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Edited Transcript of LODE earnings conference call or presentation 9-May-19 3:00pm GMT

Q1 2019 Comstock Mining Inc Earnings Call

VIRGINIA CITY May 24, 2019 (Thomson StreetEvents) -- Edited Transcript of Comstock Mining Inc earnings conference call or presentation Thursday, May 9, 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, President & CEO

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Conference Call Participants

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* Carl E. Frankson

Merriman Capital, Inc. - MD

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Presentation

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Operator [1]

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Welcome to the Comstock Mining Incorporated First Quarter Update Call. (Operator Instructions) As a reminder, this conference call is being recorded Thursday May 9, 2019. I would now like to turn the conference over to your host, Mr. Corrado De Gasperis, CEO and Executive Chairman for Comstock Mining. Please go ahead.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [2]

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Thank you, Emily, and good morning, everyone. It's Corrado here, Chairman and CEO of Comstock Mining. Welcome to our 2019 first quarter conference call. This morning we published summary highlights of our quarter. We have plans to file our 10-Q next week, including our customary quarterly review relating to issues we've been working for now, so that's probably about 9 years. I will provide a brief summary of the information included in our press release from this morning, including some solid tangible progress on all aspects of our strategic initiatives. I think this part of the call will be very interesting to all of you and I'm sure we'll get some good Q&A.

If you don't have a copy of today's release, you'll find a copy on our website at www.comstockmining.com under News/Press releases. Please also let me remind you that in addition to the outlook we may have, we may make forward-looking statements on this call. Any statement relating 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 the previous reports filed by the company with the SEC and in this morning's press release. And all forward-looking statements made during this call are subject to the same and other risks that we can't identify.

Let me just start with the financial highlights. Our net costs are down period-over-period and this is despite some significantly increased amount of strategic activity primarily administrative, associated with these transactions, both the transaction with Tonogold that we've been working diligently on throughout the entire quarter, some other strategic ventures and the whole Opportunity Zones phenomena and the related business opportunities that have come from that. But despite all that work, despite all that additional activity, our costs are down period-over-period. This is primarily because the existing agreement with Tono is fully subsidizing us at a rate about $1.2 million in annual expenditures primarily for mineral claims and environmental management and related type costs. Both those categories, mine claims and environmental and reclamation have achieved record low net expenditures.

And G&A expenses were down almost 10%, about 9% lower when comparing to last quarter. So the trend is our friend. We're also continuing to pay down our debts. We've paid down a full $1.6 million down during the quarter, with almost another 2 quarters of a $1 million expected to be paid down this month of May alone. So we're making great progress on the debt. You'll also see in the press release and also in the Q, obviously when we file it, that our common shares outstanding at March 31 were 80,790,273. That is the same number that we disclosed when we filed our Annual Report earlier this year. So we're all very pleased with that too. We did file a new perspective supplement and we will always have an effective registration statement on the shelf, if you will, to maintain our efficient access to capital markets and our liquidity and always be the most -- the best most responsible fiduciary for our company in that regard.

That's it financially. I'm going to spend most of my remaining Q1 comments on strategic updates and substantially all of those I think will be either things that have just occurred or that are forward-looking. As you know, in January, we executed the definitive agreement with Tonogold. I'm going to spend a little bit of time explaining that just a little because I think there's some complexity. I want to make sure everybody understands this very well.

In January, we announced the definitive agreement for the sale of our Lucerne mine. And just recently effective April 30, we signed an amendment that allows for some enhancements, both ensuring for us that we're receiving the timely benefits that we agreed to in January and for Tono providing some additional flexibility for extending the closing time frame. Our philosophy in those discussions were that we did not want to subject the company to any delayed benefits or additional costs, but we wanted to give Tono, who has just secured a tremendous financing package and is working on due diligence to complete that, the proper and sufficient time to be able to do that. They also announced, Tono did that their funding included a signed term sheet for $5 million in immediate debt financing that, from our perspective, should actually enable a faster closing.

Relatively speaking, now that that is been secured, the financing is actually quite remarkable because it also provides them with the option to draw an additional $25 million for development working capital and production startup subject to customary due diligence with SRK who is actually on our mine site today and tomorrow doing and completing the fieldwork for that diligence literally as we speak.

Tono had paid us an additional $350,000 upon signing the amendment with an additional $450,000 due next week and $200,000 due before the end of the month. So that means to date, meaning through 2019 -- to date 2019, we have received $2.35 million from Tonogold associated with this new transaction to sell the Lucerne mine. Again, with the remaining $650,000 due this month, that puts us at $3 million in nonrefundable deposits, put towards the closing cash purchase price. And that allows them to have a clear runway until just about the end of June -- June 21 to close the deal, which we now think is most likely. Although it could happen sooner, depending on the speed that SRK and Tono completes the rest of their diligence. But they could also pay an additional $1 million that would be a total of $4 million in nonrefundable deposits if they wanted to extend it through the end of July and another $1 million, that would be a total of $5 million in nonrefundable deposits to extend it to the end of August.

Based on our understanding, again of their financing, which includes our current lender who is very familiar with our assets, we expect the closing will be sooner versus later. But either way, we feel the transaction is positioned for success. Regardless, the amendment comes with some enhancements, I would say for both. In our case, it contemplates us getting $11.5 million upfront versus $10 million upfront, which ensures that we'll have way more than enough cash to pay off all our debts at the closing. Secondly, rather than us taking the $5 million note payable that would been have due in one year, we'll now take $3.5 million in stock upfront at a fixed price with a 4-month and a 12-month hold, respectively, on half of it. We like the Lucerne asset, of course, we love the Lucerne asset and we don't mind retaining some additional upside in this structure above the 1.5% royalty that we've also retained on the Lucerne asset.

Critically important though, very important is that the amendment requires Tono now to commence reimbursing the company for 100% of our monthly interest cost and our secured debt, and 100% of the previously agreed upon additional reimbursements for the option to lease American Flat. These 2 together representing $2 million in annual savings above and beyond the $1 million we're currently being reimbursed, begins on June 1, effective June 1, regardless of when the Lucerne share closes. So I think that shows 2 very important things, Tono is expecting to close this thing sooner rather than later, regardless, and that we just didn't want to defer the benefits from the original deal. So even if we close later, we're still going to start accruing those benefits to us. So I think it's a win, win, win all the way around. Please remember, overall, that the sale of Lucerne is for the immediate total consideration of about $23 million. That is $11.5 million in cash that I have just mentioned upfront, $3.5 million in stock that I just mentioned upfront, and about $8 million in assumed liabilities.

To date, we received $2.35 million of that $11.5 million in nonrefundable deposits and we reduced our debenture principal to now, as of today, $7.6 million. So I'm sorry to be pedantic, but I just wanted to make sure that everybody really understands these pieces. And so having said that, there's more pieces. In addition to the $2 million -- the $23 million as a value number, plus $2 million in annual savings, overall, $2 million in annual operating savings when you combine both situations and then $1 million in interest savings, which is just because we limited our debt and the 1.5% royalty, we did also grant Tono an option upon closing Lucerne to lease the American Flat facility. And I think everyone knows those parameters, it's a $1 million a year to lease the facility plus a $1 a ton processed. If we get to $15 million of revenue, which we fully expect to do that even at the base case then it would still be $1 million year per annum, but then $0.50 per ton until an additional $10 million is received and that is $25 million in revenue. So that $15 million to $25 million of revenue, in addition to 1.5% royalty, which using the same cases would be $5 million to $10 million more revenue. So $20 million to $35 million revenue is the real upside of this transaction. That's really the situation where Tonogold has tremendous success and Comstock, as their partner, has tremendous success.

And it's important to remember also that those revenue numbers to us don't have capital costs or operating costs associated with them. Those revenues are royalties and profits that not only drop right to the bottom line, it's a little better than that because all of those revenues for us -- or all those profits for us would not be subject to any federal tax because of our $170-plus million of net operating loss, carryforwards or NOL. So a lot of thought has been put into this transaction, certainly on Tono side. They get, again, incredible deposits. They get speed because of the permitted platform and the infrastructure. And you get a deposit like this in strange places, even in strange places in Nevada, you're talking 7 to 10 years lead time. That's Tono's huge value equation. It would be -- our value creation comes from our corporate and tax structure and the capital sensitive. It's not actually capital sensitive, it's capital positive, in every way. So we really think this is an outstanding construct for our shareholders.

I just want to say lastly, and this is according to Tono's recent public comments, Tono has also stated that they are expanding the scope of the Lucerne 43-101 resource estimate report. I guess it's actually going to be more of a northern Comstock project, Comstock project for now because they leased our northern claims in Storey County. And so those are being expanded into the report. And they've also got an agreement to acquire additional properties on the Comstock that expands, really physically expands the Lucerne property position and even some additional claims up to the north of Lucerne. And I know that those properties are in great position to expand the resource. And I'm sure they'll be looking to do some drilling and development of those claims as well.

Interestingly, the acquisition of those claims that they are reaching agreement on, or have reached an agreement on, has a bunch of Lyon County claims as well that surround our Dayton and Spring Valley properties. And so as part of this amendment, we worked out at a very, very nice arrangement where they are able to acquire all the robust additions to their Storey County package. And then we get the Lyon County claims at no additional cost. So all this is asset enhancing for our shareholders in every way. Also, probably last point on this win-win is that anytime -- the way the agreement is written, anytime they are adding to that Storey County or Lucerne package, that automatically gets subjected to our 1.5% royalty.

So it's all fantastic. I think that the market view of the transaction is permeating. People are starting to understand it better. I hope this conversation helps that more. Tono also announced that they are -- they've started accelerating now, even though the resource estimate report is not out yet because of all the good reasons that I just mentioned, they've already engaged their consultants, Mine Development Associates of Reno, Nevada to complete -- undertake and complete a second 43-101 compliant technical report. That's really scoped as a preliminary economic assessment, that's termed as PEA in the industry for the Lucerne deposit and they're looking to have that PEA completed this summer. So the resource estimate is taking a little longer because the scope is bigger and more robust, but the PEA is coming faster, so that's outstanding. We're really looking to see this whole thing finally come together. Ultimately, the total value to us we understand the initial $23 million, but ultimately, it could exceed $60 million if all these plans come well to fruition.

Let me move on to our corporate realignment. And it's tied in small parts. It was initiated by the Tono transactions. I think people understand that the acquisition of the Lucerne mine and the Lucerne properties will come via the acquisition of Comstock Mining LLC. That was the entity that held all of our mining assets. But we've realigned our legal structure so that Comstock Mining LLC, as required by the Tono agreement, will only hold the Lucerne properties and the related permits. So that's a very, very clean structure. They are acquiring Comstock Mining LLC for the right intents and purposes, which is to get the Lucerne Mine properties.

And then in the first quarter, the Board -- our Board formally passed a resolution that it would be in the best interest of all of us, the company and our shareholders, to implement a strategy that's really focused on high value, high cash generating precious metal based activities. So this long-term debate on are you a mining company, or are you a real estate company, which I used to always say yes to, is focused and clarified. The focus, of course, is what you'd expect us to be focused on, metals and mining, exploration, engineering, resource development, economic feasibilities, enhancing valuation, enhancing minerals, ultimately mineral production and metal processing. But very, very importantly, it includes the environmentally friendly conservation-based, economically enhancing technologies and processes, that we've been working on now for a number of years and are coming to fruition. So if you take a look at the diagram that I included in the press release, the structure is designed with a very, very precise consideration of what Comstock Mining reaches as a holding company and the net operating loss, hidden asset, if you want to think of it that way, that we're sitting on.

So to the far left, you see Comstock Mining LLC, and the Northern Comstock joint venture, which is the value that Tonogold is acquiring. That's what -- we're ultimately getting $23 million in cash stock and the assumption of liabilities which is primarily the Northern Comstock liabilities and some reclamation claims. So that is a line, upon closing the deal, goes away.

The second value line that you see to the left, there is a Comstock Industrial and just beneath it, DTSS. Comstock Industrial is a 98-acre Industrial property in Silver Springs, Nevada, and DTSS is the agreement we have to purchase 160 acres in Silver Springs, Nevada. So that dotted line goes away when the Silver Springs Capital Partners Fund that -- the new Opportunity Zone Fund that we helped, and I helped directly coordinate and collaborate with to come to agreement on the purchase from Comstock Mining of those 98 acres and the water rights for $7.2 million and for the Downtown Silver Springs and associated plans and approvals. So that commercial development for $2.5 million. So long story short, the 98 acres and the water rights and the 160 acres sold to Comstock -- I'm sorry, sold to Silver Springs Capital Partners for almost $10 million, we expect those transactions to close hopefully by July or August at the latest, which you can imagine, the Tonogold transaction alone eliminates our debt, delivers $3 million of annual savings. That's a huge number, puts some cash into the treasury. The Silver Springs transaction should give us at least $10 million obviously in cash on hand. What's left then, what do we have left? We do still have some Comstock real estate. It's in a subsidiary called Comstock Real Estate LLC. That reflects the Daney Ranch and that reflects the Gold Hill Hotel.

Gold Hill Hotel, which has been profitable to us on a cash basis for the last 2 years running, very stable, outstanding. But more importantly, the realignment then takes the remaining assets and puts them into 3 separate LLCs. So Comstock Northern Exploration LLC, holds all the Storey County mineral claims that we own or control in addition to the Lucerne Mine, which would be sold with Comstock Mining LLC. Those assets we've agreed to lease to Tonogold as part of the closing of the sale of the Lucerne mine, we get a royalty associated with all those, but most importantly, they are very excited to start drilling and development. The amount of work that they've done on those geological structures and the potential for new resources and new discoveries will be exciting for all of us, of course, using their capital, and we would get the benefit through the royalty.

Alternatively, flipping over to the middle circle for one second, Comstock Exploration & Development, LLC is the Lyon County mineral claims that we own and retain and control that has the Dayton consolidated mine, the Spring Valley. And it's a dedicated company with dedicated mineral claims, with a resource estimate that we're looking to update this year. We have not started the work on the Dayton exploration and drilling, although it is very high on our list. Once we get the Tono and the funding that comes in through those transactions, we're doing a tremendous amount of internal work towards the new technical report, but ultimately, once these other things are out of our system and the funding, we'll commence some drilling on the Dayton and the advancement of the mine claim. We've also agreed, in the last Silver City advisory board meeting, to start collaborating with the community as mutual stakeholders on a community plan. And we're really appreciative of that breakthrough.

The middle box, Comstock Processing, is the American Flat infrastructure, that's the crusher, the Merrill-Crowe, the processing ponds and the properties out there. And that entity is the one that -- they're all 100% owned, of course, by Comstock Mining Inc. And that entity is the one that will be the direct beneficiary of leasing those assets and processing those tons for Tono or otherwise. The new entity that is not yet formed but has been structured, designed and is ready to be formed is an Opportunity Zones fund called Comstock Capital Partners. So if you can all appreciate that when the -- at our last annual meeting, when I mentioned that Governor Sandoval, approved 61 Opportunity Zones in Nevada, 4 of them in northern Nevada, one of them, as you now know, now Silver Springs, that the other one was Storey County.

100% of Storey County is an Opportunity Zones fund. And we are facilitating the formation of Comstock Capital Partners, it is an Opportunity Zones fund, and Comstock Mining will own 9.9% of that fund. It cannot own more than 9.9% of that fund without creating designations to us as investment advisers. We do not want to be investment advisers, but we do want to be a partner in an efficient capital source that can invest in Storey County or any opportunity zone for that matter in mineral and mineral-related initiatives. We're going to -- I'm going to spare any more discussion about that because I'm sure I'm going to get some good questions on all of that. But the realignment has really sharpened the way we've organized ourselves, the way that we've put our assets into the right separate buckets, more than anything to facilitate growth and facilitate transactions. And that growth is intending to be cash-generating, revenue-generating opportunities.

So Comstock Processing, which again is the wholly-owned subsidiary, has that platform, along with Comstock Mining, is pursuing strategic ventures, meaning we've been working with people for years. So there's nothing that I'm going to refer to in this last piece of the update where we haven't been working with the counterparty for at least a year, and in some cases 2, 3 and 5 years. So we're working directly on technologies for reprocessing leached materials. Most people are familiar with Dr. Whitney in Itronics, and the incredible work he's done with his KAM-Thio technology for maximizing silver recoveries from previously leached cyanide tailings, cyanide leach pad materials, waste up materials, all of that. We're looking to formalize a venture to be using that technology and/or Cycladex's technology, which is different, but with the same type of objectives.

Before I go on, let me pause and mention one thing. One of the largest growth markets in mining is the reprocessing of waste. The majors have clearly hit peak gold. The majors are clearly in a depletion mode. I don't think the market understands how significant that depletion mode is. I think they've done a good job. Newmont acquiring Goldcorp, Barrick and Newmont Nevada merging, tremendous operational synergies, an almost unbelievable level of operational synergies. But we don't want to confuse those mergers, acquisitions and synergizations, if that's a word, I don't think it is a word, synergies, with the fact that, none of those things did anything to increase the individual companies reserves. It's like Hecla acquires Klondex, and Hecla announced today that they're suspending Klondex's Nevada operations because when you acquire somebody, it doesn't make the reserves grow. The only way to make the reserves grow is either if you're drilling and development or reprocessing waste. So every time a major processes a virgin ton of ore, a new ton of waste is generated that has gold and silver in it. This is a market that's growing massively and it's a market that governments are starting to demand, get attended to because they're not -- we look at them as potential assets, but for most intents and purposes, everyone's sitting on reclamation liabilities. So this is what we've been working on for so long, and now it's coming to fruition.

The second area is water purification. I think people are familiar that we had Hydrus Technology come on-site over a year ago, test and prove that they can take water -- industrial complex, heavy metal complex, cyanide contaminated, mining ponds and reprocess the water to come up with dischargeable water and come up with sludge that, guess what, still had gold and silver in it. So we're working with Hydrus now to be a strategic partner for reprocessing those same materials, getting the gold, getting the silver. And both of those ventures would result in near-term revenue for us.

Lastly and maybe most nearest term, the Board has been very active in reviewing a mercury remediation technology that is remarkable. It is a placer mining type of equipment configuration that has 4 patent pending technologies, including centrifuges and spirals that remarkably are able to extract mercury from contaminated soil, separate the high content of gold and silver from those mercuries, and then separate and properly dispose of those as well. And so we -- I can tell you, we're going to be announcing the first of at least 3 ventures in those areas that I just mentioned in the reasonably near future. In each case, it could be a joint venture, in each case we would have at least 50% of the venture, or it could be structured where we're doing all of one activity and the partner's doing all of the other activity. And in every case we get gold and silver out of the equation. Let's call that profit. Let's call that metal, and we have great designs for that to all happen.

I'm going to stop there only because, again, I'm sure we'll get a lot of questions on these kinds of things. I've gone 30 minutes. But I'm going to say this, the level of maturity and the level of advancement of what I'm talking about is such that our strategic partners are already coordinating to be showcased at our annual meeting this year. Because of these things and because of our very sincere focus on getting the Tono transaction up and running and getting -- fully supporting Tono to bring the Lucerne Mine back into production, we've scheduled the meeting. We haven't finalized the date, that's going to require a final Board approval on the record date. But we're looking at early September for our meeting, with news coming out reasonably soon this month when we expect that date to actually be. It would be at the Gold Hill Hotel again, here on the Comstock.

And Emily, let me stop there and turn it over to you for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Carl Frankson.

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Carl E. Frankson, Merriman Capital, Inc. - MD [2]

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Boy, I've got to tell you, I'm trying to settle down a little bit here. I've been on the call obviously all -- for all these years and we've gone through a very barren time you would have to admit since we started mining.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [3]

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Yes. I hear you.

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Carl E. Frankson, Merriman Capital, Inc. - MD [4]

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You've got to -- I'm trying to get my arms around some of the numbers that you've said. Just number 1, just in terms of Lucerne Tonogold transaction, I think you mentioned ultimately there would be something like $24 million in revenues generated from that?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [5]

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Yes. So that's just wouldn't be...

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Carl E. Frankson, Merriman Capital, Inc. - MD [6]

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The question is that there are no costs involved with that, we have tax loss carryforwards, that all comes down to the bottom line as revenue. We haven't had revenue in ages. How does that get reported, in cents per share? I mean, are we all going to suddenly see -- for 6 months you earn $0.24 a share or something? This is more than the market cap of the stock.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [7]

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Yes. So great question. Let me hit it in 2 points. So let me break it into 3 pieces, if you will. okay? So the 23 -- there's $23 million that we're going to get, which $11.5 million is a cash payment, $3.5 million is a stock payment, those will all be gains that we will record on the sale of the asset. And those gains will fall to net income, those gains will translate to earnings per share and those gains will be sheltered from taxes. And so in fact, we'll actually be able to recognize some -- the NOLs and then operating loss assets that are currently not recognized as well. So you'll get the full benefit of that profit for lack of a better description.

Then, very importantly to what you just said, that the additional, let's call it, $25 million that comes from rental of American Flat, both in terms of an annual fee and dollar per ton, that is revenue. It's structured like a triple net lease. So there is no cost of sales associated with that revenue and that revenue drops right down to the bottom line, and it is sheltered from tax and it's EPS. And then there's a 1.5% royalty, which would be -- and let me just say this, if you look at Tono's base case in preliminaries, they're probably talking about that conservatively, over a 4 -- the base part, the $15 million, the first estimate over about a 4-year period, and then maybe the second part over a 2- to 3-year or more period, you're looking at a very nice, very nice stream of revenue. And then the royalty on top of that, which, again, has no cost of sales associated to it. So I know people didn't quite understand that it's not a royalty on steroids, the royalty is very reasonable at 1.5%. But it's turning the American Flat asset into a revenue generator.

And by the way, not just with Tono, these other clean technologies we're looking to do very similar things, not that they would be renting the facilities, they can't do that because Tono will be renting the facilities, but we'll be creating new equipments, new technologies, we'll be placer mining -- we could be placer mining in Spring Valley in 2 months literally. As we move into this mercury remediation, if we get the deal with either Cycladex or Itronics, then, in the near-term, which we expect one, if not possibly both will happen, we'll be reprocessing tailings. All the tailings that are sitting on that leach pad, Carl, are ours. We get to reprocess all 3 million tons. Guess what? Silver revenues. Guess what? NOL usage. So this is not an overnight success. The barren -- the barrenness was some of the hardest 2.5 years of my life. But the Board kept saying, "Look, fix the balance sheet, monetize the nonstrategic assets. But in your free time, could you try to set up some future possibilities?"

We haven't been able to talk about them because until we fix the foundation, how do we look forward? So I've got to credit the Board for not only being disciplined on, get the monetization done, that's your number 1 and number 1-A priority, but man, if there's any chance to progress the future strategy, we'd like to talk about that. So we are now formalizing that strategy. We kind of sneak-previewed it at the last annual meeting, about all these potentials. Every name you're going to hear come up was listed on the Board at the annual meeting last year, but people just -- and in fairness to them, no one could see past it because Tono was not a mature transaction yet. It was a very nascent transaction and no one really was certain how far it would go. These Tono guys are -- they're not only very competent and expert miners, but they're scrappy. I mean they're scrappy. They just keep moving forward and it's pretty fun to be part of because ultimately, that means Lucerne will be mining again. That's what we're really excited about.

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Carl E. Frankson, Merriman Capital, Inc. - MD [8]

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Another kind of the question that's related, you kind of lost me with all the LLCs and capital partners and whatnot? This is kind of a forward-looking question, but we've gone from no revenues to how many potential different revenue sources are there? It sounds like there are 8 or 10 different areas where we're going to be generating revenues.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [9]

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There are 6 that we're specifically focused on, right? We have Tono royalty, we have Northern Minerals royalties, but those would be a little bit further off. You have 3 clean technologies that we believe will be revenue generating and then you have the Dayton mine itself. So those are near-term. But I want to say to you, as we've got 3 mature, clean technologies -- and when I say mature, I mean we've got engineering designs, we've got feasibility work. We haven't finally fully proved the concept, but finally fully proving it means we start generating revenue. So we, literally in the first proof-of-concept with the mercury equipment, will be generating revenue. So I would say 6 that are known, that are on our whiteboard. But we haven't fully completed feasibilities obviously we haven't fully modeled those streams, but what we're hoping is that by the annual meeting, which is just this summer, we'll have a lot of clarity and a lot of specificity and those folks are going to be there and you're going to get to talk to them and it's going to be very exciting.

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Carl E. Frankson, Merriman Capital, Inc. - MD [10]

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Well, I've got to tell you, thanks. I've been on this call for quite a while and this is -- going forward now, it really sounds exciting.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [11]

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We have like a real company that's generating real revenue.

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Operator [12]

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(Operator Instructions) Our next question comes from a private investor, Lauren Denny.

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Unidentified Participant, [13]

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So I have digested a lot of what you said and it all makes sense, but I'm going to ask you to look forward a little bit and specifically with Dayton. But before I do that I've got one other quick question. The formation of all those entities, that's not going to impact or decrease or hurt the NOL at all, right?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [14]

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No, no. Everything remains 100% under common control of Comstock Mining Inc. and Comstock Mining Inc. reserves fully its NOLs. The NOL -- there's really no provision to lose the NOL, but there are provisions to limit the NOL if you materially change the ownership of Comstock Mining. So it's interesting to say that because when we were talking about the Opportunity Zones, one of the first ideas was what if an opportunity fund bought Comstock Mining. And the immediate response was that would destroy the NOL. So we've been a big part of this, which you've clearly picked up on, as we've been -- how do we structure revenue generation and value generation without, a, diluting our shareholders or minimizing that dilution to the absolute lowest number, while maximizing the use of the NOL. That's really been the 2 governing parameters when it comes to structure.

Obviously, the opportunities come for different reasons. People see us as a permitted platform with remarkable accolades on environmental competency, environmental acknowledgment. So there's -- we've become a sort of a -- I used to think of those awards, first place reclamation, first place reclamation, first place reclamation as intangible, like it feels good, we're glad that we do things well. But it's turning into a tangible asset because people are coming -- I'll use the mercury example. The counterparty came to us and said, "We've been testing mercury around the world. We've been testing mercury in the Philippines, we've been testing Mercury in Nicaragua. We have a solution that works on Mercury. But for people to really accept it, wouldn't it would be ideal if we could test it in the United States under an EPA and Nevada EPA." U.S. EPA and Nevada EPA formally approved plan for remediation -- remediating mercury. But where are you going to find that? Oh guess what? We have that. So by doing all those things the right way, and frankly investing the money in that long-term plan, getting the U.S. EPA District 9 approval, getting NDEP's sponsorship, we now have an asset. And so now together with this technology, we commercialize that asset. So anyway, I got a little sidetracked. No. The NOLs are fine. Very fine actually. Very fine.

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Unidentified Participant, [15]

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And then one more thing about the NOLs and then I'll move on to Dayton. So on the NOLs, what do they have, about another 15, 20 years before they start expiring?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [16]

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Yes, yes. So to answer it this way, like our oldest block, I mean they go -- they actually go back -- some very small ones will go back as far as 12 or 13 years, 14 years. So that means those only have 6 years left on their lives so those are the ones we had used. There's a big block that's 8 years old. We've got 20 years to use them. So the big block gives us 12-year headroom. So I would say the average life, if you weighted the average, it's probably 15, 16 years. I didn't do that math, to be honest, but I'd be sure that's directionally correct.

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Unidentified Participant, [17]

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And then getting onto the Dayton. What would be the ultimate hypothetical use of the Dayton. Would Comstock Mining -- would you guys mine it, would possibly Tono mine it? I mean, I know obviously it's early and there's tons of possibilities, but what -- is there any plan in place or it's too early or now there's just infinite possibilities?

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [18]

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No. We have a full plan in place to bring it into production -- okay, so that's not the right verbalization. We have the full intention to bring it into production ourselves and we have a schedule that represents all the planning activities required to do that, okay? Part of that would be get special-use permit in Lyon County, part of that would be to ensure that the local community, participates in that planning and that we're communicating before we go for the permits on what we're doing and how we would do it and getting their input. Part of that is the economic feasibility, and so we're marching to update our resource estimate. That's the first technical report, and we're doing it in a way that it will be an updated resource estimate. It will be fully compliant with the new guidelines. The U.S. is also adopting Canadian guidelines, which is -- that's not the right verbalization. The U.S. is adopting new guidelines in an enhancement of guide 7, that actually is much more consistent with the Canadian resource reporting, which is viewed as the best standard in the world. And that will allow us to start disclosing our resources and reserves in our filings. That's been prohibited to date by the United States. That's why a lot of people prefer to list in Toronto. That's coming to the U.S. Now so that's great.

So we're going to put out a resource estimate report as that's updated. It's going to be scoped, sort of like what Tono is doing, to have a lot of the prerequisites for a preliminary economic assessment. That would then allow us to do a second report that is more of a real preliminary economic assessment. Now you're starting to talk about economic shells. You're starting to talk about mine plans, you're starting to talk about costs associated with every aspect of what you're doing. So we are doing that all fully ourselves. We have the senior engineering, we have senior geological, we even have a junior geologist now on staff where we're going to be working to develop those plans. We've said consistently from the minute we launched our project schedule, we're probably about 2, 2.5 years away from production.

But having said all of that, certainly Tono has the right to come to us and say, "Hey, we'd like to do something like we did with Lucerne or something different." Others can say that. Our view is to be return -- responsible and return focused. So we're only going to allow responsible plans, but we want to get the maximum returns as fiduciaries on our assets. So I would say all of it is possible. What you said is that all of it is possible. But we know because of what we know and what we can do, we can ensure getting to a PEA ourselves, really is a value enhancer. It's not only, we don't only believe it will increase the value of the Dayton property, we believe it'll provide tremendous transparency to the market, who will then accept that value. You know what the value in Dayton is on our stock right now, it's 0. Maybe it's even negative. So it's not even recognized. And when people realize that, we already have 0.25 million ounces of measured and indicated resource, you have another 0.25 million of inferred resource and it represents a tiny fraction of an almost 3-mile stripe that goes all the way down to Spring Valley and Highway 50. That's a valuable asset that's not even recognized.

So when Carl was saying. "Gosh, the economics of Lucerne are multiples and multiples of your market cap." Well, don't forget the economics of Dayton, which are 0. No one's even recognized those yet. So we're unlocking the value. And part of this realignment, it's not superficial, it's to enable focus, strategic focus, but it's also to enable transparency. So most people don't even realize that we published the resource on Dayton. It's buried in the back of the Comstock project technical report. Well now we'll have a separate standalone Dayton technical report.

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Unidentified Participant, [19]

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Got it. And then so you touched on drilling in the Dayton, so there's going to be a lot of that because you've only touched on a fractional share of 3 miles, there's -- it sounds like there's plenty of room for drilling.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [20]

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Yes. So there's a precise drill plan. Larry Martin, our chief geologist, and Mike Norred, our senior mine engineer, quietly, just like we've been doing, quietly have been building cross section level plans. We're integrating them. And when you do that, the precision that you get on a 3 dimensional model allows for -- I hate the word because it's a little exaggerated, but it allows for more surgical drilling. I mean you aren't drilling right into a cross section and a cross point where you know there is a structure, but you don't know what the mineral values are. So we tend to get very, very high returns on those drilling dollars. That's in the tiny part up at the top. But then it -- for another 2 miles, we've done geophysical analysis and the magnetic signatures.

What's really beautiful about it is, you're looking at the magnetic signatures where you know, you have a 0.5 million ounces of gold. Right? So that tells you something. Then you do geophysics down for 2 miles, which we've done with the third parties and the signature continues. And then you start defining where you believe all the structures would overlay and you drill into that. That is a longer term drill plan. That is a very, very exciting prospect. When I talk about going into production within 2, 2.5 years, I'm talking about the small northern part of the possibilities. If we were talking about drilling out the rest of the Dayton, drilling out the rest of the Spring Valley, you're talking -- that's going to be an awesome runway for much, much more mineral definition and resource estimation grow.

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Operator [21]

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That concludes the question-and-answer session today. I would like to turn the call back to Mr. Corrado De Gasperis.

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Corrado F. De Gasperis, Comstock Mining Inc. - Executive Chairman, President & CEO [22]

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Well, everyone, thank you for the time. We are pleased with the recent -- it doesn't feel like recent progress, it feels like 2.5 years of hard work finally coming to fruition. But we can certainly expect updates and communications in May and in June as well as nailing down the annual meeting and reporting that date. So we look forward to talking to you guys in the near future. And we appreciate all the interest.

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Operator [23]

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That concludes today's conference call. You may now disconnect.