Comstock Inc.
Q3 2019 Earnings Call Transcript

Published: 29 Oct 2019

[Operator:]

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

[Corrado De Gasperis:]

Thank you, Samantha, and good morning, everyone. This is Corrado De Gasperis, CEO of Comstock speaking on the line. And I have both JC Giron, our new CFO and President; and Zach Spencer, our External Relations Director listening on the line today. And we welcome you to our third quarter conference call.Later this week, we will file our third quarter report on Form 10-Q, supported by our customary quarterly review with Deloitte & Touche. And I’ll provide a brief summary today of the information included in our press release that was released this morning and the progress on our strategic initiatives.If you don’t have a copy of today’s release you will find a copy on our website at www.comstockmining.com, under News/Press Releases.Please also let me remind you that we make forward-looking statements on this call. Any statement related to matters that are not historical facts may constitute forward-looking statements. The statements are based on current expectations, and are subject to the same risks and uncertainties that could cause actual results to differ materially.These risks and uncertainty are detailed in previous reports filed by the company and with the SEC and in this morning’s press release. And all forward-looking statements made during this call are subject to those same and other risks that we cannot necessarily identify.Before I start, I would like to take a moment of appreciation for one of our shareholders, [Jeff Wanamaker] [ph]. Jeff passed away last month. And for many of you who have known or even seen him at our Annual Shareholder Meetings, he was a fixture in Nevada, with a deep passion for the Comstock and especially for Gold Hill and the Gold Hill Hotel.He was a caring and thoughtful advisor to the company. And he is and will be deeply missed. We know he is at peace and our sympathies go to his wife, [Linda Wanamaker] [ph] and all those who loved him. God bless you, Jeff. We miss you.I’d like to spend the first few minutes of this call just going over our financial highlights. I’ll be brief on that, and then mainly focus on the strategic transactions, what it all means to LODE for 2020, our valuation and our immediate next steps and our plan for next year.For the 3 months ended September 30, 2019, total costs and expenses were $0.8 million compared to $1.6 million for the comparable period last year, representing a savings of almost 50% in just one quarter, quarter on quarter, coming from reductions in every expense category. Total costs and expenses for the 9 months ended were $3.9 million as compared to $5.4 million for the comparable 2018 period, a savings of almost 30% for the 9 months to date, compared to the comparable period.This is a critical area for us all the time, where the trend obviously here remains our friend. We witness this trend dramatically with really hard work from 2015 to 2018, from a significant amount of internal restructuring change in streamlining. The continuation into 29 really more reflects the impact of the collaboration with Tonogold, where the substantial majority of the 29 savings can be attributed to the reimbursements from Tono, who is subsidizing our permitted platform.These savings will increase for the full year 2020 when it is year-over-year, as many of them only just became effective June 1 of this year. The company’s 2020 base operating expenses are planned at approximately $4 million, that’s a number that excludes depreciation and amortization, but it also represents a 25% savings year-over-year when looking for 2019 forward to 2020.And as I mentioned, June 1 of 2019 is when we started realizing this higher rate of subsidy and we expect to continue receiving that subsidy from Tono to the tune of an annualized total of $2.2 million and the full benefit of that in 2020.That should result in our net planned operating expenses for next year at about $2.8 million, a little under $3 million, again, excluding depreciation and amortization.We also did this quarter record net income, driven by recognizing a $2.2 million non-recurring income from the prior earning agreement. But overall, I feel like we positioned ourselves extremely well for an efficient fully functioning mining platform with a fully functioning technical team, that now with even stronger leadership in place, where we’re excited about looking forward.Continuing financially, we’ve also continued paying down our debt, bringing debenture down to less than $5.9 million today. We have just a little under $1 million in cash on hand and we’re looking forward to closing the two most immediate transactions this quarter. When those sales go as planned, we would not need to or expect to sell any more stock.Let’s discuss the Tono transaction first in a little more detail, then the Silver Springs non-mining asset sales, and where they put us financially at the end of this year and next.For Tono, we plan on closing in the next few weeks, meaning specifically, we will receive $3.3 million plus in cash in addition to the $4.25 million in cash already received to date for 50.3% of the Lucerne properties.This will immediately reduce our debt down to about $3.5 million less. And we are working now closer and closer with Tono than we have ever before on the Lucerne transaction. And frankly, we’re starting to get pretty excited about the drilling and exploration programs that they have been diligently working on with their advisors, with our team, and are finalizing for their drill programs and expectations for early next year.We have signed mineral leases for them to explore and develop our mineral claims north of Lucerne and the geologic planning all around in that context have been really exceptional.Additionally, the transaction pays us another $4 million in cash in the first 6 months of next year, and as I said, continuous reimbursing us at a monthly rate that translates to about $2.2 million per annum. And we’ve also received today $5 million worth of stock that is deposited in our treasury.I know that our market clap doesn’t reflect any of this. But I think we can all agree that the revised terms and payments and continued progress shows Tonogold’s commitment to the deal, and that Comstock is and will be well rewarded for our collaborations and our near-term patience.Let me now discuss the non-mining asset sales. Earlier this year, the company’s Board approved the precious metal based strategy, focusing us on creating value from cash generating precious metals and metal processing related ventures, where we have specific mining competencies, specific relationships or positions that are meaningful and economically enhancing technologies that we can implement.We’ve been working on this for quite a long time, but we really got our focus this year on bringing these transactions to ventures. The company did advance this strategy this quarter, by facilitating the formation of a qualified opportunity zone fund, named Sierra Springs Opportunity Fund Inc., and Sierra Springs Enterprises Inc., its qualified business.Sierra Springs Enterprises has now formally agreed to acquire Comstock non-mining assets in Silver Springs that represents the 98 acres alongside the Silver Springs airport, the 160 acres in the very center of the downtown and water rights associated with those properties for over $10 million in cash with an agreement to close this year.The fund is swarmed. The fund has already received its initial capital. The fund has placed deposits on the property and has been getting new capital commitments over the past few weeks. The fund has also gone beyond these two properties and secured almost a dozen independent projects, including the acquisition of the centrally-located regional airport, and many well and ideally located adjacent lands, approved development projects, facilities and water rights, all consolidating the nucleus of Silver Springs, one of the fastest growing areas from all that we can see in our country.Once we’ve sold consummated this transaction and sold the non-mining assets and closed with Tono, we will be debt free, with almost $6 million of cash on hand that will positions us going into 2020. Also, after we sold these Silver Springs non-mining land, we still have our entire district intact with Tono developing Lucerne exploring the northern targets, all of which we hold royalties directly on, but we still own all of the American Flat facilities, properties, infrastructure, and all of the southern territories too represented by nearly 2 miles of mineralized trend from the north tip of the Dayton mine, to the southern tip of our Spring Valley resource targets including the daily patent, all of our Lyon County mineral properties.We remain a fully integrated permitted crushing, leaching, and processing operations with waste lands and private properties under our ownership, and a lease option that subsidizes all of this cost plus additional potential future lease revenue, processing revenues and royalties from American Flat.In addition in 2020, we’ll also have $4 million in cash payments due in the very first half of the year plus a planned $4 million from the sale of our other non-mining assets mainly the Ranch with the projection for the end of next year at about $12 million in cash and that number actually includes us investing some money in drilling and development of the Dayton and Spring Valley. I am not sure, somehow there has been a perception that when we sell Lucerne, there’s nothing left of our company could not be further from the truth. And once we get these transactions closed, we’ll be fixed and rectified that in everybody’s mind. So that’s really what we’ve been setting up to do. And then it positions us for more strategic growth.And so let me sort of ended with discussion about the mercury initiative. As most of you know, we launched Mercury Clean Up venture 4 months ago with our industries from the development of mercury remediation systems with exceptionally proprietary mechanical, hydro, electro-chemical and oxidation processes that are set to reclaim, treat and remediate mercury from the landscape, from mine tailings, from industrial affluence. We are applying for 4 patents including the spirals, the centrifuges and the mercury reactor and including the organic solution for removing the contaminants and recovering the metals.We, Comstock, provides the platform at American Flat for this remediation system, equipment will be starting to arrive this week. And we’ll commence operations in the new year starting with MCU’s pilot facility at about 2 tons per hour ramping up to about 25 tons per hour. MCU in collaboration with Comstock has already and just received end-up approval for proceeding with some of the testing and sampling, and it’s secured a drill to begin sampling location. So amazingly, we will be drilling and we will be sampling and we will be identifying locations to start bringing materials up to American Flat and processing with this new facility in the new year.We’ve also and maybe this is more amazing, at least, it is in my mind been approached for an international project. I’ve mentioned it twice sort of in passing, but now it’s really getting serious and we’re engaged in direct discussions. And it looks promising and they told me, I can’t say anything more about it, so we will stay tuned on that one.Coming back to the opportunity zone and the new fund, I’ve now shifted the majority of my time. The substantial majority of my time to completing this in large part, because JC is now on board, and in part, because Tono has established the clear path for the closing. And most importantly, Comstock is going to retain a 9.5% ownership in an enterprise that from our review and our understanding has planned sort of a multi-billion valuation. And so we’re going to have almost 10% of something that we believe will be exceptionally valuable over a longer period of time, of course. But that’s in addition this $10 million of net proceeds that we’re looking again in the short-term.These opportunity zones are adjacent due to the extent people don’t know, and also include the Tahoe Reno Industrial Center. So Silver Springs is 4-census tract. It qualifies, Storey County qualifies, and combined it represents one of the largest most industrially expanding areas in the nation. Google’s out there right now with a fleet of construction vehicles literally ripping down a mountain. Fernley is announcing multiple industrial developments and everything continues to migrate closure and closure to Silver Springs.So we’re on the final lap of monetizing these opportunities. We’re cleaning the remarkable ownership interest for our investment in the fund and a real immediate funded platform for 2020 growth. And that’s really what we’re going to showcase and we are looking forward to showcasing at the annual meeting on November 12 in just 2 weeks.So let me summarize with very, very high level slight evaluation be a little bit more specific at the meeting. But number 1, we are monetizing the non-mining assets of $15 million of cash, $10 million this quarter hopefully, $4 million, $5 million in the new year. Number 2, we are eliminating the $6 million of debt, and sitting with the funded cash position. Number 3, we are monetizing Lucerne. The value of Lucerne has multiple facets, the most immediate one is $25 million broken down between cash, stock, assumption liabilities. The second most immediate one is, we’re getting reimbursed for the expenses of the platform.In the future, we have 1.5% royalty could be value that $5 million to $10 million. We have American Flat option, which could have a value of $15 million plus, depending on what that mine plan ultimately looks like. And none of those dollars include the development of the Dayton and the Spring Valley, where we’ve already built an economic shell around that resource based on $1,200 gold, based on about 80,000 ounces of gold that comes out at about $40 million, obviously at higher gold price that number would itself rise, but we’re really looking to drill and develop that being to be 2, 2.5, maybe 3 times the size based on what we know in that mineral resource and then that mineralized trend. But it’s got a long runway beyond that going all the way down the Highway 50.So developing those Spring Valley targets and the continuation of Dayton is just exciting to us. And then the northern targets, we experienced resource development and drilling through Tono. We’re not seeing any value, obviously, in our company with those today. But as those details of those resources become better known, better communicated, better published then as the drilling results continue to follow then we certainly expect to see value increase.MCU is a whole different animal, it’s addressing a global market with disruptive technology. We’re looking hundreds of millions in valuation, but quite frankly that’s our notion of each project. So as we prove this out, obviously, we are trying to drive and efficacy from 90% to 99%, we’re excited about doing that. But we have a system that work – that has worked before and we’re already being solicited for it. So each project will stand on its own merit. But it doesn’t seem like there is any limit of potential there as we prove this out and move forward.Sierra Springs, 9.5% of the terminal value that’s in excess of a $1 billion, is $100 million. So we look like we got a nice foundation here to just continue to benefit in the growth of what we had a part in starting, while getting immediate benefit from the monetization.We do understand these are all development opportunities. But they’re all based on activities that we are intimate with, engaged in for extended periods of time, and frankly, expert it. So we’re finally to the point where we can start being much more vocal, explain much more specifically to the market and in better detail. But we know that closing Tono and closing the property sales remain the first and only priority.Until then, we positioned all these other things and we really do look forward to showcasing them on November 12 and, of course, throughout 2020. So, Samantha, let me stop there. And please let us turn to questions-and-answers.

[Operator:]

Thank you. [Operator Instructions] Our first question will come from [James Dell] [ph], private investor.

[Corrado De Gasperis:]

Hey, Jim.

[Unidentified Analyst:]

Thanks. How are you doing?

[Corrado De Gasperis:]

I’m doing good, sir. Good to hear your voice.

[Unidentified Analyst:]

Alrighty. Hey, listen, several questions here. With the – why was this Leviston deal important? Why was it necessary?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Well, was there any reason why you couldn’t just go out like a note to provide that item or go on a line of credit, whatnot?

[Corrado De Gasperis:]

Yeah, we’re not permitted – we’re not permitted to incur any indebtedness with the debenture in place. So…

[Unidentified Analyst:]

All right.

[Corrado De Gasperis:]

And, frankly, we don’t – nobody is going to have any joy from having the full stock certainly at this level. But just we don’t – we have to get rid of the debt and get funded, so we can move forward with our plans.

[Unidentified Analyst:]

Okay. Now, with the outstanding shares right now, is it like 116 million or something or what?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Okay. One last question, I got an e-mail from you, I think yesterday, which says about this meeting.

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Yeah, as I clicked on it, my McAfee software said, whoa, this is a major phishing thing, watch out…

[Corrado De Gasperis:]

Yeah, thank you for bringing it up, so we can – I can tell 70 people all at one time. I think I responded to like 25 people yesterday. But now it’s all fixed and we’re all secure. And just – it’s just horrible. These hacking and phishing schemes keep getting more and more and more sophisticated.We have a solid third-party provider. So as soon as it came up, we locked it down, changed all the passwords, fixed everything. We’re just trying to get the communication out to everybody to ignore it. So thank you for bringing it up.

[Unidentified Analyst:]

And earlier this year there was a silver-backed Bitcoin thing that came out. They called themselves Lode.

[Corrado De Gasperis:]

Yeah, yeah.

[Unidentified Analyst:]

Have you guys done anything about that?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Okay, because it’s like – I enquired the guys and I told them they were being deceitful about it indignitively. But…

[Corrado De Gasperis:]

Yeah.

[Unidentified Analyst:]

It’s sort of like, okay, these guys are stealing your name for some sort of a funky purpose here. So I don’t know. So last thing is, are we going forward with any kind of a future deal with Tono on the northern Target, Occidental area?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Okay. And listen, I think I’ve taken up enough – so thank you…

[Corrado De Gasperis:]

Thanks, Jim. Appreciate it. Bye-bye.

[Operator:]

Thank you. Our next question will come from [Harvey Monarka with Investor] [ph].

[Corrado De Gasperis:]

Hey, Harvey.

[Unidentified Analyst:]

Good morning, Corrado.

[Corrado De Gasperis:]

Good morning to you.

[Unidentified Analyst:]

Can you talk a little bit more about the Tonogold’s 5 million of stock, what value is that at?

[Corrado De Gasperis:]

So, very specifically, prior to – let me just think out loud for one second. You got 3.92 – we had about $4.75 million of stock at September 30. And that $4.75 million was valued by a third-party, outside independent third-party valuation firm at, I believe, $5.65 million, which is the number that should appear on the face of the balance sheet, $5.65 million. So the stock that we had received by September 30 was valued at almost $1 million above the face value of the certificates that we receive and have in treasury. Since then…

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

So a different question, sorry. So, yeah, it’s a good question, so sorry. So the stock is preferred stock that has an underlying conversion based on the lower of three possibilities. One would be their most recent private placements, comparable mark to their most recent private placements, which $0.18 a share or it would be the lower of that versus the then current share price versus any public offering that they did.So we tried to protect theirselves with a trifecta of options, where we would take the lowest. But in answering your question, the valuation people put the most weight on the $0.18 recent transaction and the current share price that they’re at. So it’s some hybrid of that number. Let’s say, maybe it’s probably around $0.20 – $0.19, $0.20 as an assumption.

[Unidentified Analyst:]

Okay. Now, can they buy our stock?

[Corrado De Gasperis:]

I want to say that there is a standstill on that. But I honestly don’t know with the latest agreement. We have confidentiality and we have counsel. So I want to say yes, but I’ll have to check that and get back to you, to see if there is a true prohibition. I don’t know…

[Unidentified Analyst:]

They just seem to me that the – it would seem to me that they should be mining our stock right now based on the true values and their positions.

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Okay. I may have missed in the presentation; did you say that – where are we on the Daney Ranch?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

So…

[Unidentified Analyst:]

A couple of years ago, you said that, we would be a $2 share by the end of 2020.

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Your position is that we will – your position is that by the end of next year, we will be approaching that $2 valuation?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

Yeah. So a part of it was just recognizing that with Lucerne and the northern targets getting reengaged that requires much more active permit maintenance that requires much more active business coordination. Tono is acquiring Lucerne, but we own the American Flat facility, so there is still a strong partnership motion there. We do desperately want to develop and expand the Dayton and the Spring Valley that would require expansion with permits that will require additional permit. And this mercury business, it legitimately is going to be an international business. And so the day to day activities are consuming, I mean, they’re just significant putting aside the fact that you are a public company. So that was number 1.Number 2, the opportunity, fund and the properties and the operations which are all in the exact same county that we’re positioned in, we will have a meaningful interest in going forward. And so, we really felt that we needed more management, we needed more capacity, both for the on the ground day to day activities that are coming as well as the new activities that we’re forging and developing. So we did it in the reorganization. We didn’t add net people. We eliminated certain positions that were compliance oriented, that were administrative, not a lot of business value.We outsourced some of the routine activities, the financial accounting and then related reporting. JC has a business development background. We actually met him when we were piloting Hydrus technologies at American Flat for water purification in our industrial affluence and our heavy metal industrial waters, and I was just blown away by his analytical view. He started analyzing all the leach pads in the western part of United States. And then how much metal late in industrial polluted water there was for Hydrus to attack that market segment, they were starting to commercialize it.And he said, look this is exactly the direction that we’re going in, and we feel, I feel strongly that we hit peak gold. I feel that that the majors and the intermediate are still stuck in yesteryear. I don’t think that we need technological breakthroughs of biblical proportion to reprocess tailings and clean contaminated waters and materials. The industry just doesn’t seem interested in that. So you’re seeing a lot of consolidation by the majors, you’re seeing synergies of operational rationalization.And I guess, my view that is why the hell they didn’t do that sooner. You’re not seeing innovation. You’re not seeing growth of resource, that’s for sure. They’re depleting in a remarkable rate – in remarkable. In Barrick, Newmont, they do this big merger, but they go from 8 million ounces to 5.5 million ounces over a course of a few years.So we see the industry, and we think this is a great thing by the way. We see the industry in decline in so far as gold has become scarcer. Production is becoming scarcer. And for every ton of virgin material that’s processed and contaminated be it with finite in first-world countries or mercury in third-world countries, it’s creating an opportunity for reprocessing, it’s creating opportunity for secondary markets.And the beauty of attacking something that’s already been processed is all those variables, all that variation, metallurgy, grade, all of that, it’s known, I mean, there is empirical data. I mean, it’s one of the biggest challenges in mining is the constant variation of grade, metallurgy, and then of course, the monstrous strip ratios that are the most expensive things to deal with. So you don’t have any strip ratios, and exactly the metallurgy in the grade and the reactivity of the material, and you attack it with the different process. And so that’s where we’re heading.

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Okay. Thank you very much, Corrado.

[Corrado De Gasperis:]

Thanks, Harvey. Thank you.

[Operator:]

Thank you. Our next question will come from [Carl Frangson] [ph], private investor.

[Corrado De Gasperis:]

Hi, Carl.

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

Say that again, I missed that front part.

[Unidentified Analyst:]

One of the directors…

[Corrado De Gasperis:]

That’s correct.

[Unidentified Analyst:]

The directors are supposed to help – on the board to help. If they believe in our future, and what’s going on, why couldn’t they have renegotiated. I understand you can take on new debt, that’s part of the covenant. Why would they renegotiate or something, so we could have cutout all the solutions?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

Yeah. So the counterparties that we worked with, and there is more than one. But the counterparties that we work with has attended a hold as we look at the noble list and as we track our shareholders, they tend to be shareholders, they tend to be below 5%, when just filed being above 5%. So we do not see a flipping in arbitrage. That’s not to suggest by the longest terms shareholders and that we’re building the capital base is always good. That means to come with our forward growth, and we’re looking to growth from here. So I think, ending this is a strong positive, closing the deals is a strong positive, having cash on the balance sheet is a strong positive.But even then if we don’t have growth that’s going to come from it, why would people be interested. And I think that we’re driving down the right type of the right growth, because even with goal turning, and I’m just trying to say to Harvey, I didn’t probably say it as well as I wanted to, the miners are still in depletion mode. They have finite capacity. They are not getting even the valuations that we would expect them to get. But if you have cash producing businesses then you’re moving in the right direction.Certainly, we put high value in gold and silver on the ground, we put high value in growing. The amount of gold and silver on the ground, but we also put high value in processing and pouring the gold and the silver. So I think, we’ve laid a foundation now where we’ve got channels coming from royalties, we’ve got channels coming from processing, channels coming from our own resource, we’ve got channels coming from other people’s resources. And that’s really the – that chain is exciting, I mean, I just want to get to it. But I don’t think anybody wants to talk about closing the deals anymore, I certainly don’t, right, which is getting close and move on, but we’ve got something very exciting move on to.

[Unidentified Analyst:]

All right. Just as far as that goes, just switching on just a little bit, it’s about a week ago in the Wall Street Journal, there was an article that says opportunity don’t tax break off to slow start with investors. It basically said that there are 103 fund set up for opportunities on investing, and to date, we’ve raised $3 billion of roughly $22.7 billion they seek. And it says, I talk to were saying gaining traction is slower than expected.How would you relate that to closing Silver Springs, is this actually going forward, the way you wanted to? Is it comes going forward there? And at what point, do you have to get to where we get the $10 million?

[Corrado De Gasperis:]

Yeah. So great question. Thank you for asking that question. So we’ve been involved almost since the legislation first came out, it’s been fascinating to watch. Let me give you a very strong insight to this, right. The first 2 times I aggregate, it was a big conference in Reno, in fact, last year or earlier this year, and the first 2 times, we see – we saw big aggregation. It was really – it was amazing, because what we saw with a lot of single project patrons’ sort of chasing fund money, right. So I’m looking to build the hotel in Portland, Oregon, anyway. Let me just put the opportunities on fund on it. I was going to build a residential development, let me just drop an opportunity on fund on it. Okay.And you saw these funds all sort of form, I would say, superficially, like I looked at some of the presentations and some of the materials, and the word that came to my mind was amateur and what are you trying to do like take a marginal product or marginal project and sort of get it over this finish line. And so what happened was, which I was very happy about is the investors treated, the investors acted like smart money. They looked at the proposals. They looked at the models, many cases there weren’t any models. They looked at the returns and they said forget it. This is not interesting or certainly we have been that are more interesting. So that’s one segment of the lower end of the population.What we’re also seeing is serious institutions putting together serious project. The problem with them, and it’s not a big problem, is that they’re trying to get the projects means best aligned in the zone.Now by definition, a lot of the zones are tough places. Okay. They are tough places, where they wouldn’t normally attract capital and you can say, well, okay, that’s why you have the legislation to help it, and it’s going to. I don’t think there’s any doubt, it’s going to. And then you have let me say, one more thing before get to off then you have odd things. Like you go to College Park, Maryland and the population is 35,000 people, and 25,000 are college students that don’t have any income. So the area is a poor census-tract, and you see some amazing apartmental developments popping up all around the university, because it’s in the zone, right. I guess, that’s a good thing, it’s a little hard. But it’s a good thing.So in our case, right, we are sitting in a vast zone Silver Springs goes almost from the bottom of Fernley all the way through and write-down Silver Springs on the 95 corridor, on the railroad corridor, right at the intersection where USA Parkway 80, 50 and 95 all come together, it’s a real in that regard. And it’s adjacent to the Tahoe Reno Industrial Center, which is one of the largest – it’s not the largest industrial activities in the world, expanding remarkably. I mean, Google is just the latest entrant and the names that we’re hearing that are coming people would be surprised by. And you have another 20,000-acre park and you have another proposed 10,000 to 20,000 acre park in Fernley in Lyon County, and it’s all converging. And it’s fantastic, because you have – you’re in a poor census-tract because you’re rural, you’re not in a poor census-tract, because there’s some kind of structural flaw.On the contrary, it’s structurally desperate for this investment. Now on top of that, we are not talking about 90-acre project, we are not talking about 160-acre project. We absolutely have those 2 projects. 1 is an entire downtown development; the other is an industrial aviation park. We also have an airport. We also have a 180,000 square foot manufacturing facility. And we secured the option over 2,000 acres of plant, 2,000-acre feet of water rights, sewer rights, et cetera. So unlike most others, you have a backlog of projects, where these other funds are trying to chase projects typically marginal.And so far, our interface with investors, I think, we’re back in the thousand. We’ve got – we just on a very friendly introduction to people, who are familiar with the area, and I know the area. And we’ve got 5 for 5 interests. So we’ve got seed capital, and so I don’t think it’s a question of this, it’s just how much time can we dedicate to get it all done as possible. And the returns are pushing annual IRR of 50% a year. So I’m not even talking to people about the tax exemption, because the returns would be attractive in any scenario, so – and a diligent fully modeled, right, all the [Technical Difficulty] so that’s it in a nutshell for us, it’s just a solid foundation.

[Unidentified Analyst:]

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

[Corrado De Gasperis:]

Yeah. So the fund looking rate is $50 million of equity and with the existing commitments just $20 million gets our deals closed.

[Unidentified Analyst:]

Just $20 million.

[Corrado De Gasperis:]

So the first $20 million will get our deals closed.

[Unidentified Analyst:]

You don’t have to get the $50 million to close?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

Okay.

[Corrado De Gasperis:]

It’s very compelling. It’s very compelling.

[Unidentified Analyst:]

Yeah. No, I mean, just certainly it was a good explanation. Also in regard to MCU, you mentioned, I believe going from crushing 2 tons per hour to how many tons per hour?

[Corrado De Gasperis:]

Right, 25, yeah.

[Unidentified Analyst:]

Whatever it is. And I understand, one of the problems is, we understand the technology works, but I understand scalability is unproven to make it commercially viable. Does that prove scalability?

[Corrado De Gasperis:]

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

[Unidentified Analyst:]

And that will make – the profitability comes into play then?

[Corrado De Gasperis:]

The profitability, if you had a 100 ton per hour system, with very low grades of gold, $1,200 price and the maximum cost for mercury disposal, these things could be producing $750,000 to $1 million a month. So the engines make a lot of money. And the capital investment for this current unit we’re looking at is less than $1 million. For the larger unit, it could be $1.5 million. I mean, so, yeah, you’re talking about something that could return in a month or two as soon as it is deployed.And if you asked anybody would you rather be an underground miner, a hard rock open-pit miner or alluvial miner, the question is, the easiest way and fastest way to get gold is the alluvium. So I’m really excited about it. I love the idea of taking surface material and cleaning it from mercury and getting the gold and silver. It’s just fantastic.

[Unidentified Analyst:]

And you feel, we will hit the scalability for profitability?

[Corrado De Gasperis:]

Yes, yeah, yeah, we’re going to be very meticulous in the ramp-up. I mean, we can throw a dime, do 25 tons an hour day one. And that doesn’t help us. We want to understand every step in the page as it relates to that. We can ensure the scalability to a 100 plus ton system. So it’s – and that’s all we’re going to be focused on, the engineering to do that. The technology we already have. It’s the engineering to get it to that higher level.

[Unidentified Analyst:]

Okay. That sounds good.

[Corrado De Gasperis:]

Yeah.

[Unidentified Analyst:]

My last question, it seems like one of our biggest assets, it doesn’t seem to get mentioned anymore is the Dayton.

[Corrado De Gasperis:]

Yeah, I tried to mention it.

[Unidentified Analyst:]

It seems as [indiscernible] maybe a 43-101 for that and bring that back into the fold as part of our assets. It seems like that’s kind of not mentioned anymore.

[Corrado De Gasperis:]

Yeah, so let me tell you what’s happening behind the scenes. So, Larry Martin, almost full-time; Wyatt Cowan, our junior geologist, full time and on weekends; and then, Mike Norred, our Chief Engineer; we’ve been reworking all the level planes and cross-sections, meaning updating them, adding all of the drilling data, all of the surface mapping data. The sheer zone that was exposed in the added – when we had the water runoff, and the interpretations and the buildups, they’re very exciting.And so, the internal debate is we have enough information here to publish a standalone technical report. That’s not debated. But what’s happened is all this cross-section level planning and reintegration into a more robust model with more data is pointing out some pretty incredible targets to drill.So the technical team would love nothing more than a very, very targeted precise drilling program to really fill in some of the gaps in the data, where they’re seeing exceptional structures and exceptional trends. And they would really – they really believe, and I believe them that an amount of drilling will really enhance that technical report and then we publish it standalone.Originally, I was just going to separate and publish it. But I think that – but then all this work that’s been done, that’s coming. The only discipline that we have to keep is that we need to get the funding before we go ahead and approve it. But it could all come very fast. That’s why I think you can have a very, very real scenario in early 2020 where there is drills in the north and drills in the south. It hasn’t been finally reviewed, signed off and approved yet by the Board. But, man, they’re really working their asses off to get it done and it’s looking very good.So, again, I think once these deals are done, once there is cash in treasury, we can talk very credibly and very precisely about the growth of that resource, no question.

[Unidentified Analyst:]

Okay, sounds good. Thank you. And just last one, to use some of this cash regard to repurchase stock, that’s my recommendation. It’s just…

[Corrado De Gasperis:]

Thank you, Carl. Thank you so much.

[Unidentified Analyst:]

Thanks, Corrado.

[Corrado De Gasperis:]

Thanks.

[Operator:]

Thank you. Our last question will come from [Syed Akali] [ph], investor.

[Corrado De Gasperis:]

Hello, Syed. How are you?

[Unidentified Analyst:]

Hey, Corrado, thanks for your call. I just wanted to see what’s your plan just to stop going forward for reverse split. How can we stop that?

[Corrado De Gasperis:]

I’m sorry. Just say that last part again, Syed. I just missed your last part.

[Unidentified Analyst:]

I just wanted to see what would you do to stop getting reverse split before [indiscernible].

[Corrado De Gasperis:]

Yeah, yeah. Yeah, thank you for asking questions. So I believe foundationally, closing the Tono transaction and closing these other transactions, it will be more than sufficient to do it. So that’s sort of our plan A. We’re monitoring it real time every day, every week. And I’m very, very positive on getting some of these transactions and getting some of these cash into the treasury in the very, very near future.And then, at the Annual Meeting taking everything that I have overviewed today and really laying it out in a much more precise way. So I think that’s what we have right in front of us. We have also had good experience with the New York Stock Exchange talking about this. I mean, they actually are very knowledgeable about the company. We are compliant in every regard except for the share price.And that’s probably important thing for people to appreciate, because structurally if you don’t have authorized capital that are – or if you don’t have sufficient assets or if you don’t have sufficient other qualifying – we qualify for all the requirements except just the share price. So that means foundationally the company is on a much more solid base. The issue is more technical. We just need to communicate, not just, I guess – maybe to answer your question better, not just to consummate or communicate much more effectively to everybody now that these transactions are within our crosshairs. Now that we are close to crossing the finish line, we can start credibly communicating this.And we have started to get more interest. We have started to get more interest. I think that may be obviously a macro factor with gold and silver, especially gold turning. But there is interest out there. Money is starting to come back in to the market in a very meaningful way. And I think all that ultimately have to contribute to supporting and lifting the valuation. So I hope that’s helpful. I hope I answered the question. If you are on…

[Unidentified Analyst:]

Yes, absolutely. Thank you, Mr. Corrado. Thank you for your time.

[Corrado De Gasperis:]

Thank you, sir. Thank you. Samantha?

[Operator:]

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

[Corrado De Gasperis:]

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

[Operator:]

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