What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-02-11 compared with 2020-11-13 · 142 added, 202 removed, 327 unchanged (51% of the section changed)

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Risk Factors, of this report and Part I, Item 1A.

Risk Factors, in our Annual Report on Form 10-K for the year ended June 30, 2020, these factors include among others:

Risk Factors, in our Annual Report on Form 10-K for the year ended June 30, 2020, and Part I, Item 2.

Risk Factors, in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, these factors include among others:

Ability to raise capital to fund capital expenditures;

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Legislation that may regulate mining activities;

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

Changes in applicable tax rates and other regulatory changes, including as a result of the recent presidential and congressional elections in the U.S.;

Impact of new and potential legislative and regulatory changes on mining operating and safety standards, including as a result of the recent presidential and congressional elections in the U.S.;

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

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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.

Except as required by law, the Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events.

All forward-looking statements included herein are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

The Company engages in exploration for gold ore and associated minerals in Alaska through a 30.0% membership interest in Peak Gold, LLC (the “Joint Venture Company”), which leases approximately 675,000 acres for exploration and development and through its wholly-owned subsidiary, Contango Minerals Alaska, LLC (“Contango Minerals”), which separately leases approximately 167,000 acres for exploration.

On September 29, 2020, the Company, CORE Alaska, LLC (“CORE Alaska”) and KG Mining (Alaska), Inc., a Delaware corporation (formerly known as Skip Sub, Inc.) (“KG Mining”) and an indirect wholly-owned subsidiary of Kinross Gold Corporation, a corporation formed under the laws of Ontario, Canada (“Kinross”), entered into a Purchase Agreement (the “CORE Purchase Agreement”), pursuant to which CORE Alaska sold a 30.0% membership interest (the “CORE JV Interest”) in the Joint Venture Company, to KG Mining (the “CORE Transactions”).

On September 29, 2020, the Company, CORE Alaska, LLC (“CORE Alaska”) and KG Mining (Alaska), Inc.

(“KG Mining”), an indirect wholly-owned subsidiary of Kinross Gold Corporation, a corporation formed under the laws of Ontario, Canada (“Kinross”), entered into a Purchase Agreement (the “CORE Purchase Agreement”), pursuant to which CORE Alaska sold a 30.0% membership interest (the “CORE JV Interest”) in the Joint Venture Company, to KG Mining (the “CORE Transactions”).

The CORE Transactions closed on September 30, 2020.

In consideration for the CORE JV Interest, the Company received $32.4 million in cash and 809,744 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”).

The 809,744 shares of Common Stock were acquired by KG Mining from Royal Gold, as part of the Royal Gold Transactions (discussed below) and were subsequently canceled by the Company.

The 809,744 shares of Common Stock were acquired by KG Mining from Royal Gold, as part of the Royal Gold Transactions (described below) and were subsequently canceled by the Company.

Of the $32.4 million cash consideration, $1.2 million constituted a reimbursement prepayment to the Company by KG Mining relating to its CORE Alaska’s proportionate share of silver royalty payments that the Joint Venture Company may be obligated to pay to Royal Gold, with the understanding that as a result of such reimbursements, KG Mining would bear the entire economic impact of those silver royalty payments due from the Joint Venture Company.

Concurrently with the CORE Purchase Agreement, KG Mining, in a separate transaction, acquired from Royal Gold (i) 100% of the equity of Royal Alaska, LLC (“Royal Alaska”), which held a 40.0% membership interest in the Joint Venture Company.

Therefore, as of September 30, 2020, the Company held a 30.0% membership interest in the Joint Venture Company, and KG Mining held a 70.0% membership interest in the Joint Venture Company.

Prior to the Kinross Transactions (defined below), the Joint Venture Company, the Company, Contango Minerals, CORE Alaska, Royal Gold and Royal Alaska entered into a Separation and Distribution Agreement, dated as of September 29, 2020 (the “Separation Agreement”).

Therefore, as of December 31, 2020, the Company held a 30.0% membership interest in the Joint Venture Company, and KG Mining held a 70.0% membership interest in the Joint Venture Company.

Prior to the Kinross Transactions (described below), the Joint Venture Company, the Company, Contango Minerals, CORE Alaska, Royal Gold and Royal Alaska entered into a Separation and Distribution Agreement, dated as of September 29, 2020 (the “Separation Agreement”).

Pursuant to the Separation Agreement, the Joint Venture Company completed the formation of Contango Minerals and contributed approximately 167,000 acres of Alaska State mining claims to it, subject to an Option Agreement, dated as of September 29, 2020 (the “Option Agreement”).

Under the Option Agreement, Contango Minerals granted the Joint Venture Company an option, subject to certain conditions contained in the Option Agreement, to purchase approximately 13,000 acres of the Alaska state mining claims which were contributed to Contango Minerals pursuant to the Separation Agreement., together with all extralateral rights, water and water rights, and easements and rights of way in connection therewith, that are held by Contango Minerals.

As a result, the Company controls approximately 168,000 acres and the Joint Venture Company leases an estimated 675,000 acres for the exploration of gold ore and associated minerals as of September 30, 2020.

As a result, the Company controls approximately 167,000 acres, subject to the Option Agreement, and the Joint Venture Company leases an estimated 675,000 acres for the exploration of gold ore and associated minerals as of December 31, 2020.

Kinross is a large gold producer with a diverse global portfolio and extensive operating experience in Alaska.

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KG Mining and CORE Alaska entered into the Amended and Restated Limited Liability Company Agreement of the Joint Venture Company (the “A&R JV LLCA”) on October 1, 2020 to address the new ownership arrangements and to incorporate additional terms that will permit the Joint Venture Company to further develop and produce from its properties.

As of September 30, 2020, the Company had approximately $36.4 million of cash.

As of September 30, 2020, the Company had funded a total of $1.3 million to the Joint Venture Company during calendar year 2020, which was used primarily for the care and maintenance of the Peak Gold Joint Venture Property.

The Joint Venture Company anticipates cash needs of approximately $3.6 million in last calendar quarter of 2020 for drilling and testing, environmental work, engineering studies, and other items, of which the Company’s proportionate share is $1.1 million.

As of December 31, 2020, the Company had approximately $31.9 million of cash.

As of December 31, 2020, the Company had funded a total of $2.4 million to the Joint Venture Company for its portion of the calendar year 2020 budget.

During the last calendar quarter of 2020, the Joint Venture Company engaged in drilling and testing, environmental work, engineering studies, and other items.

On December 10, 2020, the Management Committee approved a total budget of $18.0 million for the calendar year 2021 to undertake in-fill drilling, engineering and environmental studies necessary to complete a feasibility-level study, additional exploration, community relations, and to prepare the project for formal permitting.

The Company’s proportionate share of the approved budget is approximately $5.4 million.

In addition, the Company plans to fund a roughly $3.0 million exploration program to explore for additional resources on 100%-owned Triple Z prospect in late 2021, focused on the areas immediately adjacent to the known Joint Venture Company resources.

The Company also plans to continue its exploration efforts on its earlier stage Eagle and Hona projects located immediately north of the Peak Gold project area

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.

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These payments lowered the production royalty to a range of 2.25% to 4.25%, depending on the type of metal produced and the year of production.

On or before July 15, 2020, the Tetlin Tribal Council had the option to increase its production royalty by (i) 0.25% by payment to the Joint Venture Company of $150,000, (ii) 0.50% by payment to the Joint Venture Company of $300,000, or (iii) 0.75% by payment to the Joint Venture Company of $450,000.

The Management Committee extended the Tetlin Tribal Council’s option until December 31, 2020.

On or before December 31, 2020, the Tetlin Tribal Council had the option to increase its production royalty by (i) 0.25% by payment to the Joint Venture Company of $150,000, (ii) 0.50% by payment to the Joint Venture Company of $300,000, or (iii) 0.75% by payment to the Joint Venture Company of $450,000.

The Tetlin Tribal Council exercised this option on December 30, 2020.

In lieu of a cash payment, the $450,000 will be credited against future production royalty and advance minimum royalty payments due by the Joint Venture Company to the Tetlin Tribal Council under the lease once production begins.

The Joint Venture Company has also historically held certain State of Alaska unpatented mining claims for the exploration of gold ore and associated minerals.

Prior to the Kinross Transactions, the Joint Venture Company, Contango Minerals Alaska, LLC, an Alaska limited liability company formed by the Joint Venture Company (“Contango Minerals”), the Company, CORE Alaska, Royal Gold and Royal Alaska entered into a Separation and Distribution Agreement, dated as of September 29, 2020 (the “Separation Agreement”).

Pursuant to the Separation Agreement, the Joint Venture Company formed Contango Minerals, contributed approximately 168,000 acres of Alaska State mining claims to it, subject to the Option Agreement (defined below), and retained an additional 1.0% net smelter returns royalty interest on certain of the Alaska state mining claims that were contributed.

Pursuant to the Separation Agreement, the Joint Venture Company formed Contango Minerals, contributed approximately 167,000 acres of Alaska State mining claims to it, subject to the Option Agreement (described below), and retained an additional 1.0% net smelter returns royalty interest on certain of the Alaska state mining claims that were contributed.

After the formation and contribution to Contango Minerals, the Joint Venture Company made simultaneous distributions to Royal Alaska and CORE Alaska by (i) granting a new 28.0% net smelter returns silver royalty on all silver produced from a defined area within the Tetlin Lease and transferring the additional 1.0% net smelter returns royalty described above to Royal Gold and (ii) assigning 100.0% of the membership interests in Contango Minerals to CORE Alaska, which were in turn distributed to the Company, resulting in Contango Minerals becoming a wholly-owned subsidiary of the Company.

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Subject to the conditions in the Option Agreement, the Joint Venture Company may exercise the option to purchase the Alaska state mining claims, in whole or in part, at an exercise price of $50,000.

The Joint Venture Company’s option to purchase the Alaska state mining claims from the Company expires and is of no further force and effect upon the earlier of (i) eighteen months after the date of the Option Agreement, or (ii) the termination of the Option Agreement pursuant to its terms.

The Joint Venture Company’s option to purchase the Alaska state mining claims from Contango Minerals expires and is of no further force and effect upon the earlier of (i) eighteen months after the date of the Option Agreement, or (ii) the termination of the Option Agreement pursuant to its terms.

The Option Agreement may be terminated (i) by the Joint Venture Company at any time upon written notice to Contango Minerals, (ii) if the Joint Venture Company fails to timely pay certain fees, including taxes and certain other fees necessary to maintain the Alaska state mining claims in good standing under applicable laws, or (iii) in the event the Alaska state mining claims are subject to a condemnation under eminent domain.

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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 held by the Joint Venture Company and the Company (collectively, the “Peak Gold Joint Venture Property”) as of September 30, 2020 :

Estimated Acres

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Effective as of January 6, 2020, Rick Van Nieuwenhuyse was appointed to serve as President and Chief Executive Officer of the Company.

Brad Juneau will continue to be active in the Company as Executive Chairman.

Van Nieuwenhuyse will perform the functions of the Company’s principal executive officer.

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Van Nieuwenhuyse, 65, previously served as President and Chief Executive Officer of Trilogy Metals Inc.

from January 2012.

from January 2012 until December 2019.

Between May 1999 and January of 2012, he served as the President and Chief Executive Officer of NOVAGOLD Resources, Inc.

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Under the JV LLCA, Royal Gold was appointed as the manager of the Joint Venture Company, initially, with overall management responsibility for operations of the Joint Venture Company.

As of September 30, 2020, in conjunction with the Kinross Transactions and the signing of the A&R JV LLCA, KG Mining became the manager of the Joint Venture Company (the "Manager").

As of October 1, 2020, in conjunction with the Kinross Transactions and the signing of the A&R JV LLCA, KG Mining became the manager of the Joint Venture Company (the “Manager”).

KG Mining may resign as Manager and can be removed as Manager for a material breach of the A&R JV LLCA, a material failure to perform its obligations as the Manager, a failure to conduct the 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.

The Manager will implement the decisions of 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 A&R JV LLCA provides that the Management Committee has exclusive authority to determine all management matters related to the Company.

The Management Committee currently consists of one appointee designated by the Company and two appointees designated by KG Mining.

The Representatives designated by each member of the Joint Venture Company shall vote as a group, and in accordance with their respective membership interests in the Joint Venture Company.

Except in the case of certain actions that require approval by unanimous vote of the Representatives, the affirmative vote of a majority of the membership interests in the Joint Venture Company shall be the action of the Management Committee.

The Representatives designated by each member of the Joint Venture Company vote as a group, and in accordance with their respective membership interests in the Joint Venture Company.

Structuring Incentives to Drive Behavior .

The Company believes that equity ownership aligns the interests of the Company’s executives and directors with those of its stockholders.

As of September 30, 2020, the Company’s directors and executives beneficially own approximately 22.2% of the Company’s Common Stock.

As of December 31, 2020, the Company’s directors and executives beneficially own approximately 25.1% of the Company’s Common Stock.

An additional 12.7% of the Company’s Common Stock is beneficially owned by the Marital Trust of Mr.

Peak, the Company’s former Chairman, who passed away on April 19, 2013.

Restricted Stock;

In November 2018, the Company granted 155,000 restricted shares of Common Stock to its executives and non-executive directors.

The restricted stock granted vests in January 2021.

As of September 30, 2020, there were 155,000 shares of such restricted stock that remained unvested.

In December 2018, the Company canceled 117,332 shares of unvested restricted stock held by two of its executives and the non-executive directors that were set to vest on January 1, 2019.

The Company also granted 146,666 restricted shares of Common Stock to two of its executives and non-executive directors.

The restricted shares cancellation and the subsequent new grants were accounted for as modification to the original restricted stock grants.

The incremental fair value will be recognized over the vesting period.

The impact of the modification to the current quarter was immaterial.

All of the restricted stock granted in December 2018 vest in January 2021.

As of September 30, 2020, there were 146,666 shares of such restricted stock that remained unvested.

In November 2019, the Company granted 158,000 restricted shares of Common Stock to its executives and non-executive directors.

The restricted stock granted vests in January 2022.

As of September 30, 2020, there were 158,000 shares of such restricted stock that remained unvested.

There were no stock option exercises during the three months ended September 30, 2020 .

There were also no stock option exercises during the three months ended September 30, 2019.

In connection with the appointment of Rick Van Nieuwenhuyse as the President and Chief Executive Officer of the Company, on January 6, 2020 the Company granted to Mr.

Van Nieuwenhuyse options to purchase 100,000 shares of Common Stock of the Company, with an exercise price of $14.50 per share, which is equal to the closing price on January 6, 2020, the day on which he began employment with the Company.

On January 9, 2020, the Company issued 75,000 shares of restricted stock to Mr.

Van Nieuwenhuyse.

The options and shares of restricted stock each will vest in two equal installments, half on the first anniversary of Mr.

Van Nieuwenhuyse’s employment with the Company and half on the second anniversary of his employment with the Company, subject to acceleration upon a change of control of the Company.

Exploration and Mining Property

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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.

Tribal lands are those lands that are under control by sovereign Native American tribes.

Areas that show promise for exploration and mining can be leased from or joint ventured with the tribe controlling the land, including land constituting the Tetlin Lease.

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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

Gold, Silver, and Copper Exploration

The Company controls approximately 167,000 acres of State of Alaska mining claims and the Joint Venture Company leases the Tetlin Lease (an estimated 675,000 acres) for the exploration of gold and associated minerals.

The State of Alaska mining claims controlled by the Company are subject to the Option Agreement described above.

To date, our gold exploration has concentrated on the Tetlin Lease, with only a limited amount of work performed on the Tok, Eagle, Bush, West Fork, Triple Z, and Noah claims.

To date, our exploration has concentrated on the Tetlin Lease, with only a limited amount of exploration work performed on the Tok, Eagle, Bush, West Fork, Triple Z, and Noah claims.

The Management Committee decided to release the Bush and West Fork claims in September 2020.

The Joint Venture Company initiated a calendar year 2018 exploration program with an approved budget of $10.7 million, of which the Company’s share was approximately $6.1 million .

The 2018 exploration program was completed in October 2018.

The Company contributed $5.4 million to the Joint Venture Company during calendar year 2018.

The budget included an extensive 74 line kilometers of ground geophysics program utilizing both Induced Polarization (“IP”) and Titan EM techniques.

Surveys were carried out on targets within an 8-kilometer radius of Main Peak to identify targets similar to Main and North Peak and two targets in the southeastern part of the Tetlin Lease, Copper Hill and Taixtsalda.

Titan EM surveys were carried out on three targets identified from airborne magnetics surveys as porphyry type signatures.

The program drill tested a number of targets within an 8-kilometer radius of the Main Peak deposit.

In addition to the exploration work, during the 2018 exploration program, the Joint Venture conducted engineering studies along with metallurgical testing to support the completion of a Preliminary Economic Assessment of the Company’s Main Peak and North Peak resource areas near Tok, Alaska.

The Management Committee of the Joint Venture Company approved an exploration budget for calendar 2019 of $6.9 million, of which the Company’s share was approximately $4.1 million.

The program was completed in October 2019 below budget.

The program was completed in October 2019 below the budgeted amount.

The program included ground geophysics utilizing IP and soil samples within the greater Chief Danny area.

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The Company funded a total of $4.1 million to the Joint Venture Company during calendar year 2019, which related to both the 2019 and 2018 exploration programs.

Due to the effects of COVID-19 and for the safety of the Joint Venture Company’s field personnel and the surrounding community, the Management Committee of the Joint Venture Company approved a $2.7 million budget for calendar year 2020 that would serve to care for and maintain the Peak Gold Joint Venture Property, and postpone new exploration until conditions permit.

As of September 30, 2020, the Company has funded a total of $1.3 million to the Joint Venture Company during calendar year 2020.

From inception to September 30, 2020, the Joint Venture Company has incurred $47.7 million in exploration program expenditures.

As of September 30, 2020, the Company has contributed approximately $10.7 million in cash to the Joint Venture Company and Royal Gold had funded a total of $37.1 million (including the initial investment of $5 million).

As of December 31, 2020, the Company had funded a total of $2.4 million to the Joint Venture Company for its portion of the calendar year 2020 budget.

During the last calendar quarter of 2020 after the consummation of the Kinross Transactions, the Management Committee approved a budget of approximately $5.7 million for drilling and testing, environmental work, engineering studies, and other items.

However, due to weather delays and COVID-19 related delays, the Joint Venture Company only spent approximately $3.0 million during the last calendar quarter of 2020.

The additional work that couldn't be completed in 2020 is included in the calendar 2021 budget.

The Company’s proportionate share of the approved budget is approximately $5.4 million.

In addition, the Company plans to fund a roughly $3.0 million exploration program to explore for additional resources on 100%-owned Triple Z, Hona, and Eagle prospects in 2021, located immediately north and northwest of the Peak Gold project area.

From inception to December 31, 2020, the Joint Venture Company has incurred $50.6 million in exploration program expenditures.

As of December 31, 2020, the Company has contributed approximately $11.8 million in cash to the Joint Venture Company.

After the consummation of the Kinross Transactions, the Company has a 30.0% membership interest in the Joint Venture Company, with KG Mining holding the other 70.0%.

Kinross is a large gold producer with a diverse global portfolio and extensive operating experience in Alaska.

The Joint Venture Company plans to mine ore from the Peak and North Peak deposits and then process it at the existing Fort Knox mining and milling complex located approximately 250 miles away.

The use of the Fort Knox mill is expected to accelerate the development of Peak Gold Joint Venture Property and result in significantly reduced upfront capital development costs, smaller environmental footprint, a shorter permitting and development timeline and less overall risk for the Peak Gold Joint Venture Property.

Hona Prospect Area

The Hona Prospect area is located on Alaska State mining claims approximately 25 kilometers west of the Main Peak deposit.

The Joint Venture Company plans to mine ore from the Peak and North Peak deposits and then transport the ore to the Kinross owned Fort Knox operation located 250 highway miles where the ore will be processed at the existing Fort Knox mining and milling complex.

100% Owned State of Alaska Mining Claims

Triple Z Prospect.

The Triple Z claims were originally staked in 2009 and the claim block expanded in 2011, and again in 2019, with the claim block now covering an area of 14,810 acres immediately adjacent to the Alaska Hwy to the south and west, and the Taylor Hwy to the north and east.

The area was identified as prospective for porphyry copper-gold-silver-molybdenum mineralization based on regional government sponsored stream sediment sampling.

Surface rock (82 samples) and soil samples (115 samples) were collected in 2009.

Follow up auger soil sampling completed between 2009 and 2011 identified a large-scale copper-gold-silver-molybdenum anomaly centered along a low-profile ridge with little to no outcrop.

An airborne magnetic and resistivity survey conducted over the area in 2011 showed a coincident magnetic low and resistivity high (classic porphyry signatures) over the geochemically anomalous area.

A follow up Induced Polarization (“IP”) survey conducted in 2019 across four orthogonal lines and outlined multiple IP anomalies broadly coincident with the soil and mag/resistivity anomalies.

To date, the main targets have not yet been drilled because the Company is waiting for a land transfer to be completed between the Bureau of Land Management and the State of Alaska.

The Company has been working with the State and Federal agencies to prioritize this transfer because of the highly prospective drill-ready target.

Drilling was completed in 2012 (before the IP survey) with six core holes drilled to depths ranging from 230 meters (755 ft.) to 380 meters (1246 ft.).

Holes 1202 and 1204 encountered several zones of anomalous copper, gold and silver.

Once the land transfer is completed, the Company plans to drill this well-defined porphyry copper-gold-silver-molybdenum target, potentially in late 2021.

Hona Prospect .

The Hona Prospect area is located on Alaska state mining claims approximately 25 kilometers northwest of the Main Peak deposit.

These state mining claims are owned 100% by the Company.

A reconnaissance program was carried out on the Hona claim block in 2017, which consisted of 363 pan concentrate and 364 stream sediment samples.

Anomalous gold and copper values were found during the 2017 program and in 2019 follow-up reconnaissance work was completed.

Anomalous gold and copper values were found during the 2017 program.

In 2019 follow-up reconnaissance work was completed.

This effort consisted of taking 615 rock chip samples and surface mapping.

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Interval (meters)

The exploration effort on the Tetlin Lease has resulted in identifying two mineral deposits (Peak and North Peak) and several other gold and cop per prospects following drilling programs starting in 2011.

Surface, bedrock, and stream sediment data on the Tetlin Lease as well as on the Eagle, Noah and Tok state of Alaska claims adjacent to the Tetlin Lease have been gathered during the summer exploration programs.

There was no exploration program in 2014.

None of the exploration targets are known t o host quantifiable commercial mineral reserves and none are near or adjacent to other known significant gold or copper deposits.

There has been no recorded past placer or lode mining on Peak Gold Joint Venture Property, and the Company and the Joint Venture Company are the only entities known to have conducted drilling operations on the Joint Venture Property .

Joint Venture Company

Chief Danny Prospect Area .

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The Joint Venture 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 September 30, 2020, the Joint Venture Company conducted field-related exploration work at the Chief Danny Prospect, including collecting the following samples:

From 2009 through December 31, 2020, the Joint Venture Company conducted field-related exploration work at the Chief Danny Prospect, including collecting the following samples:

IP/Geophysics

The map below depicts the grade times thickness in the Main Peak, North Peak, and West Peak zones:

During the quarter ended September 30, 2020, the Joint Venture Company spent an estimated $0.6 million on program activities and related expenses.

The Company contributed its proportionate share of the Joint Venture's cash needs for the quarter, approximately $0.2 million.

The map below depicts the location of the core holes drilled in the East Peak and North Saddle zones.

The image below shows the Peak Gold project and surrounding targets:

The image below shows the approximate location of planned in-fill, geotechnical, hydrological and metallurgical drill holes during the $18 million 2021 Peak Gold LLC program.

The objective of the program is to advance the feasibility study and permitting for the Peak and North Peak deposits.

During the quarter ended December 31, 2020, the Joint Venture Company spent approximately $3.0 million on drilling, metallurgical testing, environmental and permitting work, engineering studies, and other related work.

The Joint Venture Company commenced drilling on November 22, 2020 and continued through December 19, 2020.

The Joint Venture Company completed 10 core holes for metallurgical testing with a total drill length of approximately 2,800 ft.

Three geotechnical holes were completed with total drill length of approximately 1,800 ft.

An additional 8 geotechnical holes will be completed in 2021.

The geotechnical information collected will be incorporated into the overall pit design and mine plan.

No exploration drilling was performed by the Joint Venture Company during the quarter, however a plan is being developed to perform exploration drilling during 2021.

2019 Exploration Program.

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Exploration drilling consisted of 1,771 meters in four holes, which included three holes for 1,117 meters in the East Peak area and one hole of 654 meters at the North Saddle.

The map below depicts the location of the core holes drilled in the East Peak and North Saddle zones.

Significant Drill Intercepts from the 2019 Program.

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In addition, seven monitor wells were installed in and around the deposit area to initiate groundwater characterized to support baseline date collection.

During the quarter ended September 30, 2019, the Joint Venture Company spent an estimated $0.3 million on program activities, including metallurgical testing, geochemical data analyses, landholding fees and other related expenses.

2018 Exploration Program - Phase I .

During the quarter ending December 31, 2018, 3.5 line-kilometers of IP surveys, 35.0 line-kilometers of Titan DCIP/MT surveys and 4,427 meters of core drilling were completed.

The Joint Venture Company spent an estimated $4.6 million, during the quarter, on program activities, including drilling, geochemical analyses, landholding fees and other related expenses.

Exploration drilling consisted of 2,177 meters in six holes in the North Saddle Area, 1,403 meters in six holes in Copper Hill, 207 meters in two holes in 2 O’clock, 261 meters in one hole in 8 O’clock, 180 meters in one hole in Main Peak and 200 meters in one northeast of North Peak.

In the 2018 field season, 6,189 meters of drilling in 28 holes were completed.

Metallurgical testing of 19 composite samples from the Main Peak deposit were completed and showed good metallurgical response to direct cyanidation.

The Main Peak testing along with previously completed metallurgical testing on North Peak were used as the basis for the Preliminary Economic Assessment completed in September 2018.

The map below depicts the location of the core holes drilled in the 8 O'clock, 2 O'clock, Main Peak and North Saddle zones:

Significant Drill Intercepts from the 2018 Phase I Program.

Sample intervals are calculated using 0.5 grams per tonne (gpt) lower cut off for gold with no internal waste less than cutoff grade that is greater than 3 meters in thickness.

Intercepts shown are drill intercept lengths.

True width of mineralization is unknown.

The grade cutoff for gold (Au) is 0.5 gpt;

for silver (Ag) is 10 gpt;

and for copper (Cu) is 0.1%.

The following table summarizes the significant drilling results obtained for the complete Phase I of the 2018 Program:

From (meters)

Interval (meters)

Eight O'clock

2018 Exploration Program - Phase I (continued) .

During the quarter ending June 30, 2018, 30.6 line-kilometers of IP surveys, 10.6 line-kilometers of Titan DCIP/MT surveys and 1,762 meters of core drilling were completed.

The Joint Venture Company spent an estimated $4.0 million, during the quarter, on program activities, including drilling, geochemical analyses, landholding fees and other related expenses.

Exploration drilling consisted of 1,518 meters in ten holes in the 2 O’clock area and 244 meters in two holes in the 8 O’clock area.

To date, the Joint Venture Company has also completed 1,370 meters of core drilling at Copper Hill, and has drilled the North Saddle Zone for porphyry prospects.

Nineteen composite samples from the Main Peak orebody and 19 composite samples from the North Peak orebody were the subject of ongoing metallurgical testing in support of the Preliminary Economic Evaluation completed in September.

Test results support the economic processing of Main and North Peak materials in a conventional gold processing plant using traditional mining methods.

The map below depicts the location of the core holes drilled in the 8 O'clock, 2 O'clock, and North Saddle zones during the 2018 Phase I Program:

The map below depicts the location of the core holes drilled in the Copper Hill zone during the 2018 Phase I Program:

Significant Drill Intercepts from the 2018 Phase I Program.

Sample intervals are calculated using 0.5 grams per tonne (gpt) lower cut off for gold with no internal waste less than cutoff grade that is greater than 3 meters in thickness.

Intercepts shown are drill intercept lengths.

True width of mineralization is unknown.

The grade cutoff for gold (Au) is 0.5 gpt;

for silver (Ag) is 10 gpt;

and for copper (Cu) is 0.1%.

For the 2018 exploration program, no significant intervals were encountered in the drilling.

During the quarter ended March 31, 2019, the Joint Venture Company spent an estimated $0.3 million on program activities, including metallurgical testing, geochemical data analyses, landholding fees and other related expenses.

Consulting Services provided by Avalon Development Corporation

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

In connection with the Peak Gold Transactions, the Company terminated the PSA with Avalon.

In connection with the formation of the Joint Venture Company, the Company terminated the PSA with Avalon.

Avalon continued to provide services to the Joint Venture Company until February 28, 2020, when its owner, Curtis J.

Freeman, retired.

The Joint Venture Company has retained key administrative, geology, and database management personnel from Avalon on a contract basis.

The Company's CEO, Rick Van Nieuwenhuyse, who has extensive experience in the mining industry, and personnel previously employed by Avalon are assisting the Joint Venture Company as independent contractors in place of Avalon.

The Joint Venture Company has retained certain key administrative, geology, and database management personnel from Avalon on a contract basis.

The Company’s President and Chief Executive Officer, Rick Van Nieuwenhuyse, who has extensive experience in the mining industry, and personnel previously employed by Avalon are assisting the Joint Venture Company in place of Avalon.

In addition, the Company hired two of Avalon's former employees in December 2020.

Services Provided by Tetlin Village Members

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Under the extended Support Agreement, the Joint Venture Company provided payments to the Tetlin Village four times during the year for an aggregate amount of $110,000 through January 1, 2017, and an additional $100,000 each year through January 1, 2020.

The Support Agreement was extended a third time for an additional one-year period under the same terms.

Under the third extension, the Joint Venture Company will provide payments to the Tetlin Village four times during the year for an aggregate amount of $100,000 through January 1, 2021.

The Support Agreement has been extended for two additional one-year periods under the same terms.

Under the latest extension, the Joint Venture Company will provide payments to the Tetlin Village four times during the year for an aggregate amount of $100,000 through January 1, 2022.

The Support Agreement defines agreed uses for the funds and auditing rights regarding use of funds.

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The Tetlin Lease also provides that the Joint Venture Company will pay the Tetlin Tribal Council a production royalty ranging from 3.0% 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 September 30, 2020, the Company had paid the Tetlin Tribal Council $225,000 in exchange for reducing the production royalty payable to them by 0.75%.

The Company had previously 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 2.25% to 4.25%.

The Management Committee extended the Tetlin Tribal Council’s option until December 31, 2020.

On January 8, 2015, the Company assigned the Tetlin Lease to the Joint Venture Company in connection with the Peak Gold Transactions.

The Tetlin Tribal Council exercised the option to increase its production royalty by 0.75% by payment to the Joint Venture Company of $450,000 on December 30, 2020.

On January 8, 2015, the Company assigned the Tetlin Lease to the Joint Venture Company in connection with the formation of the Joint Venture Company.

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.

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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 has 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.

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The Company’s consolidated financial statements include the investment in the Joint Venture Company, which is accounted for under the equity method.

The Company has designated one of the three members of the Management Committee and on September 30, 2020 held a 30.0% ownership interest in the Joint Venture Company.

The Company has designated one of the three members of the Management Committee and on December 31, 2020 held a 30.0% ownership interest in the Joint Venture Company.

KG Mining serves as the manager of the Joint Venture Company and manages, directs, and controls operations of the Joint Venture Company.

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The cumulative losses of the Joint Venture Company exceed the historical cost of the assets contributed to the Joint Venture Company;

therefore, the Company’s investment in the Joint Venture Company as of September 30, 2020 is zero.

therefore, the Company’s investment in the Joint Venture Company as of December 31, 2020 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.

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To date, neither the Company nor the Joint Venture Company has generated any revenue from mineral sales or operations.

Neither the Company nor the Joint Venture Company has any recurring source of revenue and other than Royal Gold ’s contributions in connection with the Kinross 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.

Neither the Company nor the Joint Venture Company has any recurring source of revenue other than contributions by the Company and KG Mining to the Joint Venture Company, and, in addition to the consideration received in the Kinross Transactions, the Company’s ability to continue as a going concern is dependent on the Company’s ability to raise capital to fund its future exploration and working capital requirements.

In the future, the Joint Venture Company may generate revenue from a combination of mineral sales and other payments resulting from any commercially recoverable minerals from the Peak Gold Joint Venture Property.

We do not expect the Joint Venture Company to generate revenue from mineral sales in the foreseeable future.

The Company does not expect the Joint Venture Company to generate revenue from mineral sales in the foreseeable future.

If the Peak Gold Joint Venture Property fails to contain any proven reserves, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Other potential sources of cash, or relief of demand for cash, include external debt, the sale of shares of our stock, joint ventures, or alternative methods such as mergers or sale of our assets.

No assurances can be given, however, that we will be able to obtain any of these potential sources of cash.

We will need to generate significant revenues to achieve profitability and we may never do so.

Three Months Ended September 30, 2020 Compared to Three Months Ended September 30, 2019

No assurances can be given, however, that the Company will be able to obtain any of these potential sources of cash.

The Company will need to generate significant revenues to achieve profitability and it may never do so.

Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019

General and Administrative Expense.

General and administrative expense for the three months ended September 30, 2020 and 2019 were $3,524,992 and $990,990, respectively.

The Company's general and administrative expenses primarily relate to audit fees, legal fees, management fees, and stock-based compensation expense.

The current year increase is the result of non-recurring legal and transaction related fees associated with the CORE transactions of approximately $2.9 million.

General and administrative expenses for the period ended September 30, 2019 primarily related to stock based compensation expense of $740,442 related to restricted stock granted to our officers and directors in November 2018, November 2017, November 2016, August 2016, September 2015, and November 2014, all pursuant to the Equity Plan.

General and administrative expense for the three months ended December 31, 2020 and 2019 were $2,602,591 and $1,150,944, respectively.

The Company’s general and administrative expense primarily relates to audit fees, legal fees, management fees, payroll and stock-based compensation expense.

The current year increase is the result of increased payroll related fees.

The Company added three new employees during 2020, and in December 2020, the Company’s executives that previously provided services to the Company via the Management Services Agreement with JEX, began receiving compensation directly from the Company, and the management fee under the Management Services Agreement with JEX was reduced.

The Company also paid its executives bonuses totaling $0.5 million.

There were no payroll related fees in December 2019.

General and administrative expense for the period ended December 31, 2019, primarily related to stock based compensation expense of $882,881 related to restricted stock granted to our officers and directors in November 2019, November 2018, November 2017, November 2016, August 2016, September 2015, and November 2014, all pursuant to the Equity Plan.

Loss from Equity Investment in the Joint Venture Company .

The loss from the Company’s equity investment in the Joint Venture Company for the three months ended September 30, 2020 and 2019 was $247,800 and $900,000, respectively.

The loss from the Company’s equity investment in the Joint Venture Company for the three months ended December 31, 2020 and 2019 was $1,123,452 and $1,800,000, respectively.

Pursuant to the terms of the A&R JV LLCA, the Company and KG Mining are required to jointly fund the joint venture operations in proportion to their membership interests in the Joint Venture Company to avoid dilution.

The Company invested $247,800 in the Joint Venture Company during the three months ended September 30, 2020, and $900,000 during the three months ended September 30, 2019.

The Company invested $1,123,452 in the Joint Venture Company during the three months ended December 31, 2020, and $1,800,000 during the three months ended December 31, 2019.

The portion of the cumulative loss that exceeds the Company’s cumulative investment will be suspended and recognized against earnings, if any, from the Company’s investment in the Joint Venture Company in future periods.

The suspended losses for the period from inception to September 30, 2020 are $23.0 million.

The suspended losses for the period from inception to December 31, 2020 are $ 21.8 million.

Six Months Ended December 31, 2020 Compared to Six Months Ended December 31, 2019

General and Administrative Expense.

General and administrative expense for the six months ended December 31, 2020 and 2019 was $6,127,582 and $2,141,935, respectivel y.

The Company’s general and administrative expense primarily relates to audit fees, legal fees, management fees, payroll, and stock-based compensation expense.

The current year increase is the result of non-recurring legal and transaction related fees associated with the CORE Transactions of approximately $2.9 million and payroll related fees.

The Company also paid its executives bonuses totaling $0.5 million.

There were no payroll related fees in December 2019.

General and administrative expense for the period ended December 31, 2019 primarily related to stock based compensation expense of $1,623,323 related to restricted stock granted to our officers and directors in November 2019, November 2018, November 2017, November 2016, August 2016, September 2015, and November 2014, all pursuant to the Equity Plan.

Loss from Equity Investment in the Joint Venture Company .

The loss from the Company’s equity investment in the Joint Venture Company for the six months ended December 31, 2020 and 2019 was $1,371,252 and $2,700,000, respectively.

The Company invested $1,371,252 in the Joint Venture Company during the six months ended December 31, 2020, and $2,700,000 during the six months ended December 31, 2019.

The portion of the cumulative loss that exceeds the Company’s cumulative investment will be susp ended 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, 2020 are $21.8 million.

Gain on Sale of a Portion of the Investment in the Joint Venture Company.

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The Company valued the Common Stock consideration from the CORE Transactions consistent with the accounting guidance for non-monetary exchanges.

The stock consideration was valued based on the implied fair value of the transaction in total less the cash proceeds.

The total value of the transaction was equated to the value of the Company's 30.0% ownership in the Joint Venture Company, post the 30.0% membership interest transferred to KG Mining.

As of the date of the transaction, the Company's investment in the Joint Venture Company had a zero balance, therefore the $39.6 million gain approximates the full fair value of the JV Interest surrendered in the CORE Transactions.

The stock consideration was valued based on the implied fair value of the CORE Transactions in total less the cash proceeds.

The total value of the CORE Transactions was equated to the value of the Company's 30.0% ownership in the Joint Venture Company, post the 30.0% membership interest transferred to KG Mining.

As of the date of the CORE Transaction, the Company's investment in the Joint Venture Company had a zero balance, therefore the $39.6 million gain approximates the full fair value of the CORE JV Interest surrendered in the CORE Transactions.

Liquidity and Capital Resources

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Of the $32.4 million cash consideration, $1.2 million constituted a reimbursement prepayment to the Company of its proportionate share of certain silver royalty payments that the Joint Venture Company may be obligated to pay to Royal Gold, with the understanding that KG Mining will bear the entire impact of those royalty payments due from the Joint Venture Company.

As of September 30, 2020, the Company had approximately $36.4 million of cash, cash equivalents, and short-term investments.

Due to the effects of COVID-19 and for the safety of the Joint Venture Company’s field personnel and the surrounding community, the former Management Committee approved a $2.7 million budget for calendar year 2020 that would serve to care for and maintain the Peak Gold Joint Venture Property, and postpone new exploration until conditions permit.

As of September 30, 2020, the Company has funded a total of $1.3 million to the Joint Venture Company during calendar year 2020.

As of December 31, 2020, the Company had approximately $31.9 million of cash.

The Company’s proportionate share of the approved budget is approximately $5.4 million.

The Company also plans to continue its exploration efforts on its earlier stage Eagle and Hona projects located immediately north of the Peak Gold project area.

Due to cash received in the Kinross Transaction and the capital raise completed in September 2020, the Company believes that it has sufficient liquidity to meet its working capital requirements for the next twelve months.

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If a large budget is undertaken, and no additional financing is obtained, the Company can elect not to fund its portion of the approved budget, in which case the Company would maintain sufficient liquidity to meet its working capital requirements for the next twelve months.

On September 23, 2020, the Company completed the issuance and sale of an aggregate of 247,172 shares of the Company’s Common Stock, par value $0.01 per share, in a private placement (the “2020 Private Placement”) to certain purchasers who are accredited investors.

On September 23, 2020, the Company completed the issuance and sale of an aggregate of 247,172 shares of the Company’s Common Stock in a private placement (the “2020 Private Placement”) to certain purchasers who are accredited investors.

The shares of the Common Stock were sold at a price of $13.25 per share, resulting in gross proceeds to the Company of approximately $3.3 million and net proceeds to the Company of approximately $3.2 million.

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The Company’s President and Chief Executive Officer, Rick Van Nieuwenhuyse, purchased 75,472 of shares of Common Stock in the 2020 Private Placement, for total consideration of $1.0 million, on the same terms and conditions as all other Purchasers.

As a result of Mr.

Van Nieuwenhuyse’s purchase, as of September 23, 2020, his ownership interest in the Company is 2.2%.

The Audit Committee of the Company has reviewed and approved all agreements and arrangements relating to Mr.

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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, 2020, other than updating the risk factors below.

The risks described in our Annual Report on Form 10-K for the year ended June 30, 2020 and below are not the only risks we face.

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, 2020 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, other than updating the risk factors below.

The risks described in our Annual Report on Form 10-K for the year ended June 30, 2020, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 and below are not the only risks the Company faces.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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The Company’s Common Stock is thinly traded.

As of September 30, 2020, there were approximately 6.0 million shares of the Company’s Common Stock outstanding, with directors and officers beneficially owning approximately 22.2% of the Common Stock and the Marital Trust of Mr.

Peak, the Company’s former Chairman, beneficially owning approximately 13.0% of our Common Stock .

Our Common Stock is quoted on the OTCQB tier of the OTC Markets Group Inc.

As of December 31, 2020, there were approximately 6.2 million shares of the Company’s Common Stock outstanding, with directors and officers beneficially owning approximately 25.1% of the Common Stock and the Marital Trust of Mr.

Peak, the Company’s former Chairman, beneficially owning approximately 12.7% of the Company's Common Stock .

The Company's Common Stock is quoted on the OTCQB tier of the OTC Markets Group Inc.

under the symbol “CTGO”.

Although our Common Stock is quoted on the OTCQB, trading has been irregular and with low volumes and therefore the market price of our Common Stock may be difficult to ascertain.

Since the Company's Common Stock is thinly traded (average trading volume of 528 shares of Common Stock per day for fiscal year 2020), 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 .

KG Mining will have discretion regarding the use and allocation of funds for further exploration of the Peak Gold Joint Venture Property.

KG Mining is the Manager of the Joint Venture Company and has appointed two of the three designates to the Management Committee of the Joint Venture Company, and the Company has appointed one designate to the Management Committee.

The affirmative vote of a majority of the membership interests in the Joint Venture Company represented by the designates will determine most decisions of the Management Committee, including the approval of programs and budgets and the expenditure of the Joint Venture Company’s investments, which will include the level of expenditures.

As a result, KG Mining has discretion regarding the use and allocation of funds for further exploration of the Peak Gold Joint Venture Property.

The Company has limited ability to influence the decision of KG Mining in its capacity as Manager, or as the party controlling the majority of the Management Committee.

The Company must depend upon KG Mining’s management of the Joint Venture Company following termination of the Company’s third party consulting agreements.

The Company terminated its services agreements with Avalon and certain other parties who had previously provided geological consulting services and exploration activities with respect to the Peak Gold Joint Venture Property.

The Company has historically had part-time employees, none of whom are mineral geoscientists or have experience in the mining industry, and has previously depended upon third party consultants for the success of its exploration projects.

The Company must now depend upon KG Mining for its expertise in planning work programs, conducting field work, evaluating drilling results and preparing development programs.

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

Pursuant to the A&R JV LLCA, there is no requirement that KG Mining contribute any future amounts to the Joint Venture Company to continue exploration work, and the Company will have limited funds to continue exploration of the Peak Gold Joint Venture Property, if KG Mining fails to contribute additional amounts to the Joint Venture Company.

The Company's membership interest in the Joint Venture Company may be reduced.

Pursuant to the A&R JV LLCA, the members will contribute funds to approved programs and budgets in proportion to their respective percentage membership interests in the Joint Venture Company.

If a member elects not to contribute to an approved program and budget, then each member’s proportionate membership interest in the Joint Venture Company will be recalculated, effective as of the beginning of the period covered by such program and budget, by dividing (i) the sum of (a) the value of its contribution as of the beginning of the period covered by the program and budget plus (b) the additional amount, if any, the member has agreed to contribute to the approved program and budget, plus (c) if the member is not the member who elects to contribute less than its proportionate share of the approved program and budget, then the amount, if any, in excess of the contributions required by such member’s proportionate membership interest, by (ii) the sum of (a), (b) and (c) above for all members.

If a member elects to contribute less than its share in proportion to its membership interest and is considered in default, then the non-defaulting member may elect to pay the defaulting member’s capital contribution to the Joint Venture Company on behalf of the defaulting member, and (A) such payment will be treated as a loan to defaulting member, or (B) such payment will be treated as a capital contribution by the non-defaulting member to the Joint Venture Company, and the non-defaulting member’s proportionate membership interest in the Joint Venture Company will be increased by the reduction in the membership interest of the defaulting member.

In the event a member’s membership interest falls below 5.0%, such member shall be deemed to have resigned as a member from the Joint Venture Company, and such member must sell its remaining membership interest to the other member at price determined in accordance with provisions of the A&R JV LLCA.

Going forward, the Company’s ability to contribute funds sufficient to maintain the current level of its membership interests in the Joint Venture Company will depend on its ability to raise capital and may be limited.

The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, the exploration results achieved at the Peak Gold Joint Venture Property, as well as the market price of metals.

Further financing by the Company may include issuances of equity instruments convertible into equity (such as warrants) or various forms of debt.

If the Company ever elects not to, or is unable to contribute its proportionate share of future approved exploration budgets, its membership interest in the Joint Venture Company will be reduced.

Kinross Gold Corporation, the ultimate parent company of KG Mining, is one of the largest gold and related minerals miners with worldwide operations.

Because of its vastly superior technical and financial resources, KG Mining may adopt budgets and work programs for the Joint Venture Company that the Company will be unable to fund in the time frame required, and its membership interest in the Joint Venture Company may be substantially diluted.

We may not realize all of the anticipated benefits of the Kinross Transactions.

The success of the Company will depend, in part, on the Joint Venture Company’s ability to realize the anticipated benefits from the Kinross Transactions.

These anticipated benefits may not be realized or may not be realized within the expected time period.

KG Mining, in its capacity as manager and operator of the Joint Venture Company, controls production activities and has appointed two of the three designates to the Management Committee of the Joint Venture Company, while the Company has appointed one designate to the Management Committee.

The affirmative vote of a majority of the membership interests in the Joint Venture Company represented by the designates will determine most decisions of the Management Committee, including the approval of programs and budgets and the expenditure of the Joint Venture Company, which will include the level of production activities.

As a result, the Company has limited discretion regarding the production from the Peak Gold Joint Venture Property.

There is no assurance that production from the Peak Gold Joint Venture Property will ever occur.

Even if production from the Peak Gold Joint Venture Property does occur, there is no assurance that such production will meet expectations based on current resource estimates and other available information.

Moreover, the Joint Venture Company plans to process ore mined from the Peak Gold Joint Venture Property at the existing Fort Knox mining and milling complex located approximately 250 miles away from the Peak Gold Joint Venture Property, in order to accelerate the development of the Peak Gold Joint Venture Property, reduce the upfront capital development costs and environmental footprint and shorten the permitting and development timeline.

However, the Joint Venture Company may not be able to economically process ore mined from the Peak Gold Joint Venture Property at the Fort Knox mill and achieve these operational benefits.

In addition, following the consummation of the Kinross Transactions, KG Mining holds a 70.0% membership interest in the Joint Venture Company and serves as the manager and operator of the Joint Venture Company.

The transition of management of the Joint Venture Company from Royal Gold to KG Mining could result in interference or disruption of exploration efforts, the Joint Venture Company’s business or relationships with the Tetlin Tribal Council or other persons.

Encountering any of these or any other unforeseen problems in transitioning the management of the Joint Venture Company could have a material adverse impact on our business, financial condition and results of operations, and could prevent us from achieving the anticipated benefits of the Kinross Transactions.

If the Joint Venture Company exercises the option pursuant to the Option Agreement, our asset pool and ability to generate future revenues from these assets may be adversely affected.

Following the consummation of the Kinross Transactions, the Company’s wholly owned subsidiary, Contango Minerals, holds approximately 168,000 acres of Alaska State mining claims.

These claims are subject to the terms and conditions of the Option Agreement, pursuant to which the Joint Venture Company has the option to purchase approximately 13,000 acres of the Alaska state mining claims, together with all extralateral rights, water and water rights, and easements and rights of way in connection therewith, that are held by Contango Minerals.

Subject to the terms and conditions in the Option Agreement, the Joint Venture Company may exercise the option once to purchase the Alaska state mining claims, in whole or in part, at an exercise price of $50,000.

The Joint Venture Company’s option to purchase the Alaska state mining claims from the Contango Minerals expires and is of no further force and effect upon the earlier of (i) 18 months after the date of the Option Agreement, or (ii) the date of termination of the Option Agreement.

The Option Agreement may be terminated (a) by the Joint Venture Company at any time upon written notice to Contango Minerals, (b) if the Joint Venture Company fails to timely pay or reimburse Contango Minerals for certain fees, including taxes and certain other fees necessary to maintain the Alaska state mining claims in good standing under applicable laws, or (c) in the event the Alaska state mining claims are subject to a condemnation under eminent domain.

If the Joint Venture Company exercises the option, our asset pool and ability to generate future revenues directly from these assets will be reduced accordingly and our operations may be adversely affected.

The Company’s new partnership with Kinross in the Joint Venture Company and the appointment of KG Mining as manager and operator does not provide assurance that that further exploration efforts will be successful.

The new partnership with Kinross in the Joint Venture Company and appointment of KG Mining as manager and operator does not provide assurance that further exploration of the Peak Gold Joint Venture Property will be successful, any additional resource will be discovered or a commercial deposit of gold ore and associated minerals will be located.

The results of any further exploration work will be assayed and analyzed to determine if additional work should be performed and additional funds expended.

Although the Company's Common Stock is quoted on the OTCQB, trading has been irregular and with low volumes and therefore the market price of its Common Stock may be difficult to ascertain.

Since the Company's Common Stock is thinly traded (average trading volume of 523 shares of Common Stock per day for fiscal year 2021 to date), 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 .

A change in tax laws in key jurisdictions could materially increase the Company’s tax expense.

The Company is subject to income taxes in the United States and the State of Alaska, and changes to income tax laws and regulations, or the interpretation of such laws, in any of the jurisdictions in which the Company operates could significantly increase its effective tax rate and ultimately reduce its cash flows from operating activities and otherwise have a material adverse effect on its financial condition.

Additionally, various levels of government are increasingly focused on tax reform and other legislative actions to increase tax revenue and/or no longer provide certain advantageous tax write-offs to certain natural resource oriented industries, and President Biden’s campaign proposals included increasing the U.S.

corporate income tax rate from 21% to 28%.

If implemented by taxing authorities, such changes in U.S.

federal and state tax laws or in taxing jurisdictions’ administrative interpretations, decisions, policies, and positions, could have a material adverse effect on the Company’s business, results of operations, or financial condition.

Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide this information.

As a “smaller reporting company”, the Company is not required to provide this information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis