Comstock Continues Towards 2020 Strategic Objectives
VIRGINIA CITY, NV - Comstock Mining Inc. Chairman and Chief Executive Officer, Corrado De Gasperis said, “While we all continue to follow COVID-19 guidelines at Comstock Mining, we are very fortunate to be able to continue working collaboratively, remotely and strategically with our colleagues and business partners as we continue working towards achieving our 2020 strategic objectives and ultimate value goal.”
First Quarter 2020 Selected Strategic Highlights: Investment in Mercury Clean Up LLC (MCU) increased to $1.6 million with the Comstock-based mercury remediation system scheduled this month, with necessary Nevada permits secured; MCU also signed a definitive joint venture agreement with Clean Ore Solutions OPC, to partner and lead in a major mercury remediation project located in the Philippines, with initial permits also secured; Investment in Tonogold Resources Inc. , valued at $8.8 million, represents > 10% ownership; Announced and permitted Tonogold drill plans for June, 2020, on the Occidental Lode and other claims; Extended agreements for the sale of Comstock’s two non-mining properties in Silver Springs, NV, and received an additional deposit totaling $0.4 million cumulatively, toward the $10.1 million sale; Received $0.75 million in expense reimbursements from Tonogold during the first quarter; Received $1 million in prepaid reimbursements from Tonogold for upcoming expenditures, including staff support for local and federal permitting, and geological support for exploration planning and drilling; and Consummated the April acquisition of 25% of Pelen LLC, the owner of the historic Sutro Tunnel Company.
Last year, the Company’s Board of Directors approved a transformational strategy focused on high-value, cash-generating, precious metal-based activities, (the “Strategic Focus”) including, but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of conservation-based, environmentally friendly, and economically enhancing mining technologies. Our goal is to deliver over $500 million of value from our existing assets and the commercialization of these environmental mining technologies, partnerships and ventures. Comstock Mining Inc. is the parent company that wholly owns the realigned subsidiaries.
Comstock Mining LLC owns or controls the Lucerne properties. Comstock Processing LLC owns the American Flat processing facility and represents the main platform for commercializing environmentally friendly, and economically enhancing mining technologies. Comstock Northern Exploration LLC owns or controls the remaining Storey County mining claims and exploration targets, primarily located north of the Lucerne properties, that have been leased to Tonogold and represent the focus of their recently announced drilling programs, including the Occidental Lode. Comstock Exploration & Development LLC owns or controls the Lyon County mining claims and exploration targets, including the Dayton Resource Area and the Spring Valley exploration targets.
De Gasperis said, “We are now driving our strategic initiatives forward at full speed with MCU poised to deploy two mercury remediation operating systems in the next three months, Tonogold is preparing the launch of a major, well-designed and expansive drill program as we expand the economic feasibility of our Dayton resource. Our year over year costs continue to trend down, primarily from net reductions in our operating and interest expenses. We have received $0.4 million in deposits on our silver springs non-mining assets and look forward to closing that transaction during the second quarter and eliminating the debt. We are expanding Dayton’s economic resource, but just based on current gold and silver prices, before any resource updates, we now show a low-end value of over $75 million based on our existing economic shell. We have not yet engineered an expanded pit shell (even though higher gold prices allows for lower grade cut-offs and significantly higher, economically-feasible ounces) but we are progressing with that work toward an updated, Dayton stand-alone, NI 43-101 technical report.”
Tonogold now owns a 50% membership interests in the entity that owns Lucerne. The Company retains management control over the entity until Tonogold has made all payments in full. We have partnered with Tonogold and expect to fully realize over $25 million from the sale of the Lucerne mining claims, plus the potential for over $35 million (totaling over $60 million) of additional value from leasing, processing and royalty agreements.
In March, the Company and Tonogold restated the Membership Purchase Agreement to secure the remaining cash consideration with a 12% secured convertible note with a principal amount of $5.475 million (the "Note"). To date, the Company has received $6.025 million in cash and $6.1 million the total stock consideration in the form of Tonogold Convertible Preferred Stock ("CPS"), valued at $8.795 million at March 31, 2020. The CPS can be converted into Tonogold common shares, at the Company's option, any time on or after May 22, 2020. The conversion price for the CPS will be the lower of (1) 85% of the 20-day volume weighted closing price or (2) 0.18. Tonogold can redeem the CPS prior to conversion, at a redemption price 120% of the face value of the CPS.
Tonogold guaranteed the Company’s remaining financial responsibility for its membership interest in Northern Comstock LLC, which owns and leases certain mineral properties in the Lucerne area, and assumed certain reclamation liabilities, both totaling approximately $7.0 million. The Company retains a 1.5% NSR royalty.
Last year, the Company restated their exploration lease with Tonogold in Storey County. The restated lease requires exploration spending, permitting, and engineering commitments of a minimum of $1 million per year, for a cumulative total of $20 million over 20 years. Tonogold also committed to specific milestones for issuing three technical reports on their results, including a resource estimate in the first five year term, and culminating in a published Feasibility report by the end of the final term. For the first year following the commencement of mining, royalties will be paid a 3.0% NSR, and reduced to a 1.5% NSR, thereafter.
De Gasperis commented, “Tonogold has made remarkable progress in their exploration and development plans and secured Storey County permits and funding to start a major drilling program during the second quarter. They have also significantly enhanced the technical strength of their board and announced plans to achieve full external reporting status with audited financial statements this summer, as they prepare for a national stock listing.”
American Flat Processing and Commercializing Platform: The processing platform includes the Company’s fully permitted crushing, leaching, processing and operating metallurgical equipment and labs, where our clean-technology joint ventures (including Mercury Clean Up LLC) and other partnerships, representing opportunities for significant value growth; most immediately with mercury remediation and clean reprocessing of previously leached mineralized materials.
The Company’s goal is to deliver over $500 million of value from our existing, precious metal-based assets and the commercialization, in Nevada and globally, of environmental mining technologies, partnerships and ventures.