Long Mine Life And FAST 41 Permitting Will Support Future Multi Asset Precious Metals Platform

Catalysts

About Contango Silver & Gold

Contango Silver & Gold is a precious metals company with a 30% interest in the Manh Choh gold project and a portfolio of development and exploration assets in Alaska and British Columbia.

What are the underlying business or industry changes driving this perspective?

• The planned move to be debt free and hedge free around 2027, supported by Manh Choh cash flow and recent equity raises, reduces financing costs and exposure to hedging losses, which can support future net margins and earnings quality.
• The long life of mine at Manh Choh to 2029, combined with near mine exploration spend of about US$5 million in 2026 and stockpiled lower grade material that could be reassessed under higher gold price scenarios, provides optionality that can influence future revenue and mine life extension decisions.
• The fully funded work programs at Lucky Shot and Johnson Tract, including roughly US$25 million at Lucky Shot this year and another US$25 million planned for 2027, are aimed at moving these assets toward feasibility stage decisions. This can add new potential production sources and affect medium term revenue and cash flow diversity.
• The Kitsault silver and gold district coming in via the Dolly Varden merger, with about 200,000 meters of drilling fed into an updated mineral resource and a planned initial economic study, gives the company a larger multi asset platform that can spread fixed costs and potentially support higher consolidated earnings over time.
• The FAST 41 permitting framework for Johnson Tract, with a publicly visible schedule targeting federal permits by March 2028, creates clearer timing for a possible road linked mine and port. This can reduce permitting uncertainty and support long term capital allocation, future revenue visibility and potential margin planning.

Assumptions

How have these above catalysts been quantified?

• Contango Silver & Gold currently has no revenue. Analysts are forecasting revenue to reach $100.3 million by April 2029.
• As a pre-revenue company, Analysts expect Contango Silver & Gold to achieve a profit margin of 85.4% in 3 years time.
• Analysts expect earnings to reach $85.7 million (and earnings per share of $2.54) by about April 2029, up from -$36.1 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $108.2 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 11.2x on those 2029 earnings, up from -19.3x today. This future PE is lower than the current PE for the US Metals and Mining industry at 22.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.56%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company is highly reliant on the Manh Choh joint venture for near term cash flow, so any operational issues at the mine or at the Fort Knox mill, including processing disruptions or delays beyond the current 4 month lag between mining and payment, could push out expected cash receipts and affect revenue visibility and earnings timing.
• All in sustaining costs at Manh Choh are guided to rise from about US$1,616 per ounce sold in 2025 to US$2,200 to US$2,300 in 2026 due to heavier stripping and mine sequencing, and could be pressured further by wage inflation and higher diesel prices, which would compress net margins if gold prices do not move in step.
• The long term value story assumes successful advancement of multiple growth projects such as Lucky Shot, Johnson Tract and Kitsault. These projects require around US$40 million of exploration and development spending this year alone and more in 2027, so drilling results, permitting under FAST 41 and any delays to feasibility work could slow future production optionality and push out expected earnings contributions.
• The company plans to be debt free and hedge free around 2027. However, early delivery into remaining hedges and final debt repayment still depend on ongoing Manh Choh profitability, so weaker gold prices or unexpected cost inflation could lengthen the period of hedge related cash flow drag and weigh on net income.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $37.33 for Contango Silver & Gold based on their expectations of its future earnings growth, profit margins and other risk factors.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $50.0, and the most bearish reporting a price target of just $29.0.
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $100.3 million, earnings will come to $85.7 million, and it would be trading on a PE ratio of 11.2x, assuming you use a discount rate of 8.6%.
• Given the current share price of $22.0, the analyst price target of $37.33 is 41.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.