Comstock Inc. (LODE) Q1 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Comstock Mining April 2018 Quarter One Results. At this time, all participants are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. And it is now my pleasure to introduce your host, Mr. Corrado De Gasperis. Please go ahead.

Thank you, Savannah, and good morning everyone. It's Corrado here with Comstock Mining. Welcome to our 2018 first quarter conference call. We've completed our first quarter review with Deloitte & Touche just yesterday, and filed our first quarter financial statements on Form 10-Q last night. And we released a summary of those results through our press release this morning. If you don't have a copy of today's release you'll find a copy in our Web site at www.comstockmining.com under New/Press Releases. We will keep the same format for this call as we've done previously, starting with my prepared remarks and then taking as many questions as time allows, also trying to limit this [Technical Difficulty] to an hour. If you're unable to ask a question on the call we'll certainly be available this afternoon and throughout the remainder of the week for follow-up calls. Before I begin, let me also say that any statements related to matters that are not purely historical facts and may very well constitute forward-looking statements. These statements are based on current expectations and are subject to the same risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in the reports filed by the company and the SEC, and in this morning's release. And all of those forward-looking statements made during this call are subject to those same and other risks that we can't identify. Just briefly before I discuss our results and the strategic initiatives, let me welcome two new board members to our team. In February, Leo Drozdoff joined the Board with an expensive Nevada mining industry resume, including a great engineering, legislation, environmental regulation, economic development, and historical preservation background that's just absolutely broad and outstanding. He most recently had served as the director of Nevada's Department of Conservation and Natural Resources, which is the entire spread from 2010 to 2016 in which he was a cabinet member reporting to Nevada governor where he was really responsible for all of the mining, the environmental protection around the mining, water resources, forestry, state parks, state lands, and even Nevada State's historical preservation office. So, we're thrilled not only with his background, but his acumen and his role on our board. In April, just recently, we welcomed also Del Marting to our board. Del has an extensive resume in mining, mine development, strategic and operational finance. He started his career with Amax which is one of the largest molybdenum mines in the world, ultimately became part of Freeport-McMoRan which is the largest molybdenum producer in the world. And he did everything from supervising, production in one of their largest underground and open pit mines, as well as strategic planning, financial planning, and ultimately coordinating all of their global finances in a centralized European location. He also ran a junior mining company in Nevada. Got it open, restarted and into production successfully, and then took it public and sold it. He has a great financial and investment banking background and was a Navy veteran including service with a stint with SEAL Team 2 with the U.S. Navy SEALs. So Del and Leo are just tremendous additions to our board, and we're truly looking forward to what's in front of us. Operationally, let me just acknowledge that we have continued reducing spending in all areas, and we've achieved to remain in record low operating expenses in essentially every category. We're not aware of any Nevada-based production-ready junior minor that has a lower overhead structure, but that doesn't mean we stop there. We are continuing, and even this month have continued to identify and reduce costs wherever we can affect change that allows us to keep our capabilities and do more with less and more efficiently. We're currently projecting our lowest operational spend rate that we've had which will actually result in a full $2 million reduction over 2017, so full 2018 over 2017 being a full $2 million lower. And that was before the benefits that we see coming in with the Tonogold agreement. So our spend plan shows the cash operating expense of $3.6 million, and the Tono agreement improves that position because it allows for specific reimbursements of certain operating expense, namely Lucerne-related costs for environmental management, environmental insurance, specific land claims and related costs and permitting fees amongst others. We have that very specifically scheduled out in our agreement, and should result in a minimum of $1.2 million of cost reimbursement or cost reduction, if you will. These are reductions of our established Lucerne-based operating costs. Some of the costs are seasonal, especially the land claim and permit renewals. So this reimbursement doesn't necessarily occur evenly every month. In fact most of the reimbursement typically occurs in the third quarter months when we have land payment claims and permit renewals. Those are the types of things that have some of the higher obligations assigned to them. And so as we pay them we're reimbursed effectively in the follow month. Those ultimate costs are a part of - for clarity, they're part of the $20 million investment that's required by Tono over the term of the option agreement, and they're an important relevant directly related part of that. So it's all structured very, very nicely. Most, you know, obviously the last October we announced this collaboration with Tonogold led by Mark Ashley via their shareholders to be a little patient and I know that was difficult because the agreement has just and absolutely outstanding objectives around evaluating drilling, developing and ultimately delivering a full economic feasibility and will serve my project with what we are experiencing is truly a most technical highly competent and passionate strategic mining partner. Mark and I were extremely diligent when we established the initial agreement that brings this partner to us with strong technical expertise, we feel it's an extremely well aligned arrangement. We were both exceptionally incented to advance concern back into production. Mark continues to personally oversee all of these efforts remarkably with fully engaged in support of his team, including his board, working directly with us to ensure the most productive and profitable mine plant and operation is possible. They are literally onsite today working with us and they've been very, very diligent in all the works that they've been doing. They delivered clearly through the first phase of this agreement as we've operationalize collaboration. I would say just to give some color we speak weekly if not daily, we are collaborating through both direct discussions, our technical teams are working directly together and even through our working technical committee that Mark heads-up, we are moving forward. They've already invested almost $1 million in that first six months period for rebuilding and reassessing the resource estimates with really an exceptional focus on minable ounces and what would be minable ounces and ultimately establishing the proven and problem reserves the mine plant and the production schedule for the Lucerne Mine obviously we've always been confident about Luceren's potential but for those people betting against that Comstock Luceren resource. I think they are going to be disappointed because the results are developing very, very nicely. Tono themselves have publicly stated that they are targeting future operations that would provide annual growth production from 100% of the mine operation of at least 75,000 ounces gold, we are excited about that and also with cash operating cost to be under $800 an ounce. We are excited about that too, there is still a lot of work to do, but the parameters are coming together very clearly, the work is being done from the ground up and quality and diligence for us is much more important than speed but I do believe they are moving as diligently and as expediently as possible. Overall the second and third phases of our agreement requires an additional 19 million to be invested I things like engineering, drilling, development and test work towards completing these technique on economically feasible assessments and ultimately the reports that go with that. If you break it down, that means there is a little over 6 million that would be required to be spent in the next 18 months including the about a 1 million that's been sent so far. And as I said, some of those amounts in next 18 months would be also the reimbursements to us. So the second 18 months would then require a final $13 million, so very productive, very focus work that continues onsite and offsite. We would expect update a resource report sponsored by and published through the coordination of Tono. There is still some work to do before that can get back 43101 compliant technical report but they are working diligently on it. We have three other active strategic collaborations in progress that I'd like to give some color on, two of which we've publicly discussed and I'll give some color on right now. All of that is also squarely in the context of those advancing our other resource project that they have some feasibility work, so that we could also publish and produce a standalone feasibility report under them. As you recall last year, we had successfully completed some federally funded contest of Dayton mineralized materials through Cycladex Corp. Cycladex is a strategic investi, we owned 10% of Cycladex, they work on and off our site, develop technology attempting to provider faster and safer non-cyanide leaching solutions, it's based on their patented cyclodextrin recipient. And when we did that work last year at similar sizes with contest trying to simulate our historical leaching, we were happy. We were surprised to get up to 85% yields on the gold. Cycladex continues with their team working on the efficiency of their solution. This quarter, we completed a series of I would say prerequisite cyanide-based contest where we primarily for comparison purposes of some of our higher grade ores, higher grade virgin ores coming from the Dayton resource area and we got some truly remarkable results, we've always felt good about the Dayton yields, but these column simulations were based on ores teams specifically from areas that are included in our resource, taking resource model and specifically in some of the areas that have medium to higher ranges of gold grades like point out to three ounces a gold per ton on the low end and over or almost 0.05 ounces gold on the higher end these are exceptional grades or open pit mine plants. The cyanide columns we simulated leached incredibly fast. I mean, the gold reached quickly with recoveries that went up as high as 88% and didn't go lower than 80%. So we were not only surprised that the high low and the high, high but also the speed which they reach I think cumulatively, they were done for only 60 days but we got most all of that in the first 45. So we constructed six columns, they were done in the same protocol and quality controls of all our contest they were done onsite, they were our own lab results but we decided that they were certainly, they certainly exceeded our expectations and we put those yield curves in today's press release in our 10Q for all to be aware of. From Cycladex perspective they've now processed our minerals from the Dayton area on multiple types of experiments they've also experiment on over a dozen additional mines worldwide. I know they were in the Far East, they were in South America, constantly working on discovering a broader, potentially cheaper application of this technology when it compares cyanide. We feel like the collaboration has been very effective, they are now working on a design phase of a scalable proof of concept, I would call pilot plant, they might call it a process pilot plant, process plant it's all the same thing, but with them getting to the stage, they are growing a lot of independent investor interest and we are happy to see that too because that provides for independent funding and we are as I said a 10% owner of the company through our role in this earlier developments. More recently and I did discussed this also last year that over the course for the last nine to ten months, we've established the really exceptional working relationships with Itronics, Inc. Itronics is based in Reno and there the proprietors have an existing technology for extracting precious metals especially silver, from a multitude of sources predominantly fluid-based sources but across a spectrum. Itronics has funded the assessment of not only the efforts to extract residual silver from our existing leach pad, but also the effects of remediating our cost in that process. We've been working with them on this for quite a while testing our samples from silver and gold deep leach tailings as most of you know our cyanide processes have historically had good recoveries, certainly in the 80s of percentages for gold in the 50s or percentages for silver. And then, the recent contest we just mentioned showing even better potential. But their leaching methods, their attempts by leaching tests that were coordinated and paid by them and only performed in independent metallurgical labs have demonstrated to us that that there is a real effectiveness in recovering the residual silver certainly, the residual gold, some of the base metals and what's interesting is that as we've done that, we've also effectively neutralized the cyanide solution that was existing in those previously reached materials which creates an extremely attractive environmental solution. The other thing due to that, we were surprised to find that during those tests and while we were recovering the metals, the new [indiscernible] solution was being substantially regenerated during the extraction process. So anyone who's familiar with cyanide process, cyanide evaporates and gets destroyed in the process although there's always a residual cyanide in the ore samples, you are constantly consuming it in the process although it's an overall efficient means for processing, you're constantly consuming it. And so the consumption is a specific consumption of the materials used for extraction and there's a lot of materials that are available to extract gold and silver, it's just the consumption numbers are so high that they become non-economic. So what we learned is that this material was being regenerated during the process such that the consumption numbers were exceptionally low much lower than we thought and those dramatically reduced consumption creates a potentially compelling efficient economically viable solution. And so, those test results showed us that the cyanide residuals and materials were being removed by the new process neutralizing it almost actually all the way to drinking water standards, it was incredible, the results dramatically neutralize the cyanide, well effectively extracting the residual metals while still showing some efficiency in the use. So it was all seemingly very good now that that result has allowed us to make the decision to move forward and really figure out the streaming level economics of what this process would look like from beginning to end. So although all the pieces seem extremely attractive obviously we need to make sure that some of the parts equals a holistic solution that works and then also that would be scalable. So we're going to do some more feasibility work that we will expect to finish in this quarter that will give us potentially a pretty dramatic view of an alternative process here that we are only interested in if it is more economically feasible economically enhancing probably needs to be materially economically enhancing as well as environmentally friendly. So we're excited about the possibilities there and by the way both of these activities which are completely independent of each other all been coordinated by us in a way that allows us to apply all of these possibilities to the feasibility of our data resource. So in other words we're not blueskying R&D for potential global applications in other business roles obviously that would be interesting and compelling to everybody but we're very focused on seeing how do they help us immediately? That doesn't preclude the bigger opportunities but we just feel like if we can build improve onsite then yes then maybe it's much more marketable beyond. So we plan on publishing a standalone day in technical report this year, we already have sufficiency of data to update that technical report based on all of our conventional mining and processing technologies, all of our existing infrastructure and known costs and all the work that we've done since 2013. So we're very excited about that, parallel with that are these other activities that could effectively and meaningfully enhance that report or could result in separate enhancing reports, we'll see how that goes but we'll have real updates coming within the next quarter. Just switching and hopefully wrapping up on corporate, briefly on our asset sales I'm certainly not going to recount all of the extraordinary economic activity that's happening here in Northern Nevada but certainly in last January there was a meaningful event when the Tahoe Reno Industrial Center announced that in eight separate massive transactions they had sold the remaining availability of all the parcels of land at the TRI Center to a major software company called Blockchains LLC, they didn't disclose the purchase price but it's known to be $100 million plus, so it's pretty remarkable that in addition to test like Google and Apple and Wal-Mart we now have not only Blockchains enterprises coming into the industrial part but hard money has been placed out to buyout the entire part sold out in the context. And it's hard to exaggerate what's happening there as far as we're concerned it was extremely supportive of our agreement and to sell the Daney Ranch of $4 million. We're looking for that to be consummated here. There's still a possibility that will be done here in the second quarter but it might be more likely to be July but it's coming very soon that will take our debt down to even more which I'll talk about in just a minute. But we were also active within Korea across the board on our other non-mining properties very active, so there is more to come there but the macroeconomics just keep supporting higher and better values. In January we also move forward and agreement to acquire 25% of the membership interest of Pelin LLC for 585,000. Pelin is the 100% owner of the historic Sutro Tunnel Company. The private lands and patted mining claims that are owned by Sutro that is owned by Pelin are primarily hunt Gold Hill with some of them being important patented mining claims in the certain area. There's actually over 200 acres of private lands between the patented mining claims, the town sites and feed lots in Gold Hill as well as the entire town of Sutro. That we would put a value today on over $2.5 just justifying a loan for 25% purchase but really it was bigger than that Pelin also owns the historic Sutro Tunnel, I mentioned the town the Sutro but more importantly the rights to the federal lands that cover over 5,000 acres on 1,000 feet of either side of the six mile Sutro Tunnel expands. And actually the rights to the water that continues to stream out of that tunnel, so we really feel that there's a there's a huge potential for these properties as part of the Comstock district their central part of the Comstock district will be in working with the majority owners on mutual plans for optimizing in titling and ultimately exploring in developing these rights as part of the broader Comstock strategy. We issued the shares for the purchase to Peter Leonard. Pete is an existing shareholder of ours and a long standing advocate of our company and actually is the Ford generation direct descendent to the original mine manager and superintendent of the Sutro Tunnel company, so we're happy to continue to have Pete's - in the Comstock without question and even though the time the transaction hasn't fully consummated where the immediate proxy for the membership right, so we're as I said already working productively. With the majority owners and we have a very longstanding relationship with them they're also local based in Carson City. Including the Pelin purchase, the company's outstanding shares as of March 31 and today for that matter is $53.4 million. We did issue shares during the quarter to raise $1.1 million in net proceeds before we had proximity and knew that the Tono exercise was known even though we expected they would we really didn't know if Tono would exercise until very late March and frankly even into the early part of April. We're obviously held that they did. We received $2 million dollars in cash as part of Tono exercise and we paid down the prerequisite amount of the debenture bringing that number now down to below $8 million. It's $7.92 million. If you couple that with the anticipated closing of the Daney Ranch that would bring the principal balance down to $3.9 million upon closing that transaction. And as of March 31, we had cash and cash equivalents of $2 million on hand obviously that number is higher after the Tono exercise even despite the fact that most of those proceeds already and immediately went to pay down our debt. I guess, let me just close with the summary of the following salient points just as they relate to the outlook. Our net cash operating expense is number one. Our net cash operating expenses now would be expected to be about $2.5 million for 2018 with a full year of Tono benefits obviously assumed in that 12-month number. Our interest expense at the current debt levels would be $1.3 million, but we're working very hard to extinguish that number as soon as tractable and certainly hopefully before year end. Dayton will see an updated standalone technical report in 2018 as I said using known proven processes. We expect to see a minimum starting value, net present value, if you will, over that project at $50 million, but we certainly expect with the activities that are ongoing to increase that number to nine figures plus as we grow the resource and grow the economic shell. We're starting to see a Tono sponsored technical report. I'll leave it to them to provide good updates on the resource. Obviously, we're doing all that in collaboration. They're in the lead though and we respect that a lot. But updating the resource for certain and clearing a path for feasibility and ultimately production, we expect that the NPVs of these projects will already be starting in the nine figures and just grow from there. So we're talking about dramatic valuations just coming from Lucerne and Dayton. And as I mentioned with Dayton, there's very strong effort to see enhanced feasibilities from these alternative processes. Our non-mining asset sales will dramatically reduce and certainly expect it to eliminate our debt this year. That's another point of the outlook. And we're working on another pretty interesting strategic venture that I can't talk about now. But I fully expect we'll be covering during the annual meeting on May 31. Pretty certain that the May 31st meeting will be one of our best with a lot of detail and a lot of business to be delved into. Our partners are planning to be there. So it'll be a just tremendous opportunity not only to be updated but to get to engage directly with some of these folks that are doing some of these incredible things. So I will stop there, Savannah, and if you don't mind maybe we can just move right into questions.

Absolutely. [Operator Instructions] And we can take our first question from Harvey Molca. Please go ahead. Your line is open.

Good morning, Corrado.

Hey, Harvey, how are you?

Good, thanks. So what I'm seeing now is that we've increased our outstanding stock by 12%, is that correct?

Yes.

You went from 47 million to 53 million?

Correct, yes, as of March 31st and as of today.

Okay. And 688,000 of that was sold for cash at the markets?

No, 4.5 million of that was sold at cash at the market, 688,000 was the final component with IAA. We finished IAA off early in the quarter, because there was sort of a maintenance fee associated with that on a monthly basis. Once we completed it, we terminated it and closed it. So that's 100% behind us. And then we did 3.9 just a little under 4 million with Leviston during the quarter as well in terms of the…

Was that a cash transaction?

Those were all cash transactions. Well, there was a small fee associated with the Leviston one upfront that was non-cash but the - cumulatively, they were for proceeds of about a little over $1.1 million cash.

Which was what per share?

About $0.30 per share, I think that's shown in summary, in foot note six in the queue.

Okay. And then the payment, that was issued in stock, not in cash, correct?

Payment was issued in stock and it's a little different in the sense that it's tied to a cash value and depending on the share price there actually could be a scenario where we get some shares or cash back once the thing closes up and it's expected to probably close up end of the third quarter, fourth quarter. I mentioned which is important for us, that we have proxy over the membership interest at day one. So we're already working with the owners as if you know the property is ours and we're moving it forward, but the actual final title, closure, et cetera won't happen probably until then in the third quarter or early fourth quarter. Though shares were - it wouldn't be wrong to think of those shares as put on deposit for the transaction.

And the shortfall, because it looks like that the 588,000 was for 2.4, looks like $0.41 a share so there's going to be a shortfall that will owe them more shares, is that correct?

When we issued the shares, we tied it to the value; the shares that they issued and we're closer to where the share price is today. It was a little higher, but it was closer to where the share price is today. On March 31st, I think we were pretty close to our lowest point in terms of our share price so we had to mark that down, but it'll come right back up, I think, as the share price moves forward.

Okay. What's the relationship of Leviston resources to the company?

It's almost identical to the relationship that we had with IAA, but there they have a stronger institutional shareholder base associated with them so that we're constantly working on targeting new investors and bringing new investors into the story. But we do have a facility that allows us more flexibly than the IAA facility to pull equity, raise equity issues here for proceeds, if you will, with them at our discretion.

Is that their only position or is that just adding to their position?

That's their existing position and would add to their position.

Okay. Cycladex, do we anticipate seeing an income from them with our 10% ownership?

Well, so two things, right, Cycladex standalone company, patented technology, working on many, many fronts to commercialize it, getting a lot of international interest. I would expect that we would see, because they're still in a development stage, we would see more value appreciation from our ownership in them. But we also have free and full right to use the technology on our property. So the benefit is we have an ownership stake in whatever value they may accrue, accrete, but we also will have the free right, the direct right to use the technology for our properties.

So they will not be a recipient of the minerals that are on our property?

When you say that let me clarify. They could very well a very specific outcome one, I think that they would hope for is that they designed process facility using their technology that would be deemed feasible. And when I say that, I mean, by a third-party. And if they had a process facility that was deemed feasible by a third party, we would be very supportive of piloting that on our property with our ore. We would get the benefit of all that. And in so far as it comes to our ore and processing our ore and the profits related thereto, they would obviously get a huge benefit in full proof of concept with a fully operating pilot or bigger facility depending on what they wanted to do. So that opportunity exists for them/us together as partners. And I think in fairness it's almost identical to the opportunity that is being created with Itronics. And the difference with the two relationships is just the manner in which we're collaborating. I would say Cycladex is - their standalone company is forging forward hard with a very specific goal that we're incredibly supportive of. We have a supporting role. In the Itronics case we're really working - technically, our teams are working together more similar to what we're doing with Tonogold. So it's all positive, it's all good, it's just sort of a chosen motive that our partners pursue. So we're trying to position ourselves to get the maximum benefit in the - and I would use the term most sensitive capital way in all these cases we're not the deployers of the capital. It could be if we get to certain points in the relationship with Itronics for example, but right now the partners are have been really putting all the capital for work in all cases.

Can you touch on Silver Springs and Daney?

Yes, so I said it a little bit on the call but this the unexpected thing was Blockchains LLC coming in and literally cornering the market on the Industrial Park, I mean they bought up all of the rest of the available acreages inside the Tahoe Reno Industrial Center and the effect of that I guess coupled with USA Parkway being built was that people then started to look on the periphery and north and south of the park, I mean we almost immediately got like three inquiries on our industrial property by the airport in Silver Springs after the law changed announcement. There is also kind of a little funny article that Bloomberg ran saying something like gold mine are looking to from Google and Tesla's presence and they showed like, I think they showed Tesla's G4 landing on Silver Springs Airport which is adjacent to our Industrial Park. So we got a lot of good increase from that which is resulted in a sort of second phase diligence by some of these folks that are looking to step out and expand, also concurrent like coincident with all that happening, there were twenty, there's 20,000 acres adjacent to the Tahoe Reno Industrial Center that is right in between our Industrial Park, which is on 98 acres and the 80,000 acre Industrial Park. That property was owned and planned by the owner, real estate developer out of Las Vegas as a residential big residential development. There was a succession of ownership from father to the son and the son saw all that was happening with Tahoe Reno Industrial Center and about a year ago started making plans to rezone that residential acreage to industrial and I can't remember if it was January or February but in the first quarter, they got full approval from Lyon County to completely rezone that 20,000 acres to industrial. So when we say the industrial center is sold out, it's a correct, it's technically a correct statement that Tahoe Reno Industrial Center has all of its property been purchased by the broker but there's another 20,000 acres literally adjacent to it that comes right up to us, comes right up to our property and now what we're seeing is all of the new companies that are prospecting in are going South right and so that just draw everything right towards us in the airport. So we don't have any offers on the property but we've heard through the brokers that our water rights are especially interesting to folks, right. So people are probably looking at the Industrial Park and also looking at the water rights with and without the Industrial Park. In the meantime, there's at least four major developments the industrial one, two residential ones, and a commercial downtown that either has been approved, the commercial downtown was approved by county and the two residential ones are in the queue for being approved. So there is if you were thinking of this growth as a chart we're right at the vector of the hockey stick and I know that sounds promotional but just knowing what's in the queue, knowing what's being approved and all of the properties that are mentioned have their allocations of water, one of the residential ones might not have enough but most of them certainly we do the airport, the industrial park, the commercial downtown all have their water approved and allocated, we have excess water. So the people who have the wherewithal are moving in Silver Springs and it's very exciting. We'll see what happens but I expect there will be activity in the next two to three months that will be very real. Our Daney Ranch we have an agreement we are monitoring it. Intimately like we're very close to the counterparty and they're actively working on USDA sponsored loan which sounds like it's going extremely well and the equity that comes with their project is $15 million, $4 million of it is acquiring the Ranch and having the foundation for the facility they look to develop. So it's contingent on them getting that, so the lead time issue is simply tied to the financing, so we're looking good on that route. There's been some changes in the USDA administration and it's kind of a unique facilities it's taking a little bit longer but not in a negative way like in a very positive way.

So the on the 98 acre what do you have to provide?

So that the properties listed the 98 acres with the sufficient amount of water for a light industrial use and that's a variable we listed it 20 acre feet of water for $7 million and there's an additional almost 200 acre feet about 180 something, acre feet of water rights that are separately listed for about $4 million, so in total $11 million my guess is that the buyer of the property will want more than 20 acres of water right they may want all of them. We don't think that there's into a you need all of them for the industrial part certainly there are some applications that could would but it's less likely, so $11 million total for those properties.

They were saving enough water for our mining is correct?

Yes, so just as a side point, thank you for bringing that up, so the two reasons that we're talking about the [indiscernible] is in 103 and Silver Springs in 102 we have all the water rights we need and then some for our mining operations and they're fully separate from these that we're talking about mean which is a good thing right. We have a access water through your bottom-line in Silver Springs we'd have water for it but that's not currently on the plan but we have plenty of water for the Comstock there's no issue there.

Okay, good. I'll get back in the queue.

Right. Thanks Harvey.

Thank you.

Thank you. [Operator Instructions] We can go next to Jon Way. Please go ahead. Your line is open.

Hey Jon, how are you?

I'm fine. Good morning.

Good morning.

It sounds like you are busy up there?

Yes, I feel like a good busy, spend a lot of time reestablished in the platform but it feels like things are our forward looking now which is finer and more valuable as we get some traction here.

No, could you back to the CleanTech kind of alternatives group?

Yes.

The non-cyanide and kind of like, what your real objectives that and how much time for you having this are these guys just on the property thing reporting to you from time to time?

Yes, okay, that's great question. So with Cycladex, it's more like that, okay? So they give you good color like they hired two of our former lab chemical engineers and metallurgists, so they're right on site in that regard every day working in the labs, crushing samples, testing materials. They also have an office in Carson City in the envision lab and there but they've been in the some of the old Soviet provinces. They're really working the materials I would say more independent of us right we get updates that are weekly meeting on progress and whenever there's a need for support. We're happy to provide so that I guess say that's number one with electronics its offsite all the work and all the samples have been going through independent laboratory. The testing has been sponsored by there at engineers and the idea really is to see that their technology has been proven in other applications. So it's been used in extracting silver from fluid, it's been used for making fertilizer, it's been used for making electronic or recycling or electronic strap and mining from like circuit board kind of notions. That concept is could we together figure out a way to making it efficient, effective, practical on ore, right on mineralized materials and so it was kind of a, it was a very different motion of application. But for a very known established technology, so because they knew that they were willing to invest the initial amount of money and support to do all the testing, we were just providing for most intensive purposes providing samples of our ores and now for ores, but we feel right now we are to the point where we could absolutely collaborate on a specific feasibility study specifically on our ores and so that won't - because we have so much data, because of so much was independently tested. I don't think it would be that big effort to do what we would call streaming level economics, just essentially you layout your concept. But the process looks like you cost it a lot based on the testing you've done. You tested to see if there is a sales law. And then, if it's not you could move into a prefeasibility, which feasibility is pretty significant, right when you are talking about, the absolute economics for beginning and on this process working, because it extracts substantially all of the metal, which in gold and silver terms is a great thing. Sometimes in other terms like when you are getting zinc, copper, cobalt, sometimes lead, mercury, that's greatest thing, right you have to deal with separating those levels et cetera but by doing that you effectively detoxify your residual material. Then even if you are reprocessing leach materials or if you are processing Virgin materials from scratch, you are going to end up with something that not only have clean of the metal basis, but in the first scenario neutralizes - cyanide complex in the second scenario. That you signed to begin with, you could have a breakthrough. So we are very keen on the notion of, if we can efficiently assess something that's a known science. But when I say this very importantly like the scientific fraction is known, is good for certain days but that doesn't me it's efficient i.e. if you really look at the landscape of competing technologies in CleanTech. I mean, it's hard, I'm sure there is some out there but it's hard to find guys who have bad science. The ones that are making progress have good science but good science is only a prerequisite, it's necessary but not sufficient, right? This efficiency comes from mid, actually being achieved efficient, low cost. If we can do that part of it, which is not done yet, right if we can do that part of it, we will have something special. Now the reason we are talking about it is because when we were running through all the trials and we haven't done in pilot scale, we haven't done it on a larger scale. But when we are running all the trial, there was a regeneration of material, the main material used in the process that made it's net consumption very low. If the net consumption is very low, it might have a competitor to cyanide, that's the one thing that you talk to 10 different companies and they only dodge the question of efficiency and cost. They love telling you about I got 80%, I got 90%, I got 100%, but it has been more to get it then the value of it, right. So anyway that's something.

Is everything called just from the leach pad of those columns or just - are they gone into that mine to some level?

So just to compare and contrast, for Cycladex that we've been using Dayton ores the whole time, so it's do you want to call that Virgin ore and the test had been done on materials then we had history on with Itronics all of the initial testing we've done from samples on the leach pad and we've really surprising results and so just recently delivered Virgin ore samples from the Dayton because we don't see anything in the battery of test on the previously processed or that had indicated when work on Virgin ore having said that you could argue and so harder to do on previously processed [Technical Difficulty] with less gold and silver content in there to begin with because we already processed at the first time. So in reprocessing the benefits are certainly the value of the minerals that you can get out. But it also ties to lowering your reclamation cost and maybe even eliminating some of your reclamation cost and capital cost for leaching. If it works straight out, the process will look different than a leach pad. So that's what we are looking to study right now. Is there a better faster, cheaper way to do it with these materials we think there is a good possibility that there is.

How are you going to monetize the relationship with Itronics?

So we will come up with an agreement, certainly we are doing this much more collaboratively with them. Certainly, if they work the existing mines on the Comstock will benefit directly, but we are working on that campaigns right now, working very well but we don't, we are still too early like I think the screening net level economic work is pretty important variable before we even know if we have something to move forward with, but we are getting very close.

Thanks. One last thing, kind of a real simple question; we always talk about gold equivalent, the ratio of the silver and gold that are on the property? When I often believe it's so close to [Technical Difficulty].

Yes, so there is two answers, two different answers, right. One is on our property, this is holding true with all the work that I was doing with Lucerne and certainly all the experience that we've already have it closer, it's over 10 to one. So we have at least 10 ounces of silver and our resources to make sure every ounce of gold. So that's a straighter answer. On the gold equivalent question, it's just time that silver is trading at values that are if one area of gold meaning gold to silver value is 81 and most people would expect that number certainly to be less than 61 the famous discussion is always that it was historically 16 to one. No, if you get anywhere near 60, which is a - most people think is a normal or higher number, not a low number. Silver is going up faster than gold. Now I'm not saying that I did that per say I think gold has a long way to go up too, considering what's going on with money but silver's ratio to it is clearly handicap. I don't - now I think if you are one of the people that I guess on that ratio and there a lot of people that do you would say Silver is going to move faster than gold.

Basically.

Yes, yes. And we have a lot of it.

Thank you.

All right, thanks Jon. Thank you.

Bye-bye.

Thank you. And the time allowed for questions and answers has come to a close. I would like to now turn the call back over to Mr. Gasperis for closing remarks.

Thank you, Savannah. Well, folks thank you for your time, thank you for your questions. I do really encourage anyone that can to come out and visit us; May 31st is the annual meeting. It's going to be held at the hotel, the Gold Hill Hotel by the Comstock. And a lot of the stuff that we've introduced here will be - can be discussed, covered, touched, debated, and it's going to be a great meeting. So I look forward to all that, and anyone who has follow-up questions, please don't hesitate to reach Zack or I, may your convenience. Thank you.

And this does conclude today's call. Thank you everyone for your participation. You may disconnect at any time, and have a great day.