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“There’s a Catch-Up Trade Coming for Contango Silver and Gold Post Merger” says Shawn Khunkhun

MiningStockEducation.com Mar 13, 2026

Summary

Dolly Varden Silver and Contango Ore expect their merger to close around March 26, with the combined company trading as CTGO on NYSE American and listing on the TSX.

The guest expects roughly $50 million of ETF and index buying soon after closing — a catch-up trade after the stock stayed range-bound between merger announcement and completion.

A $50 million exploration budget targets a 50% increase in silver inventory toward 100 million ounces, funded by about $100 million of cash and roughly $100 million of annual cash flow from the producing Alaskan mine.

Management guides to up to $250 million of free cash flow in 2027, with Lucky Shot returning to production by 2028 and Johnson Tract doubling gold output to 200,000 ounces.

The company's hub-and-spoke, direct-shipping model cuts capital costs and avoids tailings permitting, but only works for high-grade projects near existing processors.

Key points on Agnico Eagle Mines

  • The guest points to Agnico Eagle as one of the major gold equities where sophisticated investors are already starting to value producers properly.

Key points on B2Gold

  • The guest notes Mike Cinnamon, recently named the new CEO of B2Gold, sits on the combined company's board.

Key points on First Majestic Silver

  • The guest cites First Majestic's share price being higher at $75 silver than when silver spiked to $120, attributing it to record cash flow in earnings, as evidence the market is valuing producers on cash flow rather than price spikes.
  • He says the combined company's exploration budget rivals that of companies like First Majestic, and groups First Majestic with Hecla as successful silver-and-gold businesses.

Key points on Hecla Mining Company

  • The guest holds up Hecla, in business 135 years, as an example of a long-lasting silver-and-gold producer and a comparable model for the new combined company.

Key points on Kinross Gold

  • The guest says the company has a good relationship with Kinross at Fort Knox, so acquiring a mill or processing facility would be a nice-to-have rather than a necessity.

Key points on Newmont

  • The guest says sophisticated precious metals investors are already re-rating large caps like Newmont, and that gold equities led while silver is now catching up.

Key points on Contango Ore Inc

  • The guest argues a catch-up trade is coming for Contango Silver and Gold after the merger closes around March 26, driven first by roughly $50 million of modeled ETF and index buying, with one ETF rebalancing by March 31.
  • He frames the combined company as undervalued at around $800 million versus a scenario of up to $250 million of free cash flow in 2027, calling the equity mispriced since the stock has not moved since the deal was announced December 8.
  • He lays out a production build: 60,000 ounces of gold last year, 100,000 with Lucky Shot by 2028, 200,000 once Johnson Tract comes online around the turn of the decade, plus about 5 million ounces of silver from Kitsault Valley.
  • He describes Contango's hub-and-spoke direct-shipping model as cutting capex and permitting timelines, noting it only works for high-grade projects and has been used in the Pacific Northwest for a century.
  • He says capex including $50 million at Lucky Shot and $235 million at Johnson Tract can all be funded internally from roughly $100 million of cash and about $100 million of annual cash flow from the Alaska mine, against $14.5 million of debt.

Key points on Discovery Silver Corp

  • The host raises Discovery Silver as a comp trading about six times higher in market cap while producing around 234,000 gold ounces per year.
  • The guest responds that Discovery has strong management under Tony Makuch but carries significant capex commitments including the Kirch Creek acquisition, so comparisons must be made case by case.

Shawn Khunkhun's takeaways

  • Top takeaway Khunkhun argues a catch-up trade is imminent for the post-merger Contango Silver and Gold, with about $50 million of modeled ETF and index buying starting days after the expected March 26 close.
  • He guides to up to $250 million of free cash flow in 2027 and calls the merged company mispriced at around $800 million, saying he would initially be content with one times net asset value.
  • He outlines self-funded growth: a $50 million exploration budget targeting 100 million ounces of silver and improved gold conversion, Lucky Shot production by 2028, and Johnson Tract doubling gold output to 200,000 ounces.
  • He contends the stock has been range-bound since the December 8 deal announcement and that a flood of capital will come in once the transaction closes, with the company redomiciled to the US.
  • He frames the combined entity as a new North American mid-tier silver and gold producer at a billion-dollar valuation, with only 33 million shares out and 50% held by management, strategics and institutions including BlackRock, Franklin Templeton, Fidelity and Eric Sprott.

Bill Powers's takeaways

  • Top takeaway The host presses for specifics on merger timeline, funding, valuation comps and silver price assumptions, and suggests Discovery Silver as a comparison at roughly six times the market cap.
  • He notes jurisdictional concerns in Mexico and asks whether British Columbia silver assets are attracting capital as a result.