of the 2016 Program:

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET16192

North Peak

31.34

38.29

6.95

0.784

0.023

2.5

0.023

TET16192

North Peak

42.00

43.42

1.42

1.803

0.053

1.5

0.021

TET16192

North Peak

78.51

91.78

13.27

49.194

1.435

4.5

0.035

including

North Peak

80.96

81.59

0.63

416.000

12.133

26.7

0.066

TET16192

North Peak

102.84

105.46

2.62

2.536

0.074

4.5

0.151

TET16192

North Peak

122.07

123.79

1.72

3.850

0.112

1.1

0.067

TET16192

North Peak

139.90

143.78

3.88

3.992

0.116

3.1

0.119

TET16193

North Peak

85.91

90.62

4.71

12.452

0.363

3.6

0.065

including

North Peak

88.09

89.71

1.62

27.974

0.816

5.9

0.041

TET16195

North Peak

66.50

68.34

1.84

6.718

0.196

3.7

0.069

TET16196

North Peak

65.78

69.12

3.34

0.712

0.021

14.1

0.096

TET16199

West Peak

21.09

23.13

2.04

3.462

0.101

6.9

0.037

TET16199

West Peak

50.19

52.08

1.89

1.375

0.040

0.7

0.022

TET16199

West Peak

55.62

57.79

2.17

1.805

0.053

0.005

TET16199

West Peak

80.44

82.76

2.32

1.529

0.045

1.9

0.054

TET16199

West Peak

95.08

96.63

1.55

2.690

0.078

0.9

0.006

TET16199

West Peak

139.46

145.31

5.85

0.699

0.020

1.1

0.03

TET16204

North Peak

50.41

53.34

2.93

1.100

0.032

5.2

0.189

TET16204

North Peak

63.06

65.42

2.36

2.050

0.060

1.1

0.044

TET16204

North Peak

194.11

195.93

1.82

16.338

0.477

328.4

0.157

TET16205

North Peak

65.07

70.61

5.54

0.954

0.028

2.8

0.165

TET16205

North Peak

82.91

83.67

0.76

6.715

0.196

11.2

0.005

TET16205

North Peak

150.74

151.73

0.99

3.360

0.098

4.2

0.314

TET16206

North Peak

60.95

104.38

43.43

3.611

0.105

2.1

0.108

including

North Peak

98.34

100.04

1.70

30.700

0.895

2.3

0.108

TET16207

North Peak

92.88

95.92

3.04

2.590

0.076

1.4

0.057

TET16208

West Peak

55.02

58.20

3.18

2.543

0.074

0.5

0.005

TET16208

West Peak

88.66

108.65

19.99

2.822

0.082

0.1

0.006

including

West Peak

95.55

97.45

1.90

12.050

0.351

0.5

0.011

and

West Peak

98.93

100.02

1.09

14.200

0.414

0.7

0.013

TET16209

West Peak

46.33

48.95

2.62

2.222

0.065

0.8

0.007

TET16209

West Peak

52.73

58.98

6.25

4.863

0.142

0.5

0.014

including

West Peak

55.78

57.54

1.76

12.788

0.373

1.1

0.037

TET16210

Connector

16.95

60.91

43.96

3.275

0.096

30.6

0.402

including

Connector

18.12

22.29

4.17

9.006

0.263

51.5

0.291

and

Connector

51.90

53.26

1.36

10.150

0.296

19.6

0.583

and

Connector

56.57

57.15

0.58

10.550

0.308

50.4

2.28

TET16210

Connector

131.83

135.60

3.77

2.614

0.076

52.5

0.14

 

33

 

 

In 2015, two phases of exploration drilling were completed by the Joint Venture Company on the Tetlin Property totaling 14,059 meters (46,127 feet) in 61 holes. The Joint Venture Company spent $6.8 million to complete both programs including drilling, geochemical analyses, landholding fees and other related expenses.

 

2015 Exploration Program - Phase II. The Joint Venture Company completed 6,897 meters (22,629 ft) of core drilling in 32 core holes during the 2015 Phase II drilling program on the Tetlin Property, which was completed October 19, 2015. Drilling targeted two areas, Peak West and North Peak/Blue Moon, with the objective of defining mineralization geometry and geochemical variability.

 

The map below depicts the location of the 32 core holes drilled during the 2015 Phase II drilling program:

 

2015 PHASE II CORE HOLES DRILLED

 

    

 

    

34

 

 

Significant 2015 Drill Intercepts from the 2015 Phase II 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 to date for Phase II of the 2015 Program:

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET15161

Blue Moon

81.69

84.73

3.04

1.072

0.031

0.024

TET15162

Blue Moon

165.22

178.16

12.94

0.197

0.006

3.3

0.130

including

Blue Moon

175.80

178.16

2.36

0.894

0.026

4.0

0.147

TET15163

North Peak

138.44

155.06

16.62

0.851

0.025

3.4

0.179

including

North Peak

138.44

139.53

1.09

4.530

0.132

8.9

0.083

and

North Peak

143.20

146.08

2.88

2.350

0.069

3.2

0.122

TET15164

Blue Moon

79.20

81.14

1.94

2.560

0.075

2.5

0.089

TET15165

North Peak

30.42

32.34

1.92

70.898

2.068

39.0

0.015

TET15165

North Peak

55.17

57.93

2.76

1.805

0.053

0.9

0.017

TET15165

North Peak

102.11

111.25

9.14

2.800

0.082

3.8

0.058

including

North Peak

109.06

109.59

0.53

29.100

0.849

23.9

0.184

TET15166

Blue Moon

73.29

78.48

5.19

0.594

0.017

4.4

0.175

TET15167

North Peak

49.68

57.00

7.32

6.725

0.196

1.8

0.033

including

North Peak

49.68

51.00

1.32

33.700

0.983

6.0

0.061

TET15167

North Peak

105.72

113.15

7.43

0.731

0.021

1.5

0.074

TET15167

North Peak

118.45

126.21

7.76

12.414

0.362

3.0

0.097

including

North Peak

125.56

126.21

0.65

47.100

1.374

5.7

0.094

TET15167

North Peak

163.73

173.67

9.94

0.573

0.017

10.0

0.216

including

North Peak

163.73

164.14

0.41

2.890

0.084

12.1

0.345

and

North Peak

166.52

166.92

0.40

2.230

0.065

10.9

0.302

TET15168

Blue Moon

111.55

114.28

2.73

3.630

0.106

5.1

0.140

TET15169

North Peak

22.85

27.16

4.31

3.028

0.088

1.5

0.020

TET15169

North Peak

50.08

54.11

4.03

1.573

0.046

11.7

0.143

including

North Peak

50.08

50.63

0.55

8.100

0.236

38.6

0.052

TET15169

North Peak

110.78

132.62

21.84

1.414

0.041

2.0

0.141

including

North Peak

115.29

116.43

1.14

4.590

0.134

5.5

0.197

and

North Peak

118.78

121.02

2.24

5.736

0.167

3.4

0.221

TET15170

Blue Moon

176.01

189.74

13.73

0.645

0.019

5.2

0.212

including

Blue Moon

182.22

184.32

2.10

2.340

0.068

7.3

0.337

TET15171

North Peak

3.96

10.97

7.01

1.724

0.050

0.8

0.021

TET15171

North Peak

17.34

34.14

16.80

17.939

0.523

4.2

0.027

including

North Peak

20.73

22.63

1.90

61.300

1.788

10.1

0.071

and

North Peak

24.61

25.73

1.12

49.400

1.441

22.2

0.013

TET15171

North Peak

44.50

50.14

5.64

3.760

0.110

14.6

0.014

TET15173

North Peak

123.97

127.64

3.67

13.449

0.392

96.9

0.072

TET15174

Peak West

3.35

8.89

5.54

22.077

0.644

7.6

0.110

including

Peak West

5.49

7.36

1.87

62.400

1.820

19.3

0.158

TET15174

Peak West

14.78

21.03

6.25

6.451

0.188

3.3

0.126

including

Peak West

18.59

19.11

0.52

39.500

1.152

8.5

0.152

TET15174

Peak West

44.35

55.63

11.28

3.429

0.100

2.8

0.177

including

Peak West

44.78

46.95

2.17

7.878

0.230

4.2

0.217

TET15176

Peak West

7.92

76.39

68.47

5.457

0.159

0.4

0.059

including

Peak West

44.85

76.39

31.54

9.029

0.263

0.4

0.055

TET15177

North Peak

45.84

68.88

23.04

19.859

0.579

4.2

0.056

including

North Peak

49.99

51.22

1.23

58.700

1.712

8.7

0.091

and

North Peak

62.35

64.68

2.33

87.513

2.552

9.2

0.154

TET15177

North Peak

74.68

79.55

4.87

4.746

0.138

2.8

0.057

 

35

 

 

DrillHole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET15178

North Peak

14.85

15.88

1.03

2.240

0.065

3.0

0.020

TET15178

North Peak

45.21

46.61

1.40

2.020

0.059

4.3

0.147

TET15178

North Peak

81.38

83.60

2.22

1.760

0.051

0.8

0.017

TET15178

North Peak

126.89

134.72

7.83

0.234

0.007

2

0.106

TET15178

North Peak

157.81

167.81

10.00

0.017

2.1

0.163

including

North Peak

161.99

163.43

1.44

0.032

0.001

5.7

0.491

TET15179

Peak West

26.52

31.24

4.72

0.595

0.017

0.2

0.040

TET15179

Peak West

50.14

68.28

18.14

1.512

0.044

0.017

including

Peak West

66.14

68.28

2.14

5.650

0.165

0.017

TET15179

Peak West

98.92

112.32

13.40

2.283

0.067

0.4

0.012

including

Peak West

109.16

110.29

1.13

8.210

0.239

1.2

0.02

TET15179

Peak West

117.96

126.34

8.38

2.115

0.062

1.2

0.029

TET15180

Discovery

153.92

159.85

5.93

0.543

0.016

19.7

0.286

including

Discovery

153.92

154.57

0.65

4.100

0.120

22.1

0.424

and

Discovery

158.11

159.85

1.74

0.085

0.002

54.2

0.747

TET15180

Discovery

187.40

189.05

1.65

1.988

0.058

25.2

0.356

TET15181

Peak West

15.88

17.05

1.17

6.440

0.188

2.9

0.071

TET15181

Peak West

22.71

31.09

8.38

3.948

0.115

2

0.056

TET15181

Peak West

49.83

60.05

10.22

4.635

0.135

1.1

0.03

including

Peak West

56.42

57.30

0.88

33.800

0.986

1.1

0.03

TET15181

Peak West

112.20

116.60

4.40

1.154

0.034

0.013

TET15181

Peak West

141.43

161.24

19.81

4.116

0.120

7

0.101

including

Peak West

147.45

148.19

0.74

9.990

0.291

15.5

0.103

and

Peak West

154.89

159.21

4.32

14.635

0.427

9.7

0.115

TET15182

Peak West

138.07

141.12

3.05

2.700

0.079

5.7

0.087

TET15182

Peak West

158.27

160.82

2.55

58.056

1.693

38.9

1.932

TET15184

Peak West

150.53

152.82

2.29

1.010

0.029

0.9

0.008

TET15185

Peak West

13.60

16.63

3.03

0.825

0.024

1.8

0.099

TET15185

Peak West

31.63

36.04

4.41

3.321

0.097

1.3

0.026

TET15185

Peak West

98.42

113.75

15.33

0.190

0.006

1.4

0.13

including

Peak West

100.58

101.53

0.95

1.760

0.051

3.6

0.312

TET15186

Peak West

75.16

104.38

29.22

0.280

0.008

2.6

0.160

TET15186

Peak West

126.16

128.77

2.61

1.730

0.050

0.01

TET15186

Peak West

152.59

161.68

9.09

0.838

0.024

0.3

0.025

TET15187

Peak West

69.66

76.27

6.61

0.124

0.004

2.9

0.122

including

Peak West

74.11

74.46

0.35

0.285

0.008

16.1

0.596

TET15187

Peak West

173.89

178.75

4.86

0.234

0.007

3.9

0.203

TET15187

Peak West

222.04

227.69

5.65

0.216

0.006

42.3

0.06

TET15188

Peak West

26.77

34.14

7.37

1.866

0.054

3.7

0.152

TET15188

Peak West

41.76

44.81

3.05

1.715

0.050

8.5

0.103

TET15188

Peak West

115.17

119.76

4.59

0.138

0.004

6.2

0.127

TET15188

Peak West

128.39

131.73

3.34

1.497

0.044

6.3

0.085

TET15189

Peak West

0.00

9.67

9.67

2.376

0.069

0.2

0.027

TET15189

Peak West

46.12

57.85

11.73

0.520

0.015

3.3

0.345

including

Peak West

51.86

53.75

1.89

2.880

0.084

4.3

0.415

TET15189

Peak West

66.78

69.56

2.78

0.128

0.004

4.1

0.341

TET15189

Peak West

74.72

78.33

3.61

2.003

0.058

0.008

TET15189

Peak West

87.48

96.62

9.14

0.572

0.017

1.2

0.06

TET15189

Peak West

126.45

128.32

1.87

0.254

0.007

4.0

0.329

TET15191

Peak West

42.67

44.35

1.68

1.835

0.054

0.02

TET15191

Peak West

70.83

74.38

3.55

2.682

0.078

2.0

0.143

 

 

36

 

 

2015 Exploration Program - Phase I. The Joint Venture Company completed 7,162 meters (23,498 ft) of core drilling in 29 core holes during the 2015 Phase I drilling program on the Tetlin Property, which was completed August 9, 2015. Drilling targeted seven areas identified through prior geophysical surveys and geochemical sampling outside the Peak Zone in the greater Chief Danny prospect.

 

The map below depicts the location of the 29 core holes drilled during the 2015 Phase I drilling program:

 

2015 PHASE I CORE HOLES DRILLED

 

    

 

 

37

 

 

Significant 2015 Drill Intercepts from the 2015 Phase 1 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 to date for Phase I of the 2015 Program:

 

Drill Hole

Zone

From (meters)

To (meters)

Interval (meters)

Au gpt

Au opt

Ag gpt

Cu %

TET15134

Saddle

44.50

46.02

1.52

6.380

0.186

3.1

0.011

TET15135

Saddle

46.33

47.24

0.91

6.580

0.192

4.8

0.008

TET15136

Saddle

82.46

85.90

3.44

0.404

0.012

20.2

0.005

including

Saddle

82.91

83.46

0.55

0.362

0.011

77.3

0.004

TET15143

8 O'clock

77.78

81.38

3.60

1.742

0.051

1.0

0.171

TET15145

Discovery

86.26

89.31

3.05

1.385

0.040

41.0

0.010

TET15146

7 O'clock

21.79

26.82

5.03

1.075

0.031

1.4

0.151

TET15146

7 O'clock

163.98

169.77

5.79

0.788

0.023

4.9

0.115

TET15147

Peak/Peak Deep

9.39

51.28

41.89

6.072

0.177

4.6

0.198

including

Peak/Peak Deep

22.56

26.37

3.81

16.736

0.488

4.2

0.181

and

Peak/Peak Deep

40.15

43.78

3.63

16.423

0.479

6.6

0.222

and

Peak/Peak Deep

44.29

45.61

1.32

12.700

0.370

8.7

0.293

TET15147

Peak/Peak Deep

77.26

78.94

1.68

2.170

0.063

0.5

0.016

TET15147

Peak/Peak Deep

84.58

97.73

13.15

4.061

0.118

6.3

0.274

TET15147

Peak/Peak Deep

101.70

150.12

48.42

4.980

0.145

12.0

0.338

including

Peak/Peak Deep

130.45

132.98

2.53

11.940

0.348

37.4

1.192

and

Peak/Peak Deep

140.08

141.25

1.17

16.150

0.471

35.5

1.120

and

Peak/Peak Deep

148.74

150.12

1.38

11.700

0.341

8.8

0.356

TET15147

Peak/Peak Deep

551.13

555.10

3.97

1.055

0.031

1.1

0.086

TET15148

North Peak

229.60

235.45

5.85

4.630

0.135

19.1

0.012

TET15148

North Peak

240.84

243.84

3.00

1.843

0.054

1.6

0.034

TET15149

North Peak

32.92

42.69

9.77

0.552

0.016

56.0

0.013

including

North Peak

39.47

40.84

1.37

0.828

0.024

189.0

0.034

TET15149

North Peak

56.08

57.30

1.22

6.040

0.176

17.2

0.058

TET15149

North Peak

173.61

182.27

8.66

1.401

0.041

16.1

0.097

TET15151

North Peak

11.58

14.63

3.05

1.770

0.052

1.2

0.009

TET15151

North Peak

31.27

39.47

8.20

0.679

0.020

1.2

0.012

TET15153

North Peak

10.20

32.92

22.72

9.378

0.274

1.9

0.045

including

North Peak

20.73

25.29

4.56

24.105

0.703

4.4

0.085

TET15153

North Peak

42.06

55.35

13.29

6.524

0.190

15.1

0.035

including

North Peak

53.80

55.35

1.55

39.900

1.164

7.0

0.085

TET15153

North Peak

68.07

68.70

0.63

18.700

0.545

2.9

0.063

TET15153

North Peak

113.61

121.63

8.02

0.744

0.022

1.5

0.058

TET15154

Peak Deep

21.79

48.58

26.79

0.175

0.005

53.9

0.139

including

Peak Deep

28.92

31.44

2.52

0.932

0.027

50.4

0.143

and

Peak Deep

32.43

34.22

1.79

0.035

0.001

239.0

0.102

TET15154

Peak Deep

132.57

153.92

21.35

0.138

0.004

22.0

0.813

including

Peak Deep

137.31

142.87

5.56

0.281

0.008

50.1

2.253

TET15157

SW Discovery

306.08

326.33

20.25

0.016

0.000

4.5

0.142

TET15158

Blue Moon

25.89

31.82

5.93

0.731

0.021

0.0

0.012

TET15158

Blue Moon

66.00

72.24

6.24

2.883

0.084

4.5

0.146

including

Blue Moon

69.87

70.41

0.54

21.600

0.630

17.8

0.254

 

38

 

    

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 Tetlin Property. Pursuant to the PSA, Avalon provided geological consulting services and exploration activities, including all field work at the Tetlin Lease.

 

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.

 

In connection with the Transactions, the Company terminated the PSA with Avalon, and Avalon is now providing services to the Joint Venture Company.

 

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 Tetlin project exploration programs. During the Company's exploration programs, there were 10 to 15 Tetlin residents working on the Tetlin 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 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 agreement the Joint Venture Company provides payments to the 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 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 Tetlin 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.

 

39

 

 

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 is required to spend $350,000 per year annually until July 15, 2018 in exploration costs pursuant to the Tetlin Lease. However, exploration expenditures to date under the lease have already 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, 2016, 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 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 additional 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 2015 - 2016 assessment year, claims rentals totaled $125,307. Also, if the minimum work requirement is not performed on the property, additional minimum labor payments are due on certain state of Alaska acreage.

 

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.

 

40

 

 

Investment in the Joint Venture Company. The Company’s consolidated financial statements include the investment in Peak Gold, LLC 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, 2016 held an 79.4% ownership interest in Peak Gold. Royal Gold will initially serve 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 Peak Gold, LLC as of December 31, 2016 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 not 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 Tetlin Properties. We do not expect the Joint Venture Company to generate revenue from mineral sales in the foreseeable future. If the Tetlin Properties fail 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, 2016 Compared to Three Months Ended December 31, 2015

 

General and Administrative Expense. General and administrative expense for the three months ended December 31, 2016 and 2015 were $592,142 and $318,158, respectively. Current year general and administrative expenses primarily relate to audit fees, legal fees, payroll taxes, and stock-based compensation expense. We recognized $331,306 of stock-based compensation expense for the three months ended December 31, 2016, related to restricted stock granted to our officers and directors in November 2016, August 2016, December 2015, September 2015, and January 2015 all pursuant to the Company’s 2010 Equity Compensation Plan. We recognized $146,597 of stock-based compensation expense for the three months ended December 31, 2015, related to restricted stock granted to our officers and directors in December 2015, September 2015, January 2015, and December 2013, and stock option awards granted in September 2013

 

Six Months Ended December 31, 2016 Compared to Six Months Ended December 31, 2015

 

Claim Rentals and Minimum Royalties. Claim rentals and minimum royalties consist of Federal and State of Alaska rental payments, annual labor payments, and minimum royalty payments payable to the Tetlin Village Council. We recognized claim rental and minimum royalties expense of $0 for the six months ended December 31, 2016, compared to $14,425 for the six months ended December 31, 2015. The Joint Venture Company is responsible for making all future claim rental and minimum royalty payments.

 

General and Administrative Expense. General and administrative expense for the six months ended December 31, 2016 and 2015 were $1,547,792 and $754,225 respectively. Current year general and administrative expenses primarily relate to audit fees, legal fees, payroll taxes, and stock-based compensation expense. We recognized $959,650 of stock-based compensation expense for the six months ended December 31, 2016, related to restricted stock granted to our officers and directors in November 2016, August 2016, December 2015, September 2015, and January 2015 all pursuant to the Company’s 2010 Equity Compensation Plan.  We recognized $367,220 of stock-based compensation expense for the six months ended December 31, 2015, related to restricted stock granted to our officers and directors in December 2015, September 2015, January 2015, and December 2013, and stock option awards granted in September 2013

41

 

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.  The Company's sources of cash have been from common stock offerings. The Tetlin Properties are 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 Tetlin Properties.  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 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 $9.00 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. Proceeds from the exercise of the warrants will be used for working capital purposes and for funding future obligations to the Joint Venture Company.  As of December 31, 2016, the Company has approximately $5.8 million of cash, cash equivalents, and short term investments.  Of the $5.8 million, $5.3 million is attributable to proceeds from the offering.

 

On January 8, 2015, Royal Gold invested $5 million to fund exploration activity, and will have the option to earn up to a 40% economic 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, 2016, Royal Gold has funded approximately $17.0 million (including the initial investment of $5 million) and earned an 20.6% interest in the Joint Venture Company. The proceeds of Royal Gold’s investment has been used by the Joint Venture Company for additional exploration of the Tetlin Property.  For additional information regarding the Joint Venture Company's capital budget and expenditures, see the “Gold Explorationsection above.

 

Risk Factors

 

In addition to the risk factors 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, 2016, 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, 2016, other than updating the risk factors below. The risks described in our Annual Report on Form 10-K for the year ended June 30, 2016 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:

 

There can be no assurance that Royal Gold will continue to fund the Joint Venture Company to continue exploration work.

 

The Joint Venture Company's LLC Agreement contains earn-in periods where Royal Gold has the option to fund up to $25 million on or before October 31, 2018 after its initial $5 million investment at the Closing of the Master Agreement. As of December 31, 2016, Royal Gold has funded approximately $17.0 million (including the initial investment of $5 million) and earned a 20.6% interest in the Joint Venture Company. There is no requirement that Royal Gold contribute any future amounts to the Joint Venture Company to continue exploration work, and the Company will have limited funds to continue exploration of its Tetlin Property, if Royal Gold fails to contribute additional amounts to the Joint Venture Company.

 

The Joint Venture Company has no assurance of title to its properties.

 

The Joint Venture Company holds approximately 133,900 acres in the form of State of Alaska unpatented mining claims, for gold ore exploration. Unpatented mining claims are unique property interests, in that they are subject to the paramount title of, the State of Alaska and rights of third parties to uses of the surface within their boundaries, and are generally considered to be subject to greater title risk than other real property interests. The rights to deposits of minerals lying within the boundaries of the unpatented state claims are subject to Alaska Statues 38.05.185 - 38.05.280, and are governed by Alaska Administrative Code 11 AAC 86.100 - 86.600. The validity of all State of Alaska unpatented mining claims is dependent upon inherent uncertainties and conditions.

42

 

With respect to the Tetlin Lease, the Company retained title lawyers to conduct a preliminary examination of title to the mineral interest prior to executing 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. In addition, in connection with the assignment of the Tetlin Lease from the Company to the Joint Venture Company, the Company and the Native Village of Tetlin entered into an Estoppel and Agreement and a Stability Agreement (the "Agreements") that were approved by the Tetlin Village Council and the Native Village of Tetlin members.  The Agreements approved the assignment of the Tetlin Lease to the Joint Venture Company and, among other things, confirmed the validity and effectiveness of the Tetlin Lease.  Prior to conducting any mining activity, however, the Joint Venture Company might obtain a further title review of the Tetlin Lease to identify more fully any deficiencies in title to the lease and, if there are deficiencies, to identify measures necessary to cure those defects to the extent reasonably possible. However, such deficiencies might not be cured. It does happen, from time to time, that the examination made by title lawyers reveals that the title to properties is defective, having been obtained in error from a person who is not the rightful owner of the mineral interest desired. In these circumstances, the Joint Venture Company might not be able to proceed with exploration of the lease site or might incur costs to remedy a defect. It might also happen, from time to time, that the Joint Venture Company might elect to proceed with mining work despite defects to the title identified in further title review.  

 

The Company's common stock is thinly traded.

 

As of December 31, 2016, there were approximately 4.9 million shares of the Company's common stock outstanding, with directors and officers beneficially owning approximately 16.2% of the common stock and the Estate of Mr. Kenneth R. Peak and its affiliates, the Company's former Chairman, beneficially owning approximately 16.8% of our common stock. Since the Company's common stock is thinly traded, 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.

 

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, 2016 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."

43

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

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, the Company's Chairman, President and Chief Executive Officer. We relied on the provisions of Section 4(2) and Regulation D of the Securities Act in claiming an exemption from the offering, sale and delivery of such securities from registration under the Securities Act.  Proceeds from the exercise of the warrants will be used for working capital purposes and for funding future obligations to the Joint Venture Company.

Item 4. Mine Safety Disclosures

 

None.

 

Item 5. Other Information

 

None.

 

44

 

 

Item 6. Exhibits

 

(a)

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. (7)

 

 

 

4.2

 

Certificate of Designation of Series A Junior Preferred Stock of Contango ORE, Inc. (5)

 

 

 

4.3

 

Rights Agreement, dated as of December 20, 2012, between Contango ORE, Inc. and Computershare Trust Company, N.A., as Rights Agent. (5)

 

 

 

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. (6)

 

 

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. (8)

 

 

 

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. (9)

 

 

 

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. (10)

     
4.8  

Registration Rights Agreement dated November 15, 2016, between Contango ORE, Inc. and the Purchasers named therein. (12)

     

10.1

  

Contribution Agreement, dated as of November 1, 2010, between Contango Oil & Gas Company and Contango ORE, Inc. (1)

 

10.2

  

Registration Rights Agreement, dated as of March 22, 2012, between Contango ORE, Inc. and the Purchasers named therein. (4)

 

 

10.3

 

Registration Rights Agreement, dated as of March 22, 2013, between Contango ORE, Inc. and the Purchasers named therein. (6)

 

 

 

10.4

 

Warrant, dated as of March 22, 2013, issued by Contango ORE, Inc. in favor of the Holders named therein. (6)

 

 

 

10.5

 

Management Services Agreement by and between Contango ORE, Inc. and Juneau Exploration effective October 1, 2016. (11)

 

 

 

31.1

  

Certification of Chief Executive Officer required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.

 

 

31.2

  

Certification of Chief Financial Officer required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934.

 

 

32.1

  

Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

32.2

  

Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

99.1

  

Original Schedule of Gold properties (Excluding Tetlin Lease). (2)

 

 

99.2

  

Original Schedule of REE properties. (2)

 

 

99.3

 

Report of Behre Dolbear & Company (USA), Inc. (3)

 

99.4

 

Promissory Note from Tetlin Village Council to Contango ORE, Inc. dated August 1, 2013 (7)

 

 

 

99.5

 

Voting Agreement, dated as of September 29, 2014, between Royal Gold, Inc. and the stockholders thereto (8)

 

 

 

101

 

Interactive Data Files

 

45

 

 

Filed herewith.

 

 

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 March 27, 2012.

 

 

5.

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.

 

 

6.

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.

   

7.

Filed as an exhibit to the Company’s report on Form 10-Q for the three months ended September 30, 2013, as filed with the Securities and Exchange Commission on November 14, 2013.

 

 

8.

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.

   

9.

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.

   

10.

Filed as an exhibit to the Company’s report on Form 10-Q for the three months ended September 30, 2015, as filed with the Securities and Exchange Commission on November 12, 2015.

   
11.

Filed as an exhibit to the Company’s report on Form 10-Q for the three months ended September 30, 2016, as filed with the Securities and Exchange Commission on November 10, 2016.

   
12.

Filed as an exhibit to the Company’s report on Form 8-K, as filed with the Securities and Exchange Commission on November 21, 2016.

 

 

46

 

 

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 1, 2017

 

 

 

By:

 

/s/     BRAD JUNEAU

 

 

 

 

 

 

Brad Juneau

 

 

 

 

 

 

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

Date: February 1, 2017

 

 

 

By:

 

/s/     LEAH GAINES

 

 

 

 

 

 

Leah Gaines

 

 

 

 

 

 

Vice President, Chief Financial Officer, Chief Accounting Officer and Controller

(Principal Financial and Accounting Officer)