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Edited Transcript of LODE earnings conference call or presentation 29-Oct-19 3:00pm GMT

Q3 2019 Comstock Mining Inc Earnings Call

VIRGINIA CITY Nov 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Comstock Mining Inc earnings conference call or presentation Tuesday, October 29, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Corrado F. De Gasperis

Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee

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Conference Call Participants

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* Carl Frankson;Private Investor

* James Dell;Private Investor

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Presentation

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Operator [1]

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Good day, and welcome to the Comstock Mining Q3 Update Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Corrado De Gasperis. Please go ahead, sir.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [2]

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Thank you, Samantha, and good morning, everyone. This is Corrado Gasper, CEO of Comstock speaking on the line, and I have both JC Giron, and -- our new CFO and President; and Zach Spencer, our External Relations Director listening on the line today, and we welcome you to our third quarter conference call. Later this week, we will file our third quarter report on Form 10-Q, supported by our customary quarterly review with Deloitte & Touche. And I'll provide a brief summary today of the information included in our press release that was released this morning and the progress on our strategic initiatives. If you don't have a copy of today's release, you will find a copy in our website at www.comstockmining.com under News/Press Releases. Please also let me remind you that we may make forward-looking statements on this call. Any statement related to matters that are not historical facts may constitute forward-looking statements. The statements are based on current expectations and are subject to the same risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in previous reports filed by the company and with the SEC and in this morning's press release, and all forward-looking statements made during this call are subject to those same and other risks that we cannot necessarily identify.

Before I start, I would like to take a moment of appreciation for one of our shareholders, Jeff Wanamaker. Jeff passed away last month, and for many of you who have known or even seen him at our annual shareholder meeting -- he was a fixture in Nevada, with a deep passion for the Comstock and especially for Gold Hill and the Gold Hill Hotel. He was a caring and thoughtful adviser to the company, and he is and will be deeply missed. We know he is at peace, and our sympathies go to his wife, Linda Wanamaker and all those who loved him. God bless, you Jeff. We miss you.

I'd like to spend the first few minutes of this call just going over our financial highlights. I'll be brief on that and then mainly focus on the strategic transactions, what it all means to LODE for 2020, our valuation and our immediate next steps and our plans for next year. For the 3 months ended September 30, 2019, total costs and expenses were $0.8 million compared to $1.6 million for the comparable period last year, representing savings of almost 50% in just 1 quarter -- quarter-on-quarter, coming from reductions in every expense category. Total costs and expenses for the 9 months ended were $3.9 million as compared to $5.4 million for the comparable 2018 period, for savings of almost 30% for the 9 months to date compared to the comparable period. This is a critical area for us all the time where the trend obviously here remains our friend. We witnessed this trend dramatically, with really hard work from 2015 to 2018, from a significant amount of internal restructuring change and streamlining. The continuation into 29 really more reflects the impact of the collaboration with Tonogold, with a substantial majority of the 29 savings can be attributed to the reimbursements from Tono, who is subsidizing our permitted platform. These savings will increase for the full year 2020, when its year-over-year, as many of them only just became effective June 1 of this year. The company's 2020 base operating expenses are planned at approximately $4 million. That's a number that excludes depreciation and amortization, but it also represents a 25% savings year-over-year when looking toward '19 forward to 2020. And as I mentioned, June 1 of '19 is when we started realizing this higher rate of subsidy, and we expect to continue receiving that subsidy from Tono to the tune of an annualized total of $2.2 million and the full benefit of that in 2020. That should result in our net planned operating expenses for next year at about $2.8 million, a little under $3 million. Again, excluding depreciation and amortization. We also did this quarter record net income, driven by recognizing a $2.2 million nonrecurring income from the prior earning agreement. But overall, I feel like we positioned ourselves extremely well for an efficient fully functioning mining platform, with a fully functioning technical team but now, with an even stronger leadership in place. We are very excited about looking forward.

Continuing financially, we've also continued paying down our debt, bringing debenture down to less than $5.9 million today. We have just a little under $1 million in cash on hand, and we're looking forward to closing the 2 most immediate transactions this quarter. When those sales go as planned, we would not need to or expect to sell any more stock. Let's discuss the Tono transaction first in a little more detail, then the Silver Springs non-mining asset sales and where they put us financially at the end of this year and next.

For Tono, we plan on closing in the next few weeks, meaning specifically, we will receive $3.3-plus million dollars in cash, in addition to the $4.25 million in cash already received to date for 50.3% of the Lucerne properties. This will immediately reduce our debt down to about $3.5 million less, and we are working now closer and closer with Tono than we have ever before on the Lucerne transaction. And frankly, we're starting to get pretty excited about the drilling and exploration programs that they've been diligently working on with their advisors, with our team and our finalizing for their drill programs and expectations for early next year. We have signed mineral leases for them to explore and develop our mineral claims north of Lucerne and the geologic planning all around in that context have been really exceptional.

Additionally, the transaction pays us another $4 million in cash in the first 6 months of next year, and as I said, continues reimbursing us at a monthly rate that translates to about $2.2 million per annum. And we've also received today $5 million worth of stock that is deposited in our treasury. I know that our market cap doesn't reflect any of this, but I think we can all agree that the revised terms and payments and continued progress show Tonogold's commitment to the deal and that Comstock is and will be well rewarded for our collaborations and our near-term patience.

Let me now discuss the non-mining asset sales. Earlier this year, the company's board approved the precious metal base strategy, focusing us on creating value from cash generating precious metals and metal processing-related ventures where we have specific mining company competencies, specific relationships or positions that are meaningful and economically enhancing technologies that we can implement. We've been working on this for quite a long time, but we really got focused this year on bringing these transactions to ventures. But company did advance this strategy this quarter by facilitating the formation of a qualified opportunity zone fund named Sierra Springs Opportunity Fund, Inc. and Sierra Springs Enterprises, Inc. It's qualified business. Sierra Springs Enterprises has now formally agreed to acquire Comstock non-mining assets in Silver Spring that represents the 98 acres alongside the Silver Springs airport, 160 acres in the very center of the downtown and water rights associated with those properties for over $10 million in cash with an agreement to close this year. The fund is formed. The fund has already received its initial capital. The fund has placed deposits on the properties and has been getting new capital commitments over the past few weeks. The fund has also gone beyond these 2 properties and secured almost 12 independent projects, including the acquisition of the centrally-located regional airport and many well and ideally located adjacent land, approved development projects, facilities and water rights, all consolidating the nucleus of Silver Spring. It's one of the fastest growing areas from all that we can see in our country. Once we've sold, consummated this transaction and sold the non-mining assets and closed with Tono, we will be debt-free, with almost $6 million of cash on hand. That's what positions us going in to 2020. Also, after we sold these Silver Springs non-mining lands, we still have our entire district intact, with Tono developing Lucerne, exploring the northern targets, all of which we hold royalties directly on, while we still own all of the American Flat facilities, properties, infrastructure and all of the southern territories too, represented by nearly 2 miles of mineralized trends from the north tip of the Dayton Mine to the southern tip of our Spring Valley resource targets, including the Dayton patent, all of our Lyon County mineral properties. We remain a fully integrated permitted crushing leaching processing operation, with vast lands and private properties under our ownership and a lease option that subsidizes all of this cost plus additional potential future lease revenues, processing revenues and royalties from American Flat.

In addition, in 2020, we'll also have $4 million in cash payments due in the very first half of the year, plus a planned $4 million from the sale of our other non-mining assets, mainly the ranch, with a projection for the end of next year at about $12 million in cash, and that number actually includes us investing some money in the drilling and development of the Dayton and the Spring Valley. I'm not sure how, but somehow there has been a perception that when we sell Lucerne, there's nothing left of our company. Could not be further from the truth. And once we get these transactions closed, we'll be fixing to rectify that in everybody's mind. So that's really what we've been setting up to do and then it positions us for more strategic growth. And so let me sort of end it with a discussion about the Mercury initiative.

As most of you know, we launched the Mercury Clean Up venture 4 months ago, with Oro Industries for the development of Mercury remediation systems with exceptionally proprietary mechanical, hydro electrochemical and oxidation processes that are set to reclean, treat and remediate Mercury from the landscape, from mine tailings, from industrial effluent. We're applying for 4 patents, including the spiral for centrifuges in the Mercury reactor and including the organic solution for removing the contaminants and recovering the metals. We, Comstock, provides the platform at American Flat for this remediation system. Equipment will be starting to arrive this week, and we'll commence operation in the new year, starting with MCU's pilot facility at about 2 tons per hour, ramping up to about 25 tons per hour. MCU, in collaboration with Comstock, has already and just received NDEP approval for proceeding with some of the testing and sampling and it secured a drill to begin sampling the location. So amazingly, we'll be drilling and we'll be sampling and we'll be identifying locations to start bringing materials up to American Flat and processing it with this new facility in the new year.

We've also, and maybe this is more amazing, at least it is in my mind, been approached for an international project. I've mentioned it twice, in passing, but now, it's really getting serious. And we're engaged in direct discussions. And it looks promising and they tell me I can't say anything more about it, so we'll stay tuned on that one. Coming back to the opportunities on the new front, I've now shifted the majority of my time, the substantial majority of my time to completing this in large part because JC is now on board and in part because Tono has established a clear path for the closing. And most importantly, Comstock is going to retain a 9.5% ownership in an enterprise that from our review and our understanding, has plans for a multibillion valuation. And so, we're going to have almost 10% of something that we believe will be exceptionally valuable over a longer period of time, of course, but that's in addition to the $10 million of net proceeds that we're looking to get in the short term. These opportunity zones are adjacent too, to the extent people don't know and also include the Tahoe Reno Industrial Center. So Silver Springs is a poor census tract. It qualifies -- Storey County qualifies and combined, it represents one of the largest, most industrially expanding areas in the nation. Google's out there right now with a fleet of construction vehicles, literally ripping down mountains, Fernley is announcing multiple industrial developments and everything continues to migrate closer and closer to Silver Springs.

So we're on the final lap of monetizing these opportunities, retaining a remarkable ownership interest for our investment in the fund and a real immediate funded platform for 2020 growth. And that's really what we're going to showcase and we are looking forward to showcasing at the Annual Meeting on November 12, in just 2 weeks. So let me summarize with a very, very high level slight evaluation -- be a little bit more specific at the meeting. Number one, we're monetizing these non-mining assets, $15 million of cash, $10 million this quarter, hopefully, $4 million, $5 million in the new year; number two, we're eliminating the $6 million of debt and sitting with a funded cash position; number 3, we're monetizing Lucerne. The value of Lucerne has multiple facets, the most immediate one is $25 million, broken down between cash, stock assumption and liabilities. The second most immediate one is we're getting reimbursed for the expenses of the platform. In the future, we have 1.5% royalty, could be valued at $5 million to $10 million. We have a American Flat option, which could have a value of $15-plus million, depending on what that mine plan ultimately looks like. And none of those dollars include the development of the Dayton and the Spring Valley, where we've already built an economic shell around that resource based on $1,200 gold -- based on about 80,000 ounces of gold that comes out at about $40 million. Obviously, at higher gold price, that number would itself rise, but we're really looking to drill and develop that thing to be 2x, 2.5x, maybe 3x the size based on what we know in that mineral resource and in that mineralized trend. But it's got a long run rate beyond that going all the way down to Highway 50, so developing those value targets and the continuation of Dayton is just as exciting to us. And then the northern targets, we'll experience resource development and drilling through Tono. We're not seeing any value, obviously, in our company with those today, but as those details of those resources become better known, better communicated, better published, then as the drilling results continue to follow then we certainly expect to see value increase.

MCU is a whole different animal. It's addressing a global market with a disruptive technology. We're looking at hundreds of millions in valuation but quite frankly, that's our notion of each project. So as we approve this out obviously, we're trying to drive an efficacy from 90% to 99%, knowing we're excited about doing that. But we have a system that worked -- that has worked before, and we're already being solicited for it. So each project will stand on its own merit but it doesn't seem like there's any limit of potential there as we prove this out and move forward.

Sierra Springs, 9.5% of the terminal value. That's in excess of $1 billion, is $100 million. So we look like we've got a nice foundation there to just continue to benefit in the growth of what we had a part in starting, while getting immediate benefit from the monetization. We do understand these are all developing opportunities. But they're all based on activities that we are intimate with, engaged in for extended periods of time and frankly expert at. So we're finally to the point where we can start being much more vocal, explain much more specifically to the market and in better detail. But we know that closing Tono and closing the property sales remain the first and only priority. Until then, we positioned all these other things, and we really do look forward to showcasing them on November 12, and of course, throughout 2020. So Samantha, let me stop there, and please let us turn to questions and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question will come from James Dell, private investor.

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James Dell;Private Investor, [2]

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Several questions here. How is this Lewiston deal important? Why was it necessary?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [3]

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So the foundational answer to that, Jim, is just maintaining our liquidity while we bridge to getting these asset sales done. I think what's good is that we see a clear path to closing out the Lucerne transaction, clear path to closing out the Silver Springs transaction. I know that people have had exceptional patience in those things coming to fruition. Neither has been easy, but we're really positioned to get the maximum value. We believe in both cases to continue to get value after the initial monetization needed by royalty or by ownership interest in a region, an area that we're intimate with. But we have to maintain our liquidity, we have to maintain the platform to get there. So to the extent that there is a time needed to get the transaction done, to the extent there's time needed to fund the businesses and the transaction, we have to extend the liquidity to that end. It's literally that simple, it's not -- in my mind, it's not even discretionary. It's not a judgment call, it's just foundational for us. And we've always done it and hopefully, we're to the end of it.

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James Dell;Private Investor, [4]

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Was there any reason why you couldn't just go pick a note to provide that item or draw on a line of credit or whatnot?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [5]

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Yes, we're not permitted to incur any indebtedness with debenture in place so -- and frankly, we're -- we don't -- nobody is going to have any joy from having to sell stock, certainly at this level, but just we don't -- we have to get rid of the debt and get funded so we can move forward with our plans.

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James Dell;Private Investor, [6]

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Okay. Now what's the outstanding shares right now? Is it like 130 million or something or what?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [7]

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No. it's 126 million. It was 116 million at the end of the quarter, and then we did the Leviston deal to assure that we have a clear path to get to all these transactions closing. It also ensures our stability, ensures our liquidity, ensures my ability to focus on these things. And we'll just bring it to the finish line.

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James Dell;Private Investor, [8]

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Okay. So it's like obviously, dilution is a real concern of mine as a long-time shareholder here. We've gone from like the end of the last reverse split from about 20 million out now to 126 million shares. Are we going to just stop?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [9]

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Yes, so I'm saying that's what we see now. We even had some discussion about if we've got $5 million or $6 million of cash or if we've got $10 million or $12 million of cash, then we get some of that back and then the answer is we're very open to that with these ridiculous valuation levels. So I don't want to get ahead of myself. I am and our team cannot be prouder, just working around the clock to get these things done. If there was no progress, if we were just stuck in the mud, it would be horrible. But that's not the case. We're moving forward with great progress behind the scenes. I know it doesn't show up yet, but it's very close.

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James Dell;Private Investor, [10]

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Okay. What about some compliance here? Why wasn't there a 10-Q filed?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [11]

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10-Q is drafted. Dotting the Is, crossing the Ts. We have to go through a very thorough review at Deloitte & Touche every quarter. They are good at it. It's probably at the highest end of scrutiny and review. We've never had any issues, so we look forward to filing that later this week. Hopefully, a couple of weeks ahead of the deadline.

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James Dell;Private Investor, [12]

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Okay. One last question. I got a e-mail from you, I think yesterday. Yes, it was...

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [13]

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Thank you for bringing that up. We had a hacking incident, and it was -- I spent like 2.5 hours with our IT guys yesterday. They said that they deal with this like 2 to 3 times a week. We've fixed everything on our side. I responded to everyone that came back to me asking about it. We're trying to get a bigger broadcast out there. Just delete it, ignore it, and everything should be fine going forward.

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James Dell;Private Investor, [14]

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Yes. When I clicked on it, my McAfee software said "Whoa, this is a major phishing thing." Well, I just...

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [15]

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Yes. Thank you for bringing it up so we could -- I could tell 70 people all at one time. I think I responded to like 25 people yesterday, but no, it's all fixed and we're all secure and just -- it's just horrible. These hacking and phishing schemes keep getting more and more and more sophisticated. We have a solid third-party provider. So as soon as it came up, we locked it down and changed all the passwords, fixed everything, just trying to get the communication out to everybody to ignore it, so thank you for bringing it up.

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James Dell;Private Investor, [16]

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Earlier this year, there was a silver-backed bitcoin thing that came out? They call themselves LODE? Have you guys done anything about that?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [17]

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Yes. So we -- I made an inquiry about it. We haven't taken any kind of action or anything associated with it. We haven't -- we did not hear anything back from our inquiry, so I'll make a note to follow back up with that again, Jim.

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James Dell;Private Investor, [18]

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Okay. Because you know, I queried the guys and I told them they were being deceitful about it and they got indignant with me. It's sort of like, okay, these guys are stealing your name for some sort of a funky purpose here, so I don't know. So last thing is, are we going forward with any kind of a future deal with Tono on the Northern Targets, Occidental area?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [19]

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We did. So one of the really exceptional developments has been -- so Tono has been spending a tremendous amount of time on the Lucerne, very, very productive, in our opinion, all the work that they've done. But the Lucerne is, it's part of the Comstock infrastructure, it's almost a central part of it. Some will think it's a southern part of the main road. We're learning it, obviously, it continues much further than I originally thought through Dayton and Spring Valley. But that geologic assessment started to creep forward into the North. We had agreed long, long ago that if they close on the Lucerne properties, we'd be willing to lease them, the mineral properties to the north, with royalties, et cetera. As they continue to do their data on extrapolation, they are seeing what we saw, and they wanted to accelerate the signing of those mineral leases, and so we put some very specific drilling commitments in there. We put some very specific objectives milestones towards economic feasibility, which is great for both of us. Everybody is very, very pleased and happy with it, and we've already gone ahead and executed those leases separately. So we get a fee, there is meaningful drill commitments, but the most meaningful thing is ultimately a requirement to achieve full technical economic feasibility. And what that prompted, and in general and overall, it's very positive, is it prompted an acceleration of activity on those Northern Targets. So while their core team is looking on the Lucerne closing, additional technical people have been involved, and including with and engaged with our team and their technical team and their technical advisors on an expansive exploration program to the north. And I don't want to speak for them, but the way the program's coming together, there could be drilling up there as soon as the first quarter of next year. And so for me, to be in a situation where we could be drilling today in Spring Valley in a funded way, they could be drilling the North, and Lucerne could be moving forward; it changes the entire dynamic of the entire district. It's pretty exciting.

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Operator [20]

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Our next question will come from [Harvey Monaco] with (inaudible).

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Unidentified Participant, [21]

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Can you talk a little more about the Tonogold's $5 million of stock. What value is that at?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [22]

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So very specifically, prior to -- I'm just thinking out loud for 1 second, it's 2.92 plus -- we had about $4.7 million -- $4.75 million of stock at September 30. And that $4.75 million was valued via third-party -- outside independent third-party valuation firm at, I believe, $5.65 million, which is the number that should appear on the face of the balance sheet, $5.65 million. So the stock that we had received by September 30, was valued at almost $1 million above the face value of the certificates that we received and have in treasury. Since then...

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Unidentified Participant, [23]

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What was that share value? Was it $0.20 a share or what?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [24]

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Oh, so different question, sorry. So yes, good question. So sorry. So the stock is preferred stock that has an underlying conversion based on the lower of 3 possibilities: One would be their most recent private placements, comparable mark to their most recent private placements, which is $0.18 a share. Or it would be the lower of that versus the then current share price versus any public offering that they did. So we tried to protect theirselves with a trifecta of options where we would take the lowest, but in answering your question, the valuation people put the most weight on the $0.18 recent transactions and the current share price that they have. So it's some hybrid of that number, let's say maybe it's probably around $0.20, $0.19, $0.20 as an assumption.

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Unidentified Participant, [25]

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Okay. Now, can they buy our stock?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [26]

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I want to say that there is a stance go on that, but I honestly don't know with the latest agreement. We have confidentiality, and we have [counsel] so I want to say yes, but I'll have to check that and get back to you to see if there is a true prohibition. I should...

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Unidentified Participant, [27]

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It would seem to me that they should be mining our stock right now, based on their values and their position.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [28]

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Yes, although substantively, and this is not meant to be very serious, right, they still owe us $7.3 million in cash, and they are raising very good funds from very good investors that we are aware of for drilling and mine development. So I certainly have no disparagement of anybody buying our stock. I applaud and welcome it, but they can help us the most by closing this transaction. They can help our share price the most by closing this transaction. So...

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Unidentified Participant, [29]

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I may have missed on the presentation, but did you say -- where are we on the Daney Ranch?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [30]

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So the -- I started talking at a high level at ending this year, between $5 million and $6 million of cash, ending next year between $12 million of cash. The assumptions embedded in there, is that Tono closes here in November and the non-mining asset sales in Silver Springs occur in this fiscal year and then the ranch would occur in the first half of next year. So we don't have an offer on the ranch. We have offers and agreements on Silver Springs properties.

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Unidentified Participant, [31]

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Okay. How do we get to the $260 million of valuation?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [32]

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So...

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Unidentified Participant, [33]

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The reason I asked that is a couple years ago, you said a couple of years ago, you said we would be at $2 a share by 2020.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [34]

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Yes. I walked through a little bit of an overview here at end where I was talking about the value that we accrued from monetizing Lucerne, from monetizing the non-mining assets and from the Dayton and Spring Valley. If you add those up with where we are, you get to about $100 million. If you expand the Dayton, you could get to $150 million, and then we're focused now on growing, Dayton and Spring Valley, growing this Mercury business, participating in a meaningful way on the value of the fund as it grows and expands and invests in new territory. And so that's how we build up to that number, and I'm going to be much more specific at the Annual Meeting, and then we will put out the presentations from that meeting online after we build up. But it's fundamentally predicated, closing Tono, closing non-mining asset sales. One of the things I was trying to say earlier is that somehow, the perception got that if we sell Lucerne and we sell the non-mining assets, there's nothing left of our company. That could not be further from the truth. We have a 10-square mile land position, we've got plans for every component of the district to be active, either in developing future resources, moving towards mining and/or processing, and then we are using that permitted platform now to commercialize these new businesses on top of it. So these 2 sales fix the balance sheet, eliminate the debt, give us the funding so that we can, in a non-dilutive way, start moving all these -- transport it to at end, hundreds of millions. I don't want to get ahead of myself, right? We want to close these transactions, but then once these transactions are behind us, all we're going to be talking about is the growth plans. They kind of fall on deaf ears because people are just desperately waiting for these transactions to close. We've heard that loud and clear from everyone, so if we're spending 5% to 10% of our time on these future transactions, it's just to set the table so that when we close Tono and we close the non-mining sales, we're moving fast and furious on these other opportunities. Somehow, we've been able to do that, which I'm very happy about but, not to the distraction of closing these 2 transactions. Certainly not materially to the distraction of closing these transactions. So I know I sound like a broken record but until we get these 2 closed, people aren't really listening to much else. But I want to...

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Unidentified Participant, [35]

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So your position is that we will -- that by the end of next year we will be approaching that $2 valuation?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [36]

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My position is that we have enough projects in the hopper to drive those kind of values. I did not put a timeframe on it. Typically, we're talking about 3 to 4 years, right, to get it, but I believe...

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Unidentified Participant, [37]

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Stop. A couple of years ago, you did say that number. You did say by the end of the 2020 a couple of years ago.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [38]

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Yes. Yes, so that's right. And I should be held accountable for that. It's taken us longer, right, to get these transactions closed, to get this thing positioned and move forward, but I would like to believe that the things that are on the table now are more mature, more ready and moving forward for it in 2020. So could it -- I don't know the pace that some of it will happen, I know the pace that others of it will happen and I'll try to delineate that much more specifically. Our plans typically roll for 3 years but they're meaningful. So they are hundreds of millions of dollars of potential value. They are real. They are real technologies, real assets, real resources, I mean, with real transaction, so that's what we're driving.

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Unidentified Participant, [39]

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My last question, can you explain a little bit why you all split to a -- you took the CEO position, and we have somebody new as President?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [40]

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Yes. So a part of it was just recognizing that with Lucerne, and the Northern Targets getting reengaged, that requires much more active permit maintenance, that requires much more active business coordination. Tono is acquiring Lucerne, but we own the American Flat facility, so there is still a strong partnership notion there. We do desperately want to develop and expand the Dayton and the Spring Valley, that will require expansion with the permits, that will require additional permits. And this Mercury business, it legitimately is going to be an international business. And so the day-to-day activities are consuming. I mean, they're just significant, putting aside the fact that you're a public company, so that was number one.

Number two, the opportunity fund and the properties and the operations, which are all in the exact same counties that we're positioned in, we will have a meaningful interest in going forward. And so we really felt that we needed more management, we needed more capacity, both for the on the ground day-to-day activities that are coming as well as the new activities that we're forging and developing. So we did it in a reorganization. We didn't add net people, but eliminated certain positions that were compliance-oriented, that were administrative, not a lot of business value. We outsourced some of the routine activities, the financial accounting and related reporting. JC has a business development background. We actually met him when we were piloting Hydrus technologies at American Flat for water purification in our industrial affluence and our heavy-metal industrial waters, and I was just blown away by his analytical view. He started analyzing all the leach pads in the western part of the United States and how much metalloid in industrial polluted water there was for Hydrus to attack that market segment. They were starting to commercialize it. And he said, look, this is exactly the direction that we're going in. And we feel -- I feel strongly that we've hit peak gold.

I feel that the majors and the intermediates are still stuck in yesteryear. I don't think that we need technological breakthroughs of biblical proportion to reprocess tailings and clean contaminated waters and materials. The industry just doesn't seem interested in that. So you're seeing a lot of consolidation by the majors. You're seeing synergies of operational rationalization. And I guess my view of that is why the hell didn't they do that sooner? You're not seeing innovation, you're not seeing growth of resource, that's for sure. They're depleting at a remarkable rate. In Barrick, Newmont, they do this big merger, but they go from 8 million ounces to 5.5 million ounces over a course of a few years. So we see the industry, and we think this is a great thing, by the way. We see the industry in decline in so far as gold has become scarcer. Production is becoming scarcer.

And for every ton of virgin material that's processed and contaminated, be it with cyanide in first-world countries or mercury in third-world countries, it's creating an opportunity for reprocessing. It's creating opportunities for secondary markets. And the beauty of attacking something that's already been processed is all those variables, all that variation, metallurgy, grade, all of that, it's known. I mean there's empirical data. I mean it's one of the biggest challenge in mining is the content variation of grade, metallurgy and then of course, the monstrous strip ratios that are the most expensive things to deal with. So if you don't have any strip ratios and you know exactly the metallurgy and the grade and the reactivity of the material, and you attack it with a different process. And so that's where we're heading.

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Unidentified Participant, [41]

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Last time, we were at the $0.09 a share, we had a reverse split. Are we at that point again?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [42]

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So we're on launch to get back over $0.20 by the end of this year. We've worked with the New York Stock Exchange for years and they've been nothing but incredible in terms of cooperating with us. We will remain compliant. We will not be delisted. Our conversations and our communications is that we really feel consummating these transactions, finally solve it. But it is always a possibility that we have to keep because the listing is valuable to our shareholders. It's protective to shareholders and it's something that we frankly covet. So it's to be seen, but we're working hard not to have it happen.

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Operator [43]

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Our next question will come from Carl Frankson, private investor.

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Carl Frankson;Private Investor, [44]

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I certainly don't want to belabor the situation when the prior gentleman went to it quite extensively, but as I expressed in the last call, dilution is more than we need to. And just to amplify on that, we've gone from 85 million shares to 126 million in 4 months. That's a 50% dilution. And coincidentally, or not coincidentally, our share price is $0.18 back then, and it's $0.09 now. So we're down 50%. And it's not a full number. The stock has to double to back where it was in June.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [45]

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It's not. And our view is very strongly to end that. Our view is very strongly to close these deals. Our view is very strongly to fund growth without that kind of discussion or dilution. And I think we're almost there, Carl. I don't -- I can't emphasize -- sorry?

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Carl Frankson;Private Investor, [46]

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I'm sorry. Just kind of a side question, I understand one of our directors is a principal in the company that holds our debt, is that correct?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [47]

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Say that again, I missed the front part.

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Carl Frankson;Private Investor, [48]

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One of the directors...

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [49]

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That's correct.

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Carl Frankson;Private Investor, [50]

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Well, the directors are supposed to help. They're on the board to help. And if they believe in our future and what's going on, why couldn't they have renegotiated? I understand you can't take on new debt, that's part of the covenant. Why wouldn't they renegotiate or something so we could have cut out all this dilution?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [51]

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Yes. So the -- I don't think -- so first of all, I think the fastest solution, the least expensive solution when you don't have revenue and cash flow in your immediate future is to eliminate the debt, right? And I think that our debenture holders and Clark and the whole board has been exceptional in supporting, in working with us. In the first couple of years, along in year 3, we were allowed to add debt instead of pay cash interest, okay? So it has been a flexible bridge for us. The solution is to get rid of it through these transactions, right? So I mean I know I sound like a broken record, but the only thing that really has mattered is getting the deal closed. And that's also why people are frustrated that they're not closed. So I only -- I can only -- and when there's needed to be a support or flexibility, it's been there, but I think the idea of increasing the debt, I don't -- I'm certain that wouldn't help our share price. So I think eliminating it, being funded and getting back into a growth mode I know will affect our share price. And let's just get to it.

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Carl Frankson;Private Investor, [52]

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Well the roughly 40 million shares that have been issued since the last quarterly call, is there any lockup on that? Are they restricted at all? Or is it premarket stock? And I mean, basically, it's ugly to point fingers at anybody but can somebody -- can they buy 10 million shares of stock at $0.08 and turnaround and sell it at $0.10 and just arbitrage the situation?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [53]

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Yes. So the counterparties that we worked with, and there is more than 1, but the counterparties that we worked with have tended to hold, as we look at the noble list and as we track our shareholders, they tend to be shareholders. They tend to be below 5%, one just filed being above 5%. So we do not see a flipping and arbitrage. That's not to suggest, right, that they're the longest-term shareholders and that we're building the capital base as far as we could. That means they come with our forward growth and we're looking to go from here. So I think ending this is a strong positive, closing the deals is a strong positive, having cash on the balance sheet is a strong positive.

But even then, if we don't have growth that's going to come from it, why would people be interested? And I think that we are driving down the right type of the right growth because even with gold turning, and I was trying to say to [Harvey] that I didn't probably say it as well as I wanted to, the mines are still in depletion mode, they have finite capacity. They're not getting the valuations that we would expect them to get. But if you have cash-producing businesses, then you're moving in the right direction. Certainly, we put high value in gold and silver in the ground. We put high value in growing the amount of gold and silver in the ground, but we also put high value in processing and pouring the gold and silver. So I think we've laid a foundation now where we've got channels coming from royalties, we've got channels coming from processing, channels coming from our own resource, we've got channels coming from other people's resources. And that's really the -- that chain is exciting, I mean I just want to get to it. I don't think anybody wants to talk about closing these deals anymore. I certainly don't, right? Let's just get them closed and move on. But at least we've got something very exciting to move on to.

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Carl Frankson;Private Investor, [54]

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All right. Just far as that goes, just switching on just a little bit, about a week ago in the Wall Street Journal, there was an article that says Opportunity Zone tax-break off to slow start with investors. It basically said that there are 103 funds set up for Opportunity Zone investing. And to date they've raised $3 billion of roughly $22.7 billion they seek. And it says every manager I talk to were saying gaining traction is slower than expected. Now how would you relate that to closing Silver Springs? Is this actually going forward the way you want it to? Is it coming -- going forward there? And at what point do you have get to where we get the $10 million?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [55]

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Yes. So great question. Thank you for asking me that question. So we've been involved almost since the legislation first came out, and it's been fascinating to watch. And let me give you a very strong insight to this, right? The first 2 times I aggregated, there was a big conference in Reno, in fact, last year or earlier this year, and the first 2 times we've seen -- we saw big aggregation, it was really -- it was amazing because what we saw was a lot of single-project patrons sort of chasing fund money, right? So I was going to build a hotel in Portland, Oregon, anyway, and let me just put a Opportunity fund on. Hey, I was going to build a residential development, let me just plop an Opportunity Zone fund on it, okay? And you saw these funds, all sort of form, I would say, superficially. Like I looked at some of the presentations and some of the materials and the word that came to my mind was amateur and what are you trying to do?

Like take a marginal product or a marginal project and sort of get it over the finish line? And so what happened was, which I was very happy about, is the investors treated -- the investors acted like smart money. They looked at the proposals, they looked at the models, in cases there weren't any models, they looked at the returns, and they said, forget it. This is not interesting or certainly, we have things that are more interesting. So that's 1 segment of the lower end of the population. What we're also seeing is serious institutions putting together serious projects. The problem with them, and it's not a big problem, is that they are trying to the projects, the means best aligned in these zones. Now by definition, a lot of these zones are tough places, okay? They're tough places where they wouldn't normally attract capital and you can say, well, okay, that's why you have the legislation to help it. And it's going to. I don't think there's any doubt it's going to.

And then you have, let me say one more thing before I get to us, then you have odd things. Like you go to College Park, Maryland and the population is 35,000 people and 25,000 of them are college students that don't have any income. So the area has a poor census tract. And you see some amazing apartmental development popping up all around the university because it's in a zone? So I guess that's a good thing, it's a little odd, but it's a good thing. So in our case, right, we are sitting in a vast zone, Silver Springs, goes almost from the bottom of Fernley all the way through and right down Silver Springs, on the 95 corridor, on the railroad corridor, right at the intersection where you have, say, Parkway 80, 50 and 95 all come together. It's surreal in that regard. And it's adjacent to the Tahoe Reno Industrial Center, which is one of the largest, if not the largest, industrials activities in the world, expanding remarkably. I mean Google is just the latest entrant and the names that we're hearing that are coming, people would be surprised by. And you have another 20,000-acre park and you have another proposed 10,000 to 20,000-acre park in Fernley, in Lyon County. And it's all converging. And it's fantastic because you have -- you're in a poor census tract because you're rural. You're not in a poor census tract because there's some kind of structural flaw. On the contrary, it's structurally desperate for this investment. Now on top of that, we're not talking about a 90-acre project, we're not talking about a 160-acre project. We absolutely have those 2 projects. One is an entire downtown development, the other is an industrial aviation park. We also have an airport, we also have a 180,000 square-foot manufacturing facility, and we secured the option, over 2,000 acres of land, 2,000 acre-feet of water rights, sewer rights, et cetera.

So unlike most others, you have a backlog of projects where these other funds are trying to chase projects, typically marginal. And so our, so far, our interface with investors I think we're batting a thousand. We've got -- we're just done a very friendly introduction to people who are familiar with the area and know the area. And we've got 5 for 5 interest. So we've got seed capital, and so I don't think it's a question of if, it's just how much time can we dedicate to get it all done as fastly as possible. And the returns are pushing annual IRR of 50% a year. So I'm not even talking to people about the tax exemption because the returns would be attractive in any scenario. So -- and a diligent, fully modeled, right? All the (inaudible) So that's it in a nutshell for us. It's just a solid foundation.

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Carl Frankson;Private Investor, [56]

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What is the actual number that you have to get to though, for us to get $10 million?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [57]

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Yes. So the fund's looking to raise $50 million of equity and with the existing commitments, just $20 million gets our deals closed.

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Carl Frankson;Private Investor, [58]

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Just $20 million?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [59]

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So the first $20 million will get our deal closed?

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Carl Frankson;Private Investor, [60]

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So it's a rolling close. You don't have to get the $50 million to close?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [61]

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That's absolutely right. And by definition, U.S. source capital gains, it's not like a traditional equity closing where you round it up and you do a $50 million raise. You're connecting with all the investors. Now that capital gains are realized, they come in, but we've had people actually execute, sell stock, realize the gains and commit to it because they prefer the investment. It looks like a better investment to them. And with the stock market, where it is, I expect that's going to be a common theme. We're not telling people to liquidate their equity portfolio. We're saying take a little off a top-ish market and roll it into real estate and real estate-related projects. So it's very compelling. It's very compelling.

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Carl Frankson;Private Investor, [62]

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Yes, certainly with explanation. Also, in regard to MCU, you mentioned, I believe, going from crushing 2 tons per hour to 20 tons per hour.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [63]

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Right, 25 tons.

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Carl Frankson;Private Investor, [64]

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Yes, or whatever it is. And I understand one of the problems is we understand that the technology works but I understand scalability is untried to make it commercially-viable. Does that prove scalability?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [65]

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Yes. That's exactly right. So let me say it better. These systems, these sort alluvial mining and placer mining systems that ore industry has produced, I mean, they have produced 100-, 200-plus ton per hour systems that are much bigger scale. But what we're trying to do is -- what we're trying to do is ensure that the centrifuges and the spirals and the sort of the enhancements to the system for the Mercury remediation can also scale at those rates. I don't see -- I think it's an engineering question, not a technological question, right? So the reason we want to do it so meticulously, going from 2 to 4 to 6 to 10 to 15, all the way up is that we want to absolutely ensure the engineering for the higher scalability. And the target is not to go from 25 to 500 or anything. It's to go from like 25 to 100-plus, right? So we feel like if we get -- if we're getting it solidly at those higher yields, at 25 tons an hour, we'll know everything we need to know to produce 100-ton per hour system, so it's very exciting.

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Carl Frankson;Private Investor, [66]

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So that will make a bit -- the profitability comes into play then?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [67]

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The profitability, if you had a 100-ton per hour system with a very low grade as gold, $1,200 price and the maximum cost for mercury disposal, these things could be producing $0.75 million to $1 million a month. So the engines make a lot of money. And the capital investment is, for this current unit we're looking at, it's less than $1 million. For the larger unit it could be $1.5 million. I mean, so you're talking about something that could return in a month or 2 as soon as deployed. And if you ask anybody what would you rather be, an underground miner, a hard rock open-pit miner or alluvial miner, the question is the easiest way and fastest way to get gold is the alluvial, so I'm really excited about it. I love the idea of taking surface material and cleaning it from mercury and getting the gold and silver. It's just fantastic.

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Carl Frankson;Private Investor, [68]

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And you feel we will hit scalability for profitability?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [69]

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Yes. Yes. Yes. We're going to be very meticulous in the ramp up. I mean we could throw it on and do 25-tons an hour on day 1, and that doesn't help us. We want to understand every step and pave the way so we can ensure the scalability to a 100-plus ton system, so it's -- and that's all we're going to be focused on, the engineering to do that. The technology we already have, it's the engineering to get it to that higher level.

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Carl Frankson;Private Investor, [70]

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Okay. That sounds good. My last question, it seems like one of our biggest assets that doesn't seem to get mentioned anymore is the Dayton.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [71]

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Yes, I tried to mention it.

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Carl Frankson;Private Investor, [72]

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(inaudible) maybe a 43-101 is to bring that back into the fold as part of our asset. It seems like that's kind of not mentioned anymore.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [73]

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Yes. So let me tell you what's happening behind the scenes. So Larry Martin, almost full-time, [Wyd Collin] our junior geologist, full-time and on weekends and then Mike Norred, Chief Engineer. We've been reworking all the level plans and cross-sections, meaning updating them, adding all of the drilling data, all of the surface mapping data. The shear zone that was exposed in the adit when we had the water runoff and the interpretations and the buildups are -- they are very exciting.

And so the internal debate is we have enough information here to publish a standalone technical report. That's not debated. But what's happened is all those cross-section level planning and reintegration into a more robust model with more data is pointing out some pretty incredible targets to drill. So the technical team would love nothing more than a very, very targeted, precise drilling program to really fill in some of the gaps from the data where they're seeing exceptional structures and exceptional trends. And they would really believe, and I believe them, that an amount of drilling will really enhance that technical report, and then we publish it standalone. Originally, I was just going to separate it and publish it, but I think that with all this work that's been done, that's coming, the only discipline that we have to keep is that we need to get the funding before we go ahead and approve it.

But it could all come very fast. That's why I think you can have a very, very real scenario in early 2020 where there's drills in the north and drills in the south. It hasn't been finally reviewed, signed off and approved yet by the board, but man they're really working their asses off to get it done. And it's looking very good. So again, I think once these deals are done, once there's cash in treasury, we can talk very credibly and very precisely about the growth of that resource, no question.

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Carl Frankson;Private Investor, [74]

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Okay. Sounds good. And just if I'm asked, when you use some of this cash, get the repurchase going. That's my recommendation at this point.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [75]

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Thank you, Carl. Thanks so much.

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Operator [76]

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Our last question will come from [Said Akai], investor.

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Unidentified Participant, [77]

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I just wanted to see what's your plan just to stop going forward for reward split, how can you stop there?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [78]

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I'm sorry, just say that last part again, [Said], I just missed your last part?

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Unidentified Participant, [79]

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I just wanted to see what do we need to do to stop getting us the reward split before (inaudible)

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [80]

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Thank you for asking the question. So I believe, foundationally, closing the Tono transaction and closing these other transactions, it will be more than sufficient to do it. So that sort of our Plan A. We're monitoring it real-time every day, every week. And I'm very, very positive on getting some of these transactions and getting some of these cashes into the treasury in a very, very near future. And then at the Annual Meeting, taking everything that I've overviewed today and really laying it out in a much more precise way.

So I think that that's what we have right in front of us. We have also had good experience with the New York Stock Exchange talking about this. I mean, they actually are very knowledgeable about the company. We're compliant in every regard, except for the share price, and that's probably an important thing for people to appreciate because, structurally, if you don't have authorized capital or if you don't have sufficient assets or if you don't have sufficient other qualifying characteristic -- we qualify for all of the requirement except just a share price. So that means, foundationally, the company is on a much more solid base. The issue is more technical. We just need to communicate, not just -- I guess maybe to answer your question better, not just to consummate but communicate much, much more effectively to everybody now that these transactions are within our crosshairs. Now that we are close to crossing the finish line, we can start credibly communicating this. And we have started to get more interest. We have started to get more interest. I think that maybe obviously, a macro factor with gold and silver and especially gold turning, but there is interest out there. Money is starting to come back into the market in a very meaningful way, and I think all of that ultimately has to contribute to supporting and listing the valuation. So I hope that's helpful. I hope I answered the question.

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Operator [81]

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I would like to turn the call over to you for closing remarks.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, CEO & Member of Mining Advisory Committee [82]

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I just want to thank everybody for their attention, their care, their questions and their patience. Looking very forward to the Annual Meeting, looking forward to significant amount of communication even here in the fourth quarter and then, of course, next year. And thank you again.

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Operator [83]

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Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.