Full Year 2020 Comstock Mining Inc Earnings Call
Yeah.
So we have like a record number of of entrants using zoom. So we're thrilled about that thank you price for your interest let me briefly adjusted financial results as 2020 sort of represented the anyhow for year process for.
For repositioning the company's assets and businesses in its balance sheet with a purpose for 2020 financial highlights include net income last year of $14 9 million or <unk> 49 of earnings per common share driven primarily by the $18 million gain on the sale of certain mining to turn our goals.
Debt obligations last year, we're down to $3 6 million. It was an all time low by the end of last year, but I guess the bigger news is that now as of today all of our debt has been completely extinguished.
That has no debt.
None.
<unk> nine as of today.
Someone texted me last night, saying not even one Penny 90 day, one penny. So we're very happy about that cash on cash equivalents are now over $12 million per.
Multiple current non core assets that are still being sold including our industrial and commercial properties in silver Springs.
Totaling over $13 million proceeds expected to come into the company. All of those are now under contract for sale, we still have actually over 12 million common shares in total gold as well as the secured note receivable from total gold. That's due later this year both of those together totaling over $8 million, though.
Sales alone scheduled for this year represented additional 20 plus million dollars that could easily result in us having over $30 million in cash on hand, possibly by the third quarter and again with no debt. So we feel very very good about our financial position, our new financial position, our hearts bought effort to get to that financial position.
Our balance sheet is actually Kristina.
Meaning not only do we have no debt but.
But we don't have any convertible instruments, we don't have any warrants and all of our newer investments, including in Sierra Springs opportunity Fund MCU and linacre have a preferred or priority status to us representing a very strong turnaround but also.
Clear opportunity to fund all of our growth initiatives.
Beyond the gains on just spend another minute talking about the total growth transactions that obviously has turned out very well for us, but it's got also the following additional and ongoing benefits recall that we actually get annual reimbursements of over $2 million a year paid monthly to us and last year 2000, Twenty's reimbursements actually exceeded $3 million from.
Total growth to US we also retained a one 5% net smelter return royalty on all of our properties that includes Lucerne, the Occidental Lode claims and the northern Comstock both claims with a two 5% royalty on most of those main Comstock Lode claim so when on a half across the spectrum two and a half.
On some of the most prospective of those claims.
Incredibly we have an option to also increase the MSR on those main Comstock Lode claims by additional 3% that brings our MSR royalties on the the core of those gold and silver mineral claims up to five 5%, which is actually a huge number. We also give them for cash income in addition to the reimbursement.
Which represents a 12% interest income paid monthly on that.
On that note receivable.
I guess, most importantly, total gold investing millions of dollars in exploration with drilling fully engaged now on major high grade targets. The process is slower because theyre drilling very very deep holes using core drill rigs.
We understand very well the geology that theyre drilling into and we've now got an enhanced geophysics across the entire district, which I'm going to talk about a little bit later conjunction with Dayton.
But we just need to stay tuned with total goal because there we saw from their tech technical reports will be forthcoming and they're extremely active here now drilling doing multiple locations on the Comstock.
I guess it is also notable to highlight that the $80 million per screen from 2020 on the sales Lucerne was taxable.
We have net operating losses that covered from all of those income. So there is no federal taxes on those state taxes, either paid last year.
And we have an additional 160 million over a 168 million from net operating loss carryforwards that are reflected on our balance sheet as a net zero assets. So no assets showing up on the balance sheet and embedded assets of $168 million of net operating loss carryforwards. So we're positioned incredibly well.
Donnelley sheltered our 2020 gains and other income, but we look forward for continuing to do that in the future.
Moving on to the southern Comstock property, the Dayton Spring Valley complex is the most exciting development in gold and silver that we're working on directly on.
Last year late last year, we conducted a vast airborne Geophysical survey the entire Comstock district properties. So.
That's news because we have indicated to everyone that we were doing the geophysical surveys of the Dayton and spring Valley complex, which we absolutely did.
But we were so inexpensive we.
We decided to extend the helicopter and just continue all the way up to the Virginia City.
So we don't have Geophysical survey data it just recently came in.
On both magnetic and proprietary elect net electromagnetic surveys the ultimate surveying was almost 1200 line kilometers survey and the data now is in the data sets are with our geological team.
The data is remarkable.
I personally professionally have never seen anything like it.
Clear three dimensional images of the geological structures.
Usually we are drilling and we're trying to configure what we think those geological and it just looked like now we have clear three dimensional images of the geological structures, but but at depths that exceed 200 feet.
Many of you know that most of the drilling that we have done on the Comstock over the last decade barely got to 1200 sheet and on average it was somewhere between three and 500 feet.
Total load is drilling depths in excess of 2000 and now we have data going.
As far as that we're now in the process of interpreting the data.
We've also begun the process of re modeling the updated resource for the day and so we will now be getting to publish theories of geological interpretations and developments, we started doing that during the annual meeting.
Very far along now we're actually re modeling we started the re modeling process for the resource and that will lead not only to a number of communications and releases, but ultimately to a new technical report. This year, we're now expecting it in early in the third quarter that will incorporate all the interpretations of the new resource model.
All of the drilling programs that now that are being derived from from those works and I'm sure. We will have some questions and I'll be happy to answer more about that later, let me turn to MCU as much as we love our Comstock properties than we do for them. Our business is rapidly expanding into these higher value high cash generating.
ESG based impact activities, we're moving into spaces that are fully within our core competencies when you see the process map for.
For the with the am I on.
Battery recycling Youll see lead change Youll see precipitation youll see refining. These are activities that were very familiar with their new technologies or new chemical processes, but fully within our core competency, but most immediately in the Mercury remediation business, we are re mediating contaminate.
It amalgams. These amalgams that are left back in the environment are loaded with goal we have been involved in the heavily EPA regulated mercury remediation business now for over eight years, but we're just now commercializing in fact this week.
See you Philippine Operation has gone live we're very excited.
To say that and tomorrow, there is going to be a full delegation from the Philippine Department of environmental and natural resources, that's called the <unk>.
Philippines, the provincial Governor Governor Tyrone, and even possibly we're not certain.
On the President Duterte himself well, Chris on the kickoff of our ecosystem wide cleanup for the entire notebook River territory in the province of download they are.
We're actually supposed to have the kick off for about a week or so ago, but a small COVID-19 outbreak.
Delayed by about a week the systems up and running.
Soon as it's Christian and kicked off by the delegation will start running at full and despite all of the Covid quarantines and restrictions our entire team is fully assembled the system is fully up and running it's on the ground and.
We're happy to say that finally gets there just to be clear, we own 50% of the Philippine operation directly we earned net 50% directly through a $2 million secured loan that we believe will be repaid with rapidly as the system gets up and running and start generating revenue in cash the ultimate project life of this cleanup.
It's closer to something like six to 10 years, we envisioned multiple systems operating in the Philippines, even over the next 12 months as I said, we have one fully up and running there now.
Once we have more specific operating information will start to provide more specific guidance on revenues and returns to the market not many are familiar with our engagement.
With the Mercury clean up the parent company is called MCU, we have 25%.
Of MCU fully now that's new this quarter as well we had 15% last year, we added 10% this year and we secured the for 50% directly on the Philippine joint venture what that means is that we get 50% directly and we get 25% on the other 50%.
For a total of 62, 5% participation in.
Each of the projects that we choose to we have been engaged with this business directly with the United States.
State Department, we've been engaged directly with the United States Policy group out of Washington, The EPA Comstock itself had a bill all of its Mercury remediation sampling analysis remediation protocols with U S. EPA district nine in the Nevada Department of EPA.
A very very highly regulated business, which is frankly, a big barrier to entry.
<unk> spending in the last eight years building. This platform. We are now sitting incredible position to be able to start cleaning up mine sites and cleaning up the ecosystems with our systems and with our technologies, we're really not aware of any other.
Company that has global self contained fully mercury remediated.
Systems.
That can be deployed anywhere around the United states than anywhere around the world.
For for a relatively low capital investment anywhere between $2 million to $3 million.
We also just got.
Notified by the United States Patent office that our patent application for our system has been.
That's it for review with no changes. This is incredible as there is typically a lot of back and forth that goes into the submission.
We are on the fast track now too.
Patent on the system.
Lastly, and certainly not least let me turn my attention to the other metals, let's call them. The electrification metals most comstock for us appreciate the importance of silver for share in the electrification of everything around us and now with the automobile becoming the ultimate electronic device.
Certainly beyond our phones and beyond our computers.
We're talking about with the up we're talking about cobalt, we're talking about nickel of course, we're also talking about carbon and graphite and certain other critical metals. These critical materials are increasingly scarce and staring at remarkable demand curves even the most conservative estimates show that is desperately scarce.
And income.
So we can spare announced let alone a ton of these materials and thats why they must be valor assets that is they must be renewed their values must be enhanced they must be revalued, they must be recycled those liabilities.
<unk>.
We need to turn back into assets and their critical assets. So it's a very very consistent theme with us.
In terms of both Mercury remediation or battery recycling.
Last month, we announced a remarkable entry into this market by securing the rights to up to 64% of Linacre Linacre stands for lithium nickel cobalt, who is ramping up plants to produce 99, 9% cathode materials 99, 9% pure cathode materials for the lithium ion battery market critical too.
This acquisition was securing a previously permitted existing state of the art facility.
Designed purposely for battery metal recycling right here in storey County, Nevada, just 10 minutes from our Silver Springs properties, Let me say state of the art I mean, essentially new designed just for this purpose and for air quality control system is designed and built for this purpose already installed and operating in this facility.
And a massive million plus water treatment plant already and fully installed and built into this facility. The plant sits on 11 acres of prime industrial real estate and cannot be in my opinion, a better location anywhere in the United States.
So sometimes its better lucky than good it's right on our backyard.
But it fits directly across the street from day gift factory number one and the building has a built in laboratory as well as probably in my estimate easily 20 plus million dollars.
Just in terms of replacement cost for the facility. So its design and situated to receive batteries crushed batteries separate battery metals.
And turn it into black math, and then take it to the final cathode materials I should mention I think before I go on debt.
I started my career.
After a decade of KPMG I started my career at <unk> Tec International I call. It My first real job that was then the largest industrial producer of graphite cathodes and electrodes in the world representing the largest validation supply chain on the planet, where we took the waste from the waste petroleum Coke from the oil.
The refining industry and recycled into synthetic graphite that was then used to recycle scrap metal and electric arc steel furnace and smell for aluminum. So we're very very excited about being back into this kind of supply chain in this kind of business.
Linacre, so first with Atlantica, we secured debt facility.
And then net at $10 $75 million for 64% of the company.
It represents a post deal valuation of under $17 million part of that command moving cash paid over about seven months and the other part was 3 million restricted shares lithium get linacre, sorry, you get the first $6 $25 million.
From those shares which today are valued at closer to 12 $513 million.
And the rest comes back to Comstock. This is a critical point on how we structured the deal and retained the exit value.
<unk> has also secured the rights to Singapore based green lines patented process technology and the equipment that enables the production of the 99, 9% pure lithium cathodes here in the United States.
<unk> will also directly owns 20% agreeing with the board.
The board representation in a post deal investment value in Green line of only $10 million Greentown lines technology has been proven to convert the black Madison to rejuvenated high purity battery grade metals and essentially cap.
Pure capex for a fraction of the cost a fraction of the water consumption and a fraction of the time with conventional processes. So low water usage of purity of the breakthroughs here and the entry values into the space.
And the hard assets that we've acquired all as part of this package makes it a much safer and obviously a key way for us to position value creation for our shareholders. We've committed to purchasing 20 of these mainline systems over three years with the capacity of producing 10000 tons.
Of cathode materials per annum.
We previously said that we previously said that just with 33% net rate and 60% on the applicable commodity prices the facility could generate more than $100 million in sales.
Said differently 20 million.
Green line units could generate running.