Comstock Inc. (LODE) Q3 2012 Earnings Report, Transcript and Summary

Good day ladies and gentlemen. Welcome to the Comstock Mining announces Third Quarter 2012 Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to introduce you to your host Mr. Corrado De Gasperis. Please go ahead Mr. De Gasperis.

Thank you, Naomi. Good morning and afternoon everyone. My name is Corrado De Gasperis, President and CEO of Comstock Mining and welcome to our call. I will provide a brief summary of the information included in last week’s 10-Q and our recent press releases. If you don't have a copy of those releases you will find a copy on our website at www.comstockmining.com under news/press releases. Please also remind you that I make some forward-looking statements on this call. Any statements related to matters that are not historical facts may constitute forward-looking statements. These statements are based on current expectations and those statements are subject to the same risks and uncertainties that would cause actual results to differ materially. These risks and uncertainties are detailed in the reports of the company with the SEC and those risks are identified also in the press releases and all forward-looking statements made during this call are subject to those same risks and other risks that we can’t identify. I will now briefly review production, drilling and mining development and wrap up with a few corporate highlights before we move on to Q&A. Regarding production, we began pouring gold and silver last a few days of September and we have been pouring since. Through the end of October the company shipped over 1,250 ounces of gold and over 14,800 ounces of silver. In addition, we delivered 28 ounces of gold and 292 ounces of silver to the Northwest Territorial Mint, in Dayton in Nevada to facilitate the minting of the commemorative bar celebrating the first pour. These bars were recently delivered to the owners that we've been getting just outstanding feedback on their quality; the Dore bars are just beautiful. Through early November, the combined sale with precious metals is nearly $3 million including the commemorative Dore bar sales. Our third leach pad is now producing at the higher levels from the fresh ore that was delivered here in early November combined with the continuing operation of our first 2 pads. We will add new pads of ore at a rate of just about 1 new pad per month as we ramp up our higher run rate in the next few months. We are currently mining and hauling at a rate of about 4,000 wet tonnes per day. This process is stable, currently averaging about 155 haul truckloads per day. We've also been crushing and stacking ore daily since we started the crushing system and look to stabilize the crushing and stacking at approximately 4,000 tonnes to 5,000 tonnes per day. Overall, I think many of you know these assets were designed and can produce over 4x our current rate of production with the crushing system showing the potential for almost 1,000 tonnes per hour. We’ve already now stacked over 210,000 tonnes of ore on the heap leach pad, delivering over 4,100 ounces of recoverable gold and over 40,000 ounces of recoverable silver to the heap leach pad. Please remember that the material that we place on the heap leach pad after crushing remains under solution for as long as that pad is utilized. Throughout this period, the recovery of gold and silver continues but the most effective economic recovery of the metals takes place between the first 45 to 60 days. The recovery of gold and silver from the first months represents only a portion of the overall expected recovery. As most of you know, our plants have a leaching process building up to 20,000 gold equivalent ounces per annum. Our grades could vary anywhere from the runway of between 17,000 and 24,000 per annum at any given point in the short-term, but we're very confident with this start up that we will scale up to an average of 20,000 ounces with these tonnages. The rest of the quarter and the next are very important as we focus on stabilizing those rates and establishing a solid positive cash flow. The company anticipates its annual mining operating expenses including all fixed and variable cost for mining, processing, mine administration, labor, and even royalties of approximately $13.3 million per annum with that current production rate of about 1 million tonnes per annum. These numbers have remained solid throughout our ramp up. We’ve had no major surprises in construction or operations during our March into production or our cost as we stabilize them. Most all of the non-routine activities associated with construction and startup are now final or near final, improving the overall spend profile. These mining, processing related costs don’t include however corporate admin or other G&A cost and they don’t include exploration. So far there has been absolutely no disruption, congestion or problems with any of the hauling on the alternative haul route, in fact certain haul days have significantly exceeded our daily objectives. I believe our best 10 hour day was an 180 truck load performance on that day. The extra trucking those results, as we have disclosed, in an increased cost of about $1.5 million to us for the first 6 months. We remain very confident that the BLM will permit our original off road haul route in the next 6 months, fully eliminating this redundancy. To that exact point last week, we signed the memorandum of understanding with the BLM, defining the final scope and the remaining process steps associated with permitting our larger more efficient right away. This was a critical milestone and certainly demonstrates our very real progress in working with together and forward with the BLM. In the meantime, we continue working and optimizing the rest of the system and we are happy to have stabilized all of our core production activity. In terms of growing production, most immediately need to obtain that new BLM right away and we also need to expand our existing water control permit as these are the 2 factors currently limiting us to the 1 million ton per annum run rate. We have commenced the engineering work to design and even further expand our heap leaching system which is the main prerequisite for modifying that water control permit. We also anticipate that permit will require about 6 months before it’s completed and approved and once we obtain these 2 permits, we can increase our tonnages going forward accordingly. Now let’s turn to exploration, in January of this year we launched our 2012, 2013 drilling program. The company disclosed and anticipates about 300,000 feet of reverse circulation drilling and about 13,000 feet of core drilling at a total program cost of about $12 million over the full 2 year life of that program. Let me just recap some of our outstanding exploration efforts that we have achieved year-to-date. Following the initial successful drilling in Spring Valley in early January when we hit significant mineralization on all 14 holes, the company began definition drilling in Lucerne mine in March of this year. We drilled concurrently with the commencement of mine production, but Lucerne mine drilling was completed earlier this month, the 236 reverse circulation holes totaling almost 87,000 feet and 25 core holes totaling over 6,000 feet. These results not only support the specific mining activity that's already underway, but we expect them to increase the initial mine life of Lucerne by well over a year. On an even more existing note, we also recently announced the results of our step out drilling on the east side of Lucerne, all 20 of those holes are in the program hit lengthy intervals of significant mineralization, 14 of those 20 holes encountered multiple intervals of significant mineralization totaling a 150 feet or more including 10 more other [ph] holes with contagious mineralized intervals of a 100 feet or more, it’s very difficult for us to exaggerate how excited we are about these results. Let me just comment on some of the highlights. On hole 5, we saw an assay of 1.693 ounces of gold per ton contained in a 20 foot interval averaging point .621 ounces of gold and 1.4 ounces of silver per ton. Hole 5 had significant mineralization totaling over 370 feet. Hole 12 included an assay of 1.589 ounces of gold and 6.5 ounces of silver per ton all that contained in a 60 foot interval averaging 0.187 ounces of gold and almost 3 ounces of silver per ton, the thickness is great, they are just great, hole 10 had an assay of 6 ounces of silver per ton, contained in a 75 foot interval of silver of over 1.382 ounces of silver per ton. Hole 16 showed even higher grades of silver with an asset of 6.2 ounces of silver per ton, containing a 20 foot interval with 2.33 ounces of silver per ton. Hole 17 had significant mineralization in multiple zones of 320 feet including contiguous mineralization of 220 feet. The thicknesses are just remarkable. Hole 13 encountered total mineralization of 230 feet in multiple zones. Hole 15 encountered 290 feet in multiple zones. Hole 16 included 20 feet intervals of 0.18 ounces of gold and 2.38 ounces of silver per ton and the list goes on and on and on. We've published these results previously in 2 separate press releases, but when we look at them all in one place it’s just remarkable. Hole 14, hole 18, hole 20, I'm not going to go through all the hole numbers, since all these assays are posted on our website. But I just wanted to give you a sense of the depth, the width and the extent of the grades that we’re hitting on the east side. We are very, very excited and looking forward to updating our next 43-101 technical report. The report should be all completed here late in the fourth quarter of this year and will be published in early January. It will include all of the updates on the Lucerne mine including the broader Lucerne Resource from the east side that we just talked about. As we think about it all the east side results were not only efficient; I mean all that coming just for 20 holes, but very productive and wonderfully high grading. There are some very, very interesting cross sectional analyses that are being developed by our geological team from these recent results. Going forward, the drilling forward has two significant continuing objectives. First final infill drilling in the Dayton area and second final step out and infill drilling in the east side area. For Dayton the drilling will provide detailed information needed to create the preliminary mine plan for the proposed Dayton mine and with that plan the company will be able to complete [indiscernible] are both together our prerequisite for us commencing the permitting for that second mine. The infill drilling for Lucerne will do essentially the same thing for an expanded Lucerne mine plan. It will position the company to complete the broader economic feasibility study of which of course we already have a tremendous amount of information as we are already producing there. But those studies and those drillings are a prerequisite really before any permitting of the expanded mine can even be foreseeable. The overall course of the program will likely see 3 updates in technical reporting over the next 15 months including the one that I just referred to. Following that one, most likely we will see an update for the Dayton drilling in the middle part of next year and then the completion of all of the Lucerne drilling towards the latter part of next year. All of that work provides us with the roadmap for the 2 expanded mine plans and ultimately the potential for a production plan that's sees not 20,000 ounces to 30,000 ounces a year, but 150,000 ounces to 200,000 ounces of production per year. Lastly just turning to corporate, from the balance sheet perspective cash and cash equivalents and available for sale security on hand at the end of September was $3.9 million. In addition to that our balance sheet saw inventories, stock piles and mineralized materials on the balance sheet at the end of the third quarter totaling about $4 million. To date, we now have over $8.4 million of recoverable metal at today's gold and silver prices on heap leach pad. This again represents over 4100 ounces of recoverable gold and over 40,000 ounces of recoverable silver to the leach pad so far and those numbers will go up every day. We also raised some additional capital last week. We drew down the remainder of our self-registration statement, with existing and new institutional and retail investors strongly oversubscribing the offering. We raised a net of $7.3 million through an underwritten public offering of just under 3.7 million shares. The company now has just under 3.7 million shares representing less than 3.5% of the outstanding equity of the company. As of today, the company now has just over 47.2 million common shares outstanding and $57.3 million of preferred stock. The proceeds of the offering provides the working capital for our continued ramp up of production and also ensures timely if not accelerated pursuit of the 2 previously discussed permitting activities that are required for production growth and the efficiencies that come with that right away. That is of course the right away with the BLM and the related engineering and modifications of our water controlled permits. Those are the efforts that will contribute to not only the near-term but also the intermediate and longer-term production growth. We also realize and continue to realize a very meaningful and strong expansion of the investor interest in our company, especially since September when we moved in to full production activities, but it’s coming both across the United States and in Europe. We had a number of investors from the UK participate in investing in the company for the first time and we also have a meaningful number of large institutional resource investors reaching out about scheduling site visits and visiting the mine now that we're into production. We feel that all of this bodes extremely well for strong capital appreciation as we ramp up and grow production here in the next 15 months. The balance sheet overall is strong, not only in cash position for growth but also as of September 30, we had over $8 million in current assets on the balance sheet that excludes the money that was just raised of course, almost $21 million in essentially new property plan equipment and over [Technical Difficulty] in mineral rights. We feel that 2013 will be an outstanding for year for gold and silver, but it may not be so outstanding for any of the junior producers, in fact now [Technical Difficulty] just this past Saturday at the Hard Assets Conference, many of the industry experts were predicting some very difficult time for junior mining companies. I think one fellow was even saying that a majority of the junior exploration or non-producing mining companies on the TSX will most likely die within the next 15 months. The problem is that there is just too many unfunded difficult projects with low grade and no real [indiscernible] prospects. Also, there is a tremendous amount of focus including from the Canadians for near-term production and cash flow to invest in. The companies, without that, they were saying at the conference will certainly struggle if not die over the next 12 to 15 months. That said, they were talking only about investing in companies that have minerals, money and management. From our perspective, we feel extremely well positioned and we are looking very, very much forward to ramping up this growth and this production here in the next months and throughout 2013. So in closing let me just say that we are focused and committed to stabilizing and growing our cash flow while we continue to optimize our permitted footprint, expand our resource, establish mine plans for both expansions and develop the Comstock load in new responsible ways that present incredible economic opportunities for all of us. I think with that point Naomi, we should turn it to the Q&A.

[Operator Instructions] And our first question comes from Robert Shucker [ph] and he is a private investor.

Noticed in your third quarter results, there was an item in there for $2.6 million or changes in the fair value of derivatives?

Yes, sir.

And I was just wondering that gold and silver had a terrific quarter, gold was up by $160 and silver was about $6. So perhaps you have some positions against them with those rising prices or can you explain that charge to me?

Absolutely, thank you for the question. So first there is really 2 components of the accounting that we have to do for derivative liabilities. One, which is coming very near to its end is that the preferred stock that we have in our capital structure had some protection in terms of the annual dividends that were paid in the first 3 years and that the additional dividend paid is actually accounted for as its driven liability. The good news on that front is that we are into the third year for certain and so that number will go to 0 in the course of the next 9 or 10 months, so that's one piece of it. The second part of that which relates more particularly [indiscernible] question is that in July, we did a $5 million loan that we affectively funded by selling about 3,700 ounces of gold forward at $1,600 an ounce for 2013 and so that is essentially the other material piece of the derivative liability accounting. So as gold prices go up, that number will look like a bigger liability as gold numbers go down that number will be smaller, but the economic reality is that we are simply, of the 20,000 ounces that we intend to produce and sell next year, 3,700 will effectively be sold at 1,600 because of that loan arrangement and I think for all intents and purposes that's it in a nutshell.

That's really good news.

Yes, we are not hedged against gold and obviously we are very bullish. I have been bullish but even at the Hard Asset Conference over the weekend fundamentally with the continued fiscal policies and continued fiscal problems [indiscernible] being up.

Thank you. Our next question comes from Tom Childs[ph] and he is also a private Investor.

So I know now that all the activity’s on the west side of 341 and you’ve had terrific results on the east side of 341 and your plan is to obviously develop that. Can you talk about route 341 and how that's going to be dealt with in the Lucerne mine to encompass both east and west sides?

Yes, very good question. So we are engineered, developed and mining on the west side of the state route. Our permitting activities with the state encompass both sides of the state route. The current permit with the county really just encompasses the current mine plan and there is a tremendous amount of ore that also sits right underneath the state route. The state route is actually a private road and the road is owned by us and the road has been moved on multiple occasions to actually 4 historical mining activities. And so the highest preference that we currently have in our plan and that the county shares with us in terms of intent would be after some amount of mining on the west side, that we would shift just a smaller portion of that road to the west which would not only allow for the ore immediately beneath it but certainly the incredible discoveries that we keep having as we move east. And so that's sort of the number one option. There are others that are being talked about including by the state partner transportation, all favorable, but I think that's without having a final plan and without guaranteeing any end result of course, that's the current scenario that we are planning for.

So are you, when you talk about a shift of the highway are you saying a couple of hundred yards or the next canyon over?

No, no. There's a notion of the highway moving a few hundred yards in being very nicely landscaped into the sort of the wall where we currently have the existing mining activity. The mine plan doesn’t take out the wall at mine end, and so we would. It would very nicely nestle along that landscape if you will and in fact that’s exactly where the world [ph] was previously.

Our next question comes from Jeff Wright and he is from Global Hunter Securities.

So I did have a couple quick questions on the ramp up and recoveries. Can you touch on what you think the recoveries can get to after you’ve got a quarter, just a few quarters of production under your belt and what challenges have you guys seen with the heap leach and [indiscernible] processing to-date?

Great. So, first on the recoveries. The initial sequences of ore that we’re bringing to the pad, are averaging in the metallurgy are averaging about 70% for the gold and 50% for the silver. So far we have not had any operational issues at all. In fact, I would say 2 positive things; Solution breakthrough and for each of the 3 pads that we've put online has been less than 10 days and in some cases even much quicker than that. I think one was 6-day solution break through. So we're having very, very good fluid flow through the heap leaches and despite them being the first 3 pads, without being put under leach. The second is the third pad which is now under leach is meaningfully larger than the first 2. The first 2 averaged about 50,000 ton average leach. The last one was about 70,000 tonnes and I mentioned to you that we have already over 210,000 on the pad so that fourth pad is actually forming up very, very well as we speak. The rate will be about -- and something less than, but about one pad being brought under drip and under leach about for a month. From a recovery standpoint everything seems to be on plan except that we are getting a higher rate of silver. So we haven’t done it’s still too early in the process to have reconciliations of the ultimate yields, but the silver seems to be leaching higher, so that’s been very positive. Our resource that we have been pulling from has about -- it’s not too far off on the average of the entire resource, maybe a little bit higher than 10 ounces of silver for every ounce of gold closer to let’s say to about 11 ounces of silver for every ounce of gold in terms of what we are extracting, but what’s odd is we are leaching about 11 ounces of silver for every ounce of gold and so far the gold margins seem okay. So the initial presumption is that we are leaching a little higher in terms of silver. So we will have to -- we are keeping a close eye on that as we get sufficient data for reconciliation. And could also be the rate at which silver leaching versus gold versus the absolute yield, so unfortunately my answer to your question is, to the best of our knowledge right now, about 70% gold and probably a little higher than 50% silver.

One last question, you mentioned working with the BLM on the permitting for the railway road. That’s just basically amending the existing permits, correct? You don’t have to do any additional environmental or any other studies that I am aware of, correct?

Actually, we are. That's the – I’m really glad that you asked the question because it was one of the developments that I wanted to speak to and I didn't say so specifically. So we do have an existing right away which were not using right now because of the issues that we ran into last -- earlier this year with the BLM, they did grant us a second right away which is the one that we are currently using and required some amount of trafficking and hauling on the state route, but what we’ve actually concluded to do with them right now, and we’ve signed the memorandum of understanding for scoping with them now is to actually permit over the existing right away that we have, a much bigger, much wider more robust right away. So there are 3 implications of that, one is that we do have some environmental and biological studies to complete, we have done some cultural studies already, those were perquisite to the scoping of the MOUs, so those are done, the MOU is done and now we will get into those other studies and processes. It actually presented an opportunity for us to expand this scope of studies broader in case there is other federal permitting that might become foreseeable and practical to us as we go forward. We’ll sort of kill 2 birds with 1 stone. And then lastly, for lack of a more technical term, the fatter right away, the bigger road will allow much more productivity for us, so we won’t only grab the efficiency of eliminating the redundancies of being on state route , but we will also have much more throughput in terms of haulage back and forth from the mine. So it’s a better longer term answer for us. It will take a little bit longer to do that, just a few months which is why we are still talking about 6 months to go, but I think the end result would be much, much better for us.

Okay, so when you say 6 months we should anticipate that the studies would be completed in Q2 and you would submit everything to BLM late Q2 early Q3 next year, does that sound right?

No, no, so the process that's laid out in the MOU is that scoping has been complete and now we will do kick-off meetings literally next week and then there will be public processes that will occur in the first quarter and it will all drive towards -- if you give a little buffer for Thanksgiving and Christmas it will all drive towards permitting probably late in the second quarter.

Our next question comes from the Bill Gibson [ph] and he is from Legend Merchant.

You talked briefly about Spring Valley and then went into the drill results on the east side. Does that same trend continue into Spring Valley?

Yes. In January and February, primarily because we were waiting to clear some of the prerequisites to get back into drilling in Lucerne, we did 14 river circulation holes in the Spring Valley, and just as importantly we did 2 core holes averaging about 700 feet a piece and the entire objective of those 2 core holes was to validate structurally that the Spring Valley is just a direct extension of the Dayton structure. Spring Valley is where we have the least amount of geological data. We had a Discovery hole there 38 feet from the surface in 2009 hitting high grade or right below some of the sediment. We've had some geophysical scanning which for all intents and purposes shows a continued sort of mineralized trend coming down from the Lucerne through Dayton and right into Spring Valley, but we didn't really have real substantive core samples to validate that’s the same structure, and so everything that we've analyzed to date tells us that it is which is very, very exciting for us. There’s a really meaningful stair step down when you go from the geological data and the number of holes that we have in Lucerne then down to Dayton which is significantly less than Lucerne than down to the Spring Valley. But when you think that Lucerne itself has already validated over 2.3 million gold equivalent ounces, none of those numbers including the update that's forthcoming here based on what we just talked about, and that the Dayton so far has only validated a 0.5 million ounces and Spring Valley has none. And you have it in your mind that structurally its one interconnected mineralized trend and that none of what we've learned in the Dayton both near surface and at depth and structurally and none of what we've learned at Spring Valley both near surface, at depth and structurally indicates that there's any differences. So for us, we are very, very excited about ultimately getting to Spring Valley, but it will be a challenge for us just to finish the Lucerne and the Dayton here in 2013, and I mean it being a challenge because both of those resources are still open on 3 sides and at depths. So from my view, we said it sort of this way before, we feel like we're just scratching the surface, and these 20 holes in the east side, I don't think got much of a reaction from people. I don't know probably because it was right around presidential elections or something, but the results are just outstanding. And to your question, we think that most of the center south of the Comstock is completely undiscovered country.

Our next question comes from Allen [indiscernible]. He is also from personal investment.

I have 2 quick questions. So first of all will you be selling more of bars and my second question is why was the IPO lower than the current market value?

In terms of the bars, we sent over the button, the first quarter had 3 bars and a button. The button was less than 300 ounces as I had mentioned earlier. For our estimate of how many bars the mint could print, we sold out in like 4 days. I just recently learned they were able to squeeze out like 18 or 19 more than they thought. I mean, we really weren’t hung up on it because all of the excess material gets re-melted. So there is absolutely no loss of metal in that process. But I guess I am saying publicly on the phone here that we have a few more that people are already clamoring for it. I really didn’t know how the Dore would mend. I was personally a little bit concerned. They are just beautiful and we are getting absolutely fantastic feedback from almost everybody at how nice they work. So I suspect we will very quickly here sell out the rest of those bars. I guess if anyone’s interested just send me an email and I will give you the back door link to the ordering process, but I suspect they will be gone pretty quick here. In terms of the offering, we did it -- there was a lot of volatility and the market’s been very, very difficult. We’ve always priced our deals at or very, very near or the market price, and we always in addition to that, look to place it with only the absolute best investors. So I think that did occur this time and we could not feel better about the types of funds that showed an interest. I would say 2 things about that, both in terms of institutions that already were familiar with the story that chose to invest and also new institutions that got familiar with the story. And in both of those categories, we are talking about the types of investors that could invest a tremendously larger amount and would want to invest a larger amount as we progress. So we feel that being rerated if you will as a junior producer is not a magical event. It occurs as you get good traction and you put good weeks and months and quarters of production in cash flow behind you, but also that you have keen investors who frankly see the opportunity becoming larger and larger as that cash flow becomes larger, obviously but also as it derisks the profile. So we feel like we are in a really strong foundational position, just ourselves, just for what we are trying to accomplish and what we are focused on. I guess I would just expand that to my sort of closing comments is that, with some foresight and starting now with some hindsight; I think we are going to have as an industry segment an extremely challenging 12 months in terms of access to capital, and frankly as a company we are happy to have that behind us.

And our next question comes from Jack Albright [ph]. He is a private investor.

You answered most of my questions so far. I have one, when you move the state route, how is that going to impact moving the ore?

Well, I don't have -- well, so the answer to that question fundamentally lies with the mine plan. Let me say that the initial mine by design was intended to be at least 4 years long. We don't necessarily plan to operate it for 4 years and in fact now with the recent drilling results, we are sure that it’s going to be well over 5 years if not 6 years of mine life. Again not that that’s our intention to mine it that long but that is what exists on the west side and very, very shallow scope of a pit. Ultimately, there's already 2 to 3x that amount of work sitting under the road and just to the east of that and so what we would really like to do is get the rest of that infill drilling in Lucerne and then engineer if you will the smartest expansion, the smartest evolution, the smartest phasing which minimizes disruption but optimizes our access to the ore. So the real answer to your question is we don't really know yet but we don't see that moving of the asphalt or relocation if you will of the road would have any negative effect on any of the ore. All its going to do is allow us a more efficient access to it.

Okay sounds like you guys are right on top of everything. It sounds great.

And one thing Jack too, this is what I was trying to say in my first point; I don't think that moving of the road is a near-term event. We still have a lot of drilling. We still have a lot of engineering and then we still have a lot of mine life right before we even get to that point. It’s really a more intermediate, few years away kind of thing.

Well it seems like you are having quite a bit of trouble with the town’s people on that highway and the road and the BLM and everything. I just wondered if moving that road is going to impact any problem with the towns [ph]?

No, it’s been probably one of the more discussed -- even though it’s still so far away and not certain, it’s been one of the more discussed, openly discussed. It was referred to I think in our very first technical report. So I think it’s a known entity in the sense that it’s possible so it’s not really created any object[ph] to locally.

I have another question about the Gold Hill Hotel. We never hear too much about the financial stairs [ph] of that?

Yes, the hotel is improving meaningfully. It’s very, very small in the grand scheme of everything that we are talking about. But the revenue in year-to-year comparisons recently has been up. The expenses are down. It’s going now into the cold season. So the hours are retracted. The staffing is retracted and then we’re going through the planning process for it but for most intents and purposes its stable for local engagement, it’s been outstanding for us. We get a lot of visitation and a lot of intention from important people because of that venue, I think rather than just having [indiscernible] in the mine office. We have 2 hour to 3 hour sessions in the room there and it’s a relatively small building, it only has about 12 rooms in it.

Right, we stayed there and had a wonderful trip. Okay so do you think they are profitable and not a loss?

No, in the last 12 months it operated at a small loss. Our attitude is to ensure and work very hard so that it’s breakeven, because it’s at a tremendous focal point for not just us, but really for the whole community.

One question [indiscernible] package.

Oh man [indiscernible]. I have to call you later to thank you specifically for that.

[Operator Instructions] Our next question comes from Jake Gun [ph] and he is from Rockport Global Advisors [ph].

Do you believe the recent election results will have or have had any impact on the company?

Good question. I knew politics were going to creep in to this Jason a little later. So well, [indiscernible] let me just both comment very briefly. I think everybody is like mind. The results really gives more certain [indiscernible] from a monetary policy standpoint, we're going to get a lot more the same. We don’t really need to talk much more about that, now with the federal deficit remaining at a $100 billion a month and well over $16 trillion in total. So I think for sure, that’s one of the reasons that we would be bullish in gold. But maybe more importantly, locally, we saw county commissioners come up for election in both counties, both Storey and Lyon County and it was very interesting to watch because the sentiment and some of the polling that we were able to get access to suggested strongly that -- and this is I am sure not going to be a surprise to anybody -- that if you were pro jobs and pro economic development and very importantly pro mining that you would get reelected. It was pretty much the message in the polls. And although that sounds like obvious for Nevada, it’s not necessarily so obvious for this region in terms of mining. So it was very, very encouraging for us to see that and we saw thought it was outstanding. And in terms of the results of the election, we could not be happier with the local commissioners that won, all very supportive of business and all very supportive of our activity. There was actually a very funny quote that I was just reading yesterday. There is a television, a political television show here called Nevada NewsMakers it’s run by Sam Shad and it’s probably the most watched political show, kind of like Larry King on CNN for just Nevada and Sam is phenomenal, but he was interviewing the new Commissioner Lance Gilman from Storey County and the quote says, and okay this is not a forward looking statement nor is it my statement okay, this is was Lance Gilman saying, “I actually heard there’s probably 9 million ounces of gold up there with the new election and with Obama now in place, I think gold is probably going through the roof.” and Mr. Gilman goes on to say that with comp stock mining just outside of Virginia City, we are really seeing a situation that could turn the Comstock back load back into the one of the richest places on earth. Now putting aside all that promotional points, the real point I am making is we have a brand new Storey County Commissioner who couldn’t be more excited and supportive about what we are going into. So I think from my personal perspective there was never any kind of material concern, but it was an incredible resounding validation of our type of project and what we are trying to do here. I should probably add that just this past Tuesday the Storey County commissioners, the existing commissioners, were just asked to validate the specially used permit amendment that our planning commission approved back in August, and there was a 3 to nothing unanimous vote in support of that amendment. So that's just very much a continuation of what we have been experiencing with this great county in over the last number of years.

And your last question comes from, I am sorry, if I mispronounce your last name again, Mark Peterzach [ph] and he is a private investor.

] Could you speak to the large drop in your share price in the days prior to the announcement of public offering and the growing interest, short interest your stock?

Yes, I say, I can't impart Mark, thank you very much for the question. I think that from my perspective we had a very good momentum that was in the stock leading up to the first pour, not perfectly, but it did go inside with the last post Bernanke comments on announcing Q3 and the resulting run up of gold to almost $1800. The first pour, we thought was just an absolutely fantastic objective and set the stage for more, but there seems to be from that point forward some loss of momentum that I believe did also coincide with the gold price sort of retracting back down. But I think that there was more of an evolution in September and in October of this increasing skepticism about junior companies that aren't producing positive cash flow and certainly the junior expiration folks. The market has been very, very tough on those people. I think probably people are watching our balance sheets and performance even more closely than they have before. I think there's a strong sentiment about poor project management in the industry, and I think there's very, very high liquidity fears. So I think that there is no precise answer, but we definitely saw a trend that affected us, if not even more in that month of October sort of down if you will. I really can't speak to the day or 2 before, it was very disappointing to us. We are proud and happy that there is such strong and immediate access if needed to capital. We believe that now we have a very, very strong balance sheet. We don't see it impairing in any way, shape or form, the value creation that we have to take. We think that and we intended the dilution to be minimal. We kept it small. It was a little higher than it could have been with better pricing but going into the holidays and going into this very aggressive ramp up and frankly having signed up the MOU with the BLM at least we knew it was imminent and we felt it was critical to just put the capital raise behind us and march forward. I think similar to what happened last February, I think it’s going to bode very, very well for us moving forward. But I don't know specifically about the day before. I do know the short interest was growing for a period. It’s not in any way, shape or form monumental or necessary even concerning. In part it’s a little annoying, but in part it does speak to some of the sentiment in the market. There is pervasive fear of liquidity and capital resources and from what we heard at the conference, it’s only going to get tougher.

Thank you. There are no further questions at this time. Please continue.

Well, I would just like to summarize by thanking everybody for the interest. We have well over, and usually do, a 100 participants on the call. I wish all of you a very safe and happy Thanksgiving, and please feel free if you have any follow-ups or if there's something we missed. Don't hesitate to call myself, Kim Shipley. We are always happy to answer any questions. Thank you so much.

Ladies and gentlemen this concludes the conference call for today. We thank you for your participation. You may now disconnect your lines and have a great day.