v3.26.1
Note 14 - Derivatives and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives and Hedging Activities

14. Derivatives and Hedging Activities

On August 2, 2023, CORE Alaska, a subsidiary of the Company, pursuant to an ISDA Master Agreement entered into with ING Capital Markets LLC (the “ING ISDA Master Agreement”) and an ISDA Master Agreement entered into with Macquarie Bank Limited (the “Macquarie ISDA Master Agreement”), in accordance with its obligations under the Credit Agreement, entered into a series of hedging agreements with ING Capital LLC and Macquarie Bank Limited for the sale of an aggregate of 124,600 ounces of gold at a weighted average price of $2,025 per ounce. The hedge agreements, as amended, have delivery obligations beginning in July 2024 and ending in June 2027, and represent approximately 42% of the Company’s interest in the projected production from the Manh Choh mine over the current anticipated life of the mine. As of the date of this report, the remaining hedge agreements represent approximately 14% of the remaining life of mine production for Contango's share production at Manh Choh.

As of March 31, 2026, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships:

 

Period

 

Commodity

 

Volume

 

 

Weighted
Average Price
($/oz)

 

2026

 

Gold

 

 

7,000

 

 

$

2,025

 

2027

 

Gold

 

 

15,000

 

 

$

1,933

 

 

 

 

 

22,000

 

 

$

1,962

 

 

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the fair value of the Company’s derivative financial instruments, as well as their classification on the Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025.

 

 

 

 

As of March 31, 2026

 

 

As of December 31, 2025

 

Derivatives not designated as hedging instruments

 

Balance Sheet
Location

 

Gross
Recognized
Assets /
Liabilities

 

 

Gross
Amounts
Offset

 

 

Net
Recognized
Assets /
Liabilities

 

 

Gross
Recognized
Assets /
Liabilities

 

 

Gross
Amounts
Offset

 

 

Net
Recognized
Assets /
Liabilities

 

Commodity Contracts

 

Derivative contract asset - current

 

$

769,400

 

 

$

(324,491

)

 

$

444,909

 

 

$

—

 

 

$

—

 

 

$

—

 

Commodity Contracts

 

Derivative contract liability - current

 

$

(58,576,154

)

 

$

324,491

 

 

$

(58,251,663

)

 

$

(66,465,622

)

 

$

—

 

 

$

(66,465,622

)

Commodity Contracts

 

Derivative contract liability - noncurrent

 

$

(13,946,223

)

 

$

—

 

 

$

(13,946,223

)

 

$

(37,191,718

)

 

$

—

 

 

$

(37,191,718

)

 

In addition to the settlement of gold hedges (Note 13 - Debt), as part of a price protection strategy to offset the hedge settlements, the Company paid $0.4 million to purchase 15,446 puts with a strike price of $4,000 per ounce. The schedule of the puts matches the periods of the hedge settlements. The March 31, 2026 puts were sold before their maturity for proceeds of $0.1 million.

 

As of March 31, 2026, the Company’s derivative instruments related to these agreements were in a net liability position with an aggregate fair value of $71,752,977. As of March 31, 2026, the Company has not posted any collateral related to these agreements. If

the Company had breached any of these provisions as of March 31, 2026, it could have been required to settle its obligations under the agreements at their termination value of $71,752,977.

Effect of Derivatives Not Designated as Hedging Instruments on the Income Statement

The table below presents the effect of the Company’s derivative financial instruments that are not designated as hedging instruments on the Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2026 and 2025, respectively.

 

Derivatives Not Designated as Hedging Instruments under Subtopic 815-20

 

Location of Gain or (Loss) Recognized in Other Income (Expense)

 

Amount of Loss
Recognized in Other Income (Expense)

 

 

 

 

Three Months Ended
March 31, 2026

 

 

Three Months Ended
March 31, 2025

 

 

 

 

 

 

 

 

 

 

Commodity Contracts

 

Unrealized gain/(loss) on derivative contracts

 

$

31,904,363

 

 

$

(40,475,656

)

Commodity Contracts

 

Realized loss on derivative contracts

 

$

(50,930,745

)

 

$

—

 

Total

 

 

 

$

(19,026,382

)

 

$

(40,475,656

)

 

Credit-risk-related Contingent Features

Cross Default. The Company has agreements with each of its derivative counterparties that contain a provision that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

Material adverse change. Certain of the Company's agreements with its derivative counterparties contain provisions where if a specified event or condition occurs that materially changes the Company's creditworthiness in an adverse manner, the Company may be required to fully collateralize its obligations under the derivative instrument.

Incorporation of loan covenants. The Company has an agreement with a derivative counterparty that incorporates the loan covenant provisions of the Company's indebtedness with a lender affiliate of the derivative counterparty. Failure to comply with the loan covenant provisions would result in the Company being in default on any derivative instrument obligations covered by the agreement.

Metal Sales

The Company purchases its 30% share of gold from Peak Gold JV at 1.75% discount to 5-day VWAP at time of shipment. On February 25, 2025, the Company commenced sale of all purchased quantities of gold to the derivative counterparties (the lenders under the Facility) at spot price less a 0.5% fee. The Company recorded a gain on metal sales for the three months ended March 31, 2026 and 2025 of approximately $0.7 million and $1.2 million, respectively, in “Other Income/(Expense)”. Prior to February 25, 2025, the Company’s sales to the derivative counterparties were limited to only the quantities of gold not delivered into the hedges.

The sales are accounted for under FASB Accounting Standards Codification ("ASC") 610, "Other Income" and not ASC 606, "Revenue from Contracts with Customers", since the sales are incidental to the Company's primary contractual obligation and do not constitute the Company's ongoing or central operations.

Beginning on February 25, 2025, to satisfy physical delivery obligations under the existing hedge agreements, the Company entered into agreements with the counterparties to repurchase hedged quantities of gold at a contracted fixed price at each hedge delivery date. As of March 31, 2026 the Company did not have repurchase obligations.