Comstock Inc.
Q1 2019 Earnings Call Transcript

Published: 10 May 2019

[Operator:]

Welcome to the Comstock Mining Incorporated First Quarter Update Call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session. [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.

[Corrado De Gasperis:]

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 for filing our 10-Q next week, including our customary quarterly – we’ve been working for now for probably about nine years. I’ll 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 zone phenomena and the related business opportunities that have come from that. But despite all that work, despite all that additional activity, costs are down period-over-period. This is primarily because the existing agreement with Tono is fully subsidizing us at a rate of about $1.2 million in annual expenditures, primarily for mineral claims and environmental management and related to 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 paying on our debt. We’ve paid down a full $1.6 million down during the quarter, with almost another $750,000 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 the annual report earlier this year. So we’re 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 market. Then 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 timeframe. Our philosophy in those discussions were that we did not want to subject the company to any delay benefits or additional costs, but we wanted to give Tono who has just secured a tremendous financing package and is working on the 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 and the immediate debt financing that from our perspective should actually enable faster closing. Relatively speaking now that that’s been secured, the financing is actually quite remarkable because it also provides them with the options regarding additional $25 million for development working capital and for production startup subject to customary due diligence with SRK who was 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 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 Lucerne mine. Again, with the remaining $650,000 due this month, that puts us at $3 million in non-refundable 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 of 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 non-refundable deposits It is being meant to extend it to the end of July and another $1 million, that would be a total of $5 million in non-refundable deposits to extend 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 show the transaction is positioned for success. Regardless of the amendment comes with some enhancements, I would say, for both, in our case, it contemplates of getting $11.5 million upfront versus $10 million upfront, which ensures that we have way more than enough cash to pay off all our debts at the closing. Secondly, rather than taking the $5 million note payable that would have been due in one year, we will now take $3.5 million in stock upfront at a fixed price with a four-month and a 12-month hold, respectively, a half of it. We like Lucerne asset. Of course, we love Lucerne asset and we don’t mind retaining some additional upside in this structure above the 1.5% royalty that we 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 costs and our clear debt, and 100% of the previously agreed upon additional reimbursements for the option to lease American Flat. These two together representing $2 million in annual savings above and beyond $1 million we’re currently being reimbursed begin on June 1, effective June 1, regardless of when Lucerne is closed. So I think that that shows two 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 $11.9 million in cash that I just mentioned up front, $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 non-refundable 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 want to make sure that everybody really understands these pieces. And so having said that, there’s more pieces. In addition to the $2 million, I’m sorry, the $23 million as a value number, plus $2 million in annual savings, overall $2 million in annual operating savings when you combine both the situation and then $1 million in interest savings, which is just because we eliminate our debt, and the 1.5% royalty, we did also grand Tono an option upon closing Lucerne to lease the American Flat facility. And I think everyone knows those parameters, it’s $1 million a year to lease the facility, plus $1 a ton process. If we get to $15 million in revenue, which we fully expect to do that even with 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’s $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 in revenue is the real upside of this transaction. That’s really the situation where Tonogold has tremendous success in 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, all those profits for us would not be subject to any federal tax because of our $170-plus million of net operating loss, carry forwards or NOL. So a lot of thought has been put into this transaction. Certainly on Tono side, they get, again, incredible deposit. 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 equation comes from our corporate and tax structure. And the capital sensitive, it’s not actually capital sensitive, it’s capital positives, 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 Lucerne 43-101 resource estimate report. I guess it’s actually going to be more of a Northern Comstock project. As Comstock projects move forward 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, they got an agreement to acquire additional properties on the Comstock that expand really physically expand 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 there’ll be looking to do some drilling and development of those claims as well. Interestingly, the acquisition of those claims that they’re reaching agreement on or have reached agreement on has a bunch of Lyon County claims as well that surround our Dayton and Spring Valley properties. And so it’s part of this amendment we worked at a very, very nice arrangement where they’re able to acquire all the robust additions to their storytelling 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 agreements are in anytime they’re adding to that Storey County or Lucerne package, that automatically get subjected to our 1.5% royalty. So it’s all fantastic. I think that the market’s view of the transaction is permeating. People are starting to understand it better. I hope this conversation helps there. More tone off, we’ve announced that 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 out 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 term is PEA in the industry for 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 [indiscernible] outstanding. We’re 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 cart that was initiated by the Tono transactions. These people understand that the deposition 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. So 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, a structure they’re 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 an investment system 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, are you a real estate company, which I used to always say, yes, 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 as a holding company and the net operating loss, hidden asset if you want to think of it that way, that was 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 that just primarily the Northern Comstock, liabilities and some reclamation claims. So that domain upon closing the deal that goes away. The second dotted line that you see to the left here is, Comstock Industrial. And just beneath the DTSS Comstock Industrial is there 98-acre, industrial property in Silver Springs, Nevada and DTSS agreement we have to purchase 160 acres, in Silver Springs, Nevada. So that dotted line goes away when the Silver Springs Capital Partner fund that, the new opportunities own fund that we helped and I help directly coordinate and collaborate with to come to agreement and the purchase from Comstock Mining was 98-acres and the water rights $7.2 million and for the Downtown Silver Springs, and associated plans and approvals. So that commercial development is $2.5 million. So long story short, the 98-acres and the water rights and 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 as huge number. Put 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 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, sort of the last two years running very stable, outstanding. But more importantly, the realignment then takes the remaining assets and puts them into three 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 those 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 and those geological structures and the potential for new resources and new discoveries that will be exciting for all of us, of course, using their capital and we would get the benefit to the royalty. Alternatively, flipping over to the middle circle for one second, Comstock Exploration and Development LLC is the Lyon County mining claims that we own in retaining control that has the day in a consolidated mine, the Spring Valley and it’s a dedicated company with a dedicated mineral claims, with the resource estimate that we’re looking to update this year. We have not started the work on the date and exploration in drilling, although it is very high on our list. Once we get the Tono and the funding that comes into those transactions, we were 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 will commence some drilling on the day in an advancement of the mine claims. We’ve also agreed, in the last Silver City advisory board meeting to start collaborating with the community, as mutual stakeholders on the community plan and we really appreciative of that breaks. The middle box, Comstock processing is the American Flat, infrastructure that the crusher, the Merrill Crowe, the processing times and the properties up there. And that entity is the one that they’re all a 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 in this 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, four of them in Northern Nevada, one of them as you now know Silver Springs, that the other one was Storey County. 100% of Storey County is an opportunity zone fund. And we are facilitating the formation of Comstock Capital Partners, it is an opportunities zone 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 advisors. We do not want to be investment advisors, 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 miss fair, any more discussion about that. I’m sure I’m going to get some good questions on all of that. But the realignment has really sharp and the way we organize 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 sub debt. Has that platform, along the 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 counter party for at least a year and in some cases, two, three and five 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 tailing, cyanide leach pad, materials, waste up material, all of that. We’re looking to formalize adventure, to be using that technology and/or Cycladex 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. New line acquiring Gold Corp, Barrick and Newmont Nevada merging, a tremendous operational synergies and almost unbelievable level of operational synergies. But we don’t want to confuse those mergers, acquisitions and synergization, if that’s a word, I don’t think it is a word, no synergies. With the fact that, none of those things did anything to increase, the individual companies reserve. It’s like Hecla acquires Klondex, and Hecla announced today that, they’re suspending Klondex has Nevada operations, because when you acquire somebody, it doesn’t make the reserves grow. The only way to make their reserves grow is the, if you’re drilling and development or reprocessing waste. So every time a major processes of virgin kind of war, a new ton of the waste gets generated that have 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 liability. 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 onsite over a year ago, test and prove that they can take a walk, industrial complex, heavy metal complex, cyanide contaminated, mining cons and reprocess the water to come up with dischargeable water and come up with sludge that, guess what, still have gold and silver in it. And so we’re working with Hydrus now to be a strategic partner for reprocessing, those same materials, getting the gold, getting the silver. 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’s a plaster mining, type of equipment configuration that has four 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 mercury’s, 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, at lease three ventures in those areas that I just mentioned in the reasonably near future, and each case it could be a joint ventures 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 partners doing all of the other activity. And in every case we get gold and silver out of the equation. Let’s call that profit. But let’s all call that metal, and we had 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. And 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 a Tono transaction up and running and getting and 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 final board approval on the record date. But we’re looking at early September for a meeting, with news coming out reasonably soon this month – when they stuck that date. Actually it’ll 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.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Carl Frankson. Your line is open.

[Carl Frankson:]

Thank you. Hi, Corrado.

[Corrado De Gasperis:]

Hi, Carl. How are you?

[Carl Frankson:]

Good evening, guys. How are you? Fine. I 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’re mining.

[Corrado De Gasperis:]

Yes.

[Carl Frankson:]

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

[Corrado De Gasperis:]

Yes. So that’s just…

[Carl Frankson:]

The question is, if there are no costs involved with that, we’d 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, we’re all going to sit and see, for six months you’re in $0.24 a share or something. This is more than the market cap or the stock.

[Corrado De Gasperis:]

Yes. So great question. Let me hit it in two points. So let me break it into three pieces, if you will, okay? So this $23 million that we’re going to get, which $11.5 million is the cash payment and $3.5 million is the stock payment, those will all be gain is 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 of the NOLs in every 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 its EPS. And then there’s 1.5% royalty, which would be – and let me just say this, if you look at Tono’s rate case in preliminaries, they’re probably talking about that conservatively, over a – the base part, the $15 million, the first estimate over about a four-year period, and then maybe the second part over a two- to three-year more period, you’re looking at a very nice, a 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 like – 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 generating. And by the way, not just with Tono, these other clean technologies were looking to do very similar things; not that they would be renting the facility, they can’t do that because Tono will be renting the facilities, but will be creating new equipments, new technologies, will be placer mining – we could be placer mining in Spring Valley in two mouths literally. As we move into this mercury remediation, if we get the deal with either Cycladex or Itronics spend in the near-term, which we expect one is 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? Tono 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, pick the balance sheet, monetize the non-strategic 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 got to credit the board for not only being disciplined on, get the monetization done. That’s your number one and number one 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 at the last annual meeting, about all of these potentials, like 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 confident 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.

[Carl Frankson:]

Another kind of question that’s related, you kind of lost me with all the LLCs and capital partners and whatnot.

[Corrado De Gasperis:]

Sorry.

[Carl Frankson:]

And 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 we’re going to be generating revenues.

[Corrado De Gasperis:]

There are six 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 three 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 three mature, clean technologies. And when I say mature, I mean, we’ve got engineering designs. We’ve got feasibility work. We haven’t finally and fully proved the concept, but finally proving it means we start generating revenue. So literally in the first proof of concept with the mercury equipment, we’ll be generating revenue. So I would say six that are known, that are on our whiteboard, but we haven’t fully completed feasibilities. Obviously we haven’t fully modeled those screens, 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 excited.

[Carl Frankson:]

Well, I 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. Good job.

[Corrado De Gasperis:]

We have been making a real company that’s generating real revenue.

[Carl Frankson:]

Very exciting going forward. Thanks. Corrado.

[Corrado De Gasperis:]

Thank you, Carl. Talk soon.

[Operator:]

[Operator Instructions] Our next question comes from a private investor, Lauren Danny. Your line is open.

[Lauren Danny:]

Good morning, Corrado. Glad to hear out of the blues. So I’ve 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 got one other quick question. Does the formation of all those entities, that’s not going to impact or decrease or hurt the NOL at all, right?

[Corrado De Gasperis:]

No, no. Everything remains 100% under common control Comstock Mining Inc. and Comstock Mining Inc. reserves, probably its NOLs. The NOL – there’s really no provision to lose the NOL, but there are provision 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 zone, one of the first ideas was what is an opportunity for 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 kicked up on as we’ve been how do we structure how do we structure revenue generation and value generation without diluting our shareholders or minimizing that dilution to the absolute close number, while maximizing the use of the NOL. That’s really been the two governing parameters when it comes to structure. Obviously, the opportunities come with different reasons. People see us as a permitted platform with remarkable accolades on environmental competency, environmental acknowledgement. And so 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 be ideal if we can test it in the United States under an EPA and Nevada EPA. U.S. EPA and Nevada EPA formally approved a plan for remediation – remediating mercury. But where you are going to find that? Oh, guess what? We have not. So, by doing all those things the right way, and frankly investing the money in that long-term plan, getting the U.S ETA district mine approval, getting end depths, sponsorship, we now have an asset. And so now together with this technology, we commercialize that asset. So anyway, I got a little sidetracked. Now the NOLs are fine. very fine actually. Very fine.

[Lauren Danny:]

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

[Corrado De Gasperis:]

Yes, yes. So I will answer it this way. Like our oldest block, I mean they go, they actually go back – they actually go back. Some very small ones, we’ll go back as far as 12 or 13 years, 14 years. So that means those only have six years left on their lives. Those are the ones we would use. There’s a big block that’s eight years old. We’ve got 20 years to use them. So, the big block gives us 12 year head room. So I would say the average life if you weighted the average is probably 15, 16 years. I didn’t do that math to be honest, but I would show that that’s directionally correct.

[Lauren Danny:]

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 there’s just an infinite possibilities.

[Corrado De Gasperis:]

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 and 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 and what we’re doing and how we would do it and getting their input. Part of this 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 today by the United States. That’s why a lot of people prefer to listen Toronto, but 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 is Tono is doing to have a lot of the prerequisites for a preliminary economic assessment that would allow us to do a second report that is more of a real preliminary economic assessment. Now you started talking about economic shells. You’re starting to talk about buying plans, you’re starting to talk about costs associated with every aspect of what we do. So we’re doing that all fully ourselves. We have a senior engineering, we have senior geological, we didn’t have a junior geologists now on staff, where we’re going to be working to develop those plans. We’ve said consistently from the minute we launched that project schedule, we’re probably about two and a half 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 focus. So we’re only going to allow responsible plans, but we want to get the maximum return as fiduciaries on our assets. So I would say all of it is possible. What you said is that all of that is possible. But we know because of what we know and what we can do, we can ensure getting to a PDA ourselves, really is a value enhancer. It’s not only, we don’t only believe it will increase the value of the day in property. We believe it will provide tremendous transparency to the market, who will then accept that value. You know, what the value, it’s a value in Dayton on our stock right now, it’s zero. It’s either negative. So its not even recognized. And when people realize that, we already have 0.25 million ounces of measured and indicated resource and have another 0.25 million of inferred resource and it represents a tiny fraction of a almost three mile strike it goes all the way down this Spring Valley and highway 50. That’s the valuable asset, 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 today and you know, which are zero. No one even recognize 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 to the barriers in the back of the Comstock project technical report. But now we’ll have a separate standalone Dayton technical report

[Lauren Danny:]

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

[Corrado De Gasperis:]

Yes. So the – 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 a [indiscernible] his level plans. We integrating that. And when you do that, the precision that you get on a three 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’s a structure, but you don’t know what the mineral values are. So, we tend to get very, very high returns on those dollars that’s in the tiny part up at the top. But then it feel for another two miles we’ve done geo physical 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 ago, right? So, that tells you something, then you do geophysics, down for two miles, which we’ve done with a third party and the signature continues. And then you started defining what we believe all of structures would overlay. And you drill into that. That is a longer term drill plan. That is very, very exciting prospect that, it’s when I talk about – when I talk about, going into production within two, 2.5 years, I’m talking about the small northern part of the possibility. If we were talking about drilling out the rest of the day and drilling up the rest of the Spring Valley, you’re not talking, that’s going to be an awesome runway for much, much more mineral definition and resource estimation and grow.

[Lauren Danny:]

Awesome. Thanks. You really answered my questions. That’s kind of what I envisioned. Thanks so much.

[Corrado De Gasperis:]

Thank you very much.

[Operator:]

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

[Corrado De Gasperis:]

Hi, everyone thank you for the time, and we are pleased with the recent – the 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 day. So look forward to talking to you guys in the near future and we appreciate all the interest.

[Operator:]

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