Comstock Inc. (LODE) Q2 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, welcome to the Comstock Mining Second Quarter 2018 Results Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Corrado De Gasperis. Please go ahead, sir.

Thank you, Cassidy, and good morning, everyone. This is Corrado De Gasperis, Chairman and CEO of Comstock Mining, and welcome to our 2018 second quarter conference call. Last night, we filed our financial statements on Form 10-Q for the second quarter, including a clean review as is typical from Deloitte & Touche. I'll also provide a summary of the information that was in that 10-Q as well as the press release that we put out this morning. We are advancing diligently and technically both of our mine projects and as I discussed to some of the folks on the call at the Annual Meeting, we have also established a remarkable real estate and now expanded water rights portfolio, [indiscernible] the fastest growing industrial and commercial part of this country right now, there the U.S. Treasury and the State of Nevada also certified the areas where most of our property reside as qualified opportunity zones, and we're seeing tremendous amount of capital flowing there. Before I get into that, if you don't have a copy of today's release, you will find a copy on our website at www.comstockmining.com under news/press releases. And I'll take this moment to say that we're about to relaunch our website in the month of August so we're very excited about getting better, clearer and more data out there. Please also let remind everyone that in addition to the outlook, I may make forward-looking statements on this call. Any statement relating to matters that are not historical facts may constitute forward-looking statements. The statements are based on current expectations and are subject to the same risks and uncertainties that could cause our 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 the forward-looking statements made during this call are subject to the same and other risks that we may not be able to identify. Okay. I will focus my prepared remarks, and I'll start with the Lucerne and Dayton progress, a lot going on there and that's refreshing for us. I'll talk about that non-mining assets, especially the water rights and the level of activity that's going on right now for monetizing them and how we're going to deliver higher values in 2018. It's dreadful in our mind, where the shared prices, we're very focused on it and the results on the ground are the number one driving factors. So let me start with Lucerne. As most of you know, at the beginning of the second quarter, we received $2 million in cash proceeds for the Lucerne Option Agreement, which advanced into the second phase of the Lucerne Mine development with Tonogold. We did immediately use the substantial majority of those proceeds as required to pay down the debenture. The debenture in early '17 was originally almost $11 million and it now sits at $8.4 million, so there's been a dramatic reduction in debt, we're happy about that, this Option Agreement was a big part of that. But most importantly, the Tono teams has been extremely active. They're a very hands-on technical group of professionals, they're making excellent process from every perspective that we could see on the Lucerne assessment starting with the geology clearly from the ground up. But frankly, their presence on site, their presence in Nevada, their presence with the county, with the state, even with the federal government has been outstanding. I'm impressed and they're even on-site today and participated in the dinner with us in the board last week. So I want to just give everybody a sense of how the option and the partnership is working. From my perspective, it's really progressed on the technical assessment of Lucerne project, I know that these things typically feel like they take longer than they should, but I can tell you that the activity is daily and they are planning on issuing. This is very exciting for us and it's very important on the -- ultimately, for our underlying valuation 2 national instrument 43-101, let's just say 43-101 from this point forward, 2 43-101 compliant reports. And the first one is eminent, I think they're expecting it in August. Again, there's multiple parties involved in publishing these reports. So I'm not committing exact times, but the report is eminent this summer, we believe, may be next month here in August and that would be wonderful. And it's growth, the property of merit report, a property of merit report is a new category for 43-101s, but it's really robust in subsequent tiers in so far as it relates to almost every aspect of the properties merits, be it the land and the titles, the metallurgy of the ores, the infrastructure of the permits. All of the things that are relevant to some of our properties that needs to be easily entitled for mining. And then, second to that, I believe that they're expecting a very robust updated resource report, which will also of course be NI 43-101 compliant later this year. So the relationship is now becoming long established. It's maturing in what I feel is an incredibly professional way and they're finally going to get to the point where the fruits of all of this hard work is going to -- it has been published, and we're very excited. Both of those reports will provide a tremendous amount of updated information on Lucerne across the board. And they're also foundational, as I mentioned earlier, for developing preliminary and ultimately full feasibility associated with the specific mine plans. This is really the work that's got to be done to demonstrate the real value of the Lucerne project. I guess on a closing note with Lucerne I'd say that Tono has been fully timely on all of their commitments, not just the $2.2 million in option payments, but we probably had about $0.5 million of expense reimbursements since inception of the agreement, and we're probably -- not probably, we're scheduled to have over -- about a $0.5 million just over the next couple of months. So we're becoming more and more confident with all of this from a technical, financial and ultimately developmental perspective. This is -- it's happening. It's really great. So with Dayton, I'm very excited to talk about Dayton today because there's been such great development which has been the result of a lot of internal hard work, and we've actually made some remarkable progress. So a few weeks ago, we announced that we retained Behre Dolbear to produce the first standalone independent 43-101 compliant report for the Dayton Resource. And we're targeting to publish that early in the fourth quarter and then sooner after, we'll publish a second 43-101 scoped up to what is called a PEA in our industry, a preliminary economic assessment that will either follow later in the same quarter, fourth quarter of this year or early in next year. The Behre Dolbear is actually on-site today for most of that kickoff work that they're going to be doing. The beauty of the process for us is that the reporting is based on years of internal work that we already completed. And we'll include a completely updated three-dimensional model for the Dayton project, a new resource estimate, the relevant economic scenarios for mining and processing, the Dayton material and really better established project economics and then again, ultimately valuations for the Dayton. Anyone who has any sense of [indiscernible] with our company would recognize that the value of Dayton, the value of anything is not recognized today in our stock. So these reports are grassroot, ground reestablishment of demonstrating to people how incredibly valuable these mining properties are. Just a brief summary of some of the things that we've done on Dayton that will be reflected in the technical reports. We've massively increased the property position, both mining claims and private land, including more than 350 acres of contiguous private land suitable for a mineral processing site, all been added since last technical report, we achieved a landmark Lyon County master planning zoning change that broaden the potential land use in this third mining an appropriate use for those historic mining patterns. We completed underground geologic mapping of the accessible historic mine workings and what's wonderful out there is there's large accessible audits that are allowing us to do a tremendous amount of sampling without having a drill. So we've been underground assaying, sampling and geologically interpreting all these mineral structures. We've also drilled though -- since the last technical report, we've drilled over 400 shallow holes, totaling over 30,000 feet and when I identify mineral structures covered by shallow Lucien [ph] that really, really improved and extended our view of all of the -- the main mineralization. As a separate point, we've also done a tremendous amount of non-cyanide. Trialing people are aware that we've had expanded trials with Cycladex where we're using the Dayton materials in those subject trials and now we've also done the same thing with Itronics using the KAM-Thio metallurgy recovery process. What we feel there we've had a breakthrough from a metallurgical and cost perspective. So we are now further advancing what we call screening level economics of a pilot facility for using that process on those materials. We've also done that with the leach material. So there is just tremendous amount of data. And internally, we run a large number of economic shelves that are being developed and iterated regarding the grades and ultimately it's the foundation for the preliminary economic assessment that we would be publishing in these technical reports. So all that is great but then just a few weeks ago, we had major new discovery in the Dayton. Remarkably because of heavy rainfall, we think it's really -- wasn't like a weaker rainfall, we think over the last two years, the saturation has exposed and revealed to our chief geologist, multiple new recognized mineralized cost-cutting structures. Again, underground [indiscernible] added. So as we identified and visualize those structures, we started pulling some samples out and now just before I can say this, the existing resource that Dayton already has a series of mineralization, they're incredible. We've previously reported assays in a continuous zone of over 200 feet with average grades of over 0.05 ounces per ton of gold. This is an exceptionally high grade for an open-pit mine. The full extent of the shear zone and the multiple new structures that we'd identified haven't -- is not known. And I mean it's just the beginning of what looks like three massive crossing structures, but we immediately sampled the material and we got -- we discovered a 3-feet run of over a quarter of an ounce of gold per ton and over 3.5 ounces of silver per ton. So that's remarkable. I have to go back and check our database, but those have to be the highest silver grades that we've discovered from my memory either in Lucerne or Dayton to date. The quarter of an ounce per ton of gold is nothing to sneeze out either, but we had -- we've seen that and higher grades of gold throughout. So we were really surprised by that, we were excited by that. But then the report also showed exceptionally high grades of zinc, tungsten, selenium and other minerals that are going beyond the gold and silver. So these minerals, we've either had very, very low or undetectable levels of in the past. So this is a new discovery for us as well. Normally, we'd only focus on the gold and silver anyway, but when you consider some of the breakthroughs we've had testing the alternative solutions especially the KAM-Thio, where we really have a goal or an expectation of low to 0 waste, these additional materials become valuable because they had to be economic equation if we're processing in those alternative ways. And I can explain that more maybe in the Q&A if people are interested. But for me, what's evolving and what will be published this year is a minimum of 3 and potentially 4 technical reports. 2 for sure with Lucerne, 1 for sure with Dayton and hopefully 2 with Dayton if we're expedient enough and tying all this information together. From a corporate perspective, and when I say tying it together, in the Dayton's case, the updated technical -- first technical report is a critical prerequisite to being able to do the PEA so there we have to do that in sequence and then -- and we will. So let me sort of come back with -- from a corporate perspective, we've continued reducing costs and liabilities. We've paid down debt and we have a $1.5 million of cash on hand, everything is stable. Every one of our cost categories is lower than in prior periods. Overall, period-to-period our costs are down an additional 25% from historic lows, so we're now definitely at our all-time lows for the platform that we've got together, and we maintain that platform. So we're fully permitted. We're fully compliant. We're fully established for us, for Tono and for growth. We're liquid, I mentioned we're compliant, from a current year perspective, we're compliant with all of our regulators, including the NYSE, which is a huge partner for us, and we've never been more busy from a team perspective, diligencing and working on our non-mining properties. One of the real benefits of the Tonogold team really assuming strong ownership of the project is it's freed up our time to focus on this. I know this is an area where people feel we haven't made significant or sufficient process, but I really want to say, and I want to confirm that the activity on the ground, the prerequisite thing that you would expect to see to monetize non-mining -- these non-mining asset has just -- has grown exponentially. We right now have 4 credible parties, 2 from Canada, believe it or not, 1 from Texas and 1 local that's assessing the 98 acres by the airport. So we're really busy talking to people, introducing people, touring people, our partners are busy helping it. As people know, the 98 acres includes over 200-acre feet of the most senior water rights in the basin. Just a few weeks ago, the Vidler Water Company announced the sale of a 500-acre feet of water rights in Lyon County to a real estate developer for $10 million cash. So that's $20,000 per acre foot. Then another one of their subsidiaries agreed to sell over 70-acre feet of water to a developer near Reno for $35,000 an acre foot. We were predicting the post $20,000 acre foot value in this timeframe. The $35,000 was a little shocking. So not shocking, sort of quickening, right? We've seen those levels before, but we just -- I didn't realize we're getting to those levels this quickly. We did step into an amazing option. It was very opportunistic to acquire an additional 400-acre feet to water rights in Silver Springs at a future cost of $5,800 per acre foot. Now some people are like, what are you doing? And I understand that. But we are just so intimate with what's happening on the ground when the option became available and with the clear water values and land values being below what we're seeing happening all around it, we stepped into the option. But before we did that, and by the way, this is a 160-acre property that's an approved commercial development with the water being allocated for that property. So that's a big deal. But before stepping in, we amended the option to make sure that both same water rights that were not just that they were approved on the development that they could be used anywhere. So it's going to be impossible -- it would be impossible for me to explain all the implications of becoming one of the largest water rights owners in the basin in that area. But for now, let me just say that it just exponentially increases the alternatives and opportunities for us on how we monetize this. And I can also assure you that in the next 3 or 4 months, that's going to be known, right? it's going to be much more specific. I don't know, which one of the alternatives will cross the finish line, but we have so much more flexibility. Every conversation that we're having about these non-mining properties and just as an aside, most conversations that people are having even around mining properties start and end with the water. So we really positioned ourselves to have the most critical piece of these assets as we're going forward and our board is absolutely clear with me that our number one objective is to monetize these assets, eliminate our debt and move our mining projects forward. And so we would be juggling a lot of things and dealing with a lot of things, now it's just clear focus, and we're moving straight ahead. On top of all of that, last month, the U.S. Treasury confirmed that Storey County, Nevada and parts of Silver Springs, Nevada, in Lyon County, had been certified as newly created federal Opportunity Zones. Although, I touched on this briefly at the Annual Meeting, I wasn't aware that in addition to the parts of Silver Springs that were approved and by the way those parts absolutely and certainly include our 98 acres and the 160 acres, but that all of Storey County was approved. If I had known that, I would have been screaming at the top of my lungs at the meeting, but I didn't know. Nevada really was razor sharp, the governor, Dean Heller and others at recognizing that Storey County technically qualified and was able to drive through the approval for Storey County properly and when you consider that the Tahoe Reno Industrial Center and the Silver Springs Industrial Complex is going to get hit literally, and they're both now qualified as Opportunity Zones, which I can explain a little bit better, but sufficed to say the tax incentives for capital to come to the area are off the charts. And we've already seen people crossing the Silver Springs, put deposits on property, and we're now seeing actual funds being formed to pools of capital to start investing in the area. So I know that it's been a long running, but when we look backwards and we think about the companies that are coming in, the USA Parkway getting done on time, the projects that are being submitted for approval and now the developments that are starting to occur, it really is following the paths that we predicted and it's just complex development. So it just takes longer sometimes to get all these things done. Just wrapping up, we did issues some equity in June to secure these properties. Again, it was opportunistic, and we are in a perfect position to capitalize. So we did. It doesn't change our strategy at all. It only enhances the possibilities of how we would best monetize these assets. This is -- there is just so much capital that's coming [indiscernible] the properties, and I'm on the front line of all of these negotiations, right? So I'm very intimate with it. The hotel will close in October. It's sold. We think that the buyers are just a remarkable group that are going to enhance the hotel and the area. And the Ranch, although we still are in agreement to sell, disappointingly the financing relating to it has delayed that process. And I am personally hoping to help get that back on track so that we can have a Q4 closing on that property. Both of those properties are one deeply in escrow with almost every prerequisite checked off moving to close, that's the hotel. The other was just an agreement to sell subject to financing that is going to get done. I just need to help I think and then with the property and that the marketing, but they're both still being marketing, and they show extremely well. Let me close here by saying that with the economy up and the stock market high, ironically, these Opportunity Zones are going to create a tremendous amount of capital for us. The gold is suffering and so are their share price. And I know that our share price is not suffering just because of the macro. I know that our share price is suffering because we have to demonstrate and market what these technical reports are going to show for Lucerne, what these technical reports are going to show for Dayton. I know that we have to demonstrate and execute by monetizing these other assets, by limiting our debt, I know that we have to execute by funding and moving these projects forward. Our board is fully engaged in all of this. We welcomed Clark Gillam to our board right after the Annual Meeting. We're thrilled his financial acumen and natural resource experience has really added to our strategic planning and governance. He's participated in our last two full board meetings along with Del Marting, Leo Drozdoff and Bill Nance. And the focus and productivity of the entire board as far as I've been experiencing has never been higher. So Cassidy, I think I should stop there. And let us turn to questions. Cassidy?

[Operator Instructions]. The first question comes from Jon Howe of Wedbush Securities.

When you talk about the non-cyanide alternatives I thought that you're experimenting with for the resource?

Yes. So let me just use one example. When you look at what we're doing with Itronics because they're further advanced in terms of the metallurgical testing that we've got and the cost aspects of it. We're already moving now to sort of screening level economics for example for a pilot plant. And so what's interesting about the timing of that is that as we're doing an analysis with preliminary economic assessment for Dayton. And then that analysis is based on the conventional cyanide-based processing that we're very experienced with. Like we have total history with, we have actual data with. The technical reports will reflect that, but if we advance the non-cyanide solution, there's actually an opportunity where for example in the Dayton PEA, you might actually have a cyanide solution and a non-cyanide solution economically assessed side by side. So we're really getting to a mature level with these, call them alternatives, clean technologies. And if the screening economics say it's profitable, it's going to be a home run, if they say it's even more profitable, that's better. And that's what we're going for. Like if I would answer, the most important part of your question is, look if the first phase of economic shows being with the value of $40 million to $50 million and that's my expectation rate is like with no increase in resource, just carving out reserves and the preliminary economic assessment, how much of this thing worth? How much cash will go up? Well, then what happens if we increase the yield, if we reduce the waste, if we eliminate reclamation cost because it's clean technology. What is the $50 million become? Is it $100 million? Is it $120 million? And I use those numbers directionally because that's what we're talking about in terms of a breakthrough and none of that is tied to expanding the resource through drilling, which we're very excited to do, it's the normal conventional way to go but we're feeling like we could establish good value day one, great value day two and then drill to expand that, right? So it's a safer, better way to go. So I hope that -- does that give some context in, Jon, in terms of what's the relevance of what we're trying to do with that?

Yes, it does. I guess I'll go back to the valuation of Lucerne property. Was that overstated?

So well, I mean in terms of our share price, the answer, in my mind, is absolutely no, right? Because our share price is still very extremely low. The resource in Lucerne, what we've said -- so first of all, the first resource that we published was unconstrained, meaning it had very, very low cut offs, et cetera. Since then, the 43-101 standard require sort of a concept of economic feasibility to put on every resource. So that's number one. The Tono guys will increase the cutoff. They could increase it almost double. And if you do that, then ounces that we saw there that were below a certain cutoff wouldn't be included in the resource because they would be deemed nonfeasible or noneconomic. We also learned quite a bit through the mining process and so one of the things that the Tono guys are doing are really reconciling, they're fully reconciling the original resource to the actual mining. And so I think if you get stronger, tighter assumptions, if you have higher cutoffs, if you have new information that allows you to reconcile, we're expecting, and I think they've been open, we've been open and that we're expecting a smaller resource. I mean it could be a 50% smaller. But if you're talking about 700,000, 800,000, 900,000 ounces, very, very strong, very tight, very well assessed for economic feasibility. And then you carve out of that 400,000 ounces, I'm sure they would want it to be 500 or 600 but like -- I'll just -- let's just get a starting point. Those would be proven and probable reserves. So we've never had proven and probable reserves. So the resource will be smaller. That doesn't mean you can't drill to then grow it further from that new base, but the reserve will be unprecedented. It would be new, it will be a first and that's fundamentally, there is a life cycle evaluation here where properties are valued, preliminary resources are valued and reserves are valued, reserves are the most certain, most definite, most tied to the cash flow. And there is work to be done, there is obstacles and risks to overcome. They're very real, but if you establish that kind of reserve, the valuation -- it's got to mark up dramatically. So if you combine the potential of a big Lucerne reserve and a small Dayton reserve, you're in a whole different world. And that's -- if it kills me or not, that's what we're getting to.

One last question, please. So the purchase of the Silver Springs property or the option on that. How would you go forward with that and pay for it actually to own it? And then, just please speak to the burn rate for the year where you're at right now? And I'll just sign off.

Oh, no, no. There's no problem. Thank you for the questions. I appreciate it. So let me use the first one. So our burn rate, we have about $3.5 million of operating expense. People ask me how that breaks down, and I typically say, $1 million in public company costs, $1 million in payroll and $1 million in maintaining the platform, maintaining the mining permits, the insurance, all of the things associated with having a fully permitted infrastructure. You could say, $1.2 million for each if you want to tie out, right? And in the Tono agreement, they're subsidizing about 1/3 of that, right? And that makes sense because the idea was they would subsidize maintaining the primitive platform, and we expect a $1.2 million. But the $1.2 million is not linear. It's not like a $100,000 a month and by far the largest reimbursements are July, August and September. So I have to just think about the schedule. But out of the $1.2 million, we're probably going to get $600,000 in the next two months and maybe $700,000 in the next 3 months total. So that helps dramatically with the burn, I would say that the burn is, should be $300,000 a month if you're looking at $3.6 million. We're reducing now that with the subsidy, but it should be way better in the second half of the year than the first half of the year because of the timing. With the property, we've got a commitment for -- to issue preferred stock, if we don't have -- these are fourth quarter events so they're not eminent per se. We don't want to give, obviously, these over share prices. We think that this is ultimately accretive because of the value of the properties, it's not just that the -- we knew the 160 acres in the water rights valued at somewhere between $16 million and $18 million today, okay? But just having the option over them has already increased the level of dialogue about developers coming in. And we've already had two discussions, we're combining the 98 and the 160 and combining the water rights and being able to use the water rights sort of more a discretionary has increased the debate about someone buying it. If we end up having a transaction before them, then we wouldn't have to -- we wouldn't have to issue that instrument. If we did, the instrument would be privately placed. There would be a whole period and it would be our view that it's imperative to work, then convert than it would convert at a much higher share prices. So we're in a little bit of a complex situation where we're trying to capitalize and having all that's happened, there's got to be -- I know that there's got to be a little bit of patience and face that, these assets have these values, we'll just -- we don't want to debate it very much, we just want to prove it by delivering transactions and remember that we're going to do that. So thanks, Jon, for all of that. I appreciate it.

Our next question comes from [indiscernible].

Actually, he just covered most of the questions that I had. I did have one other thing. If you can simplify for me and probably others on the call the real estate portion, just with maybe a bullet point of what these real estate values are estimated at and kind of a general thesis or time line of when you expect they could conclude? Let's say, obviously, that's looking in the looking glass, but if you can give a general idea of that.

Sure. So let me do the land piece first. So we're looking at 98 acres and we -- and 160 acres. We're paying -- we paid actually, in which case, about $3 million, $3 million for 98 acres. That's $3.5 million for the 160 acres. So very comparable purchase price in those cases. What was stunning with the 98 acres is that we got 257 acre-feet of water as part of that purchase, right? So the -- we've already sold about 50 acre-feet at $10,000 an acre-foot. Obviously, if I laid it out, that's $20,000 an acre-foot because that's the deal that we did for our transaction a few weeks ago. So that puts an over $4 million valuation on those water rights. The 98 acres and the remaining 200-plus acre-feet of water are currently up sale at $14 million. And we would certainly sell the land separately. I'm not sure that it would make any sense to sell the water separately because developers are looking for land with water. So the two are combined in a listing of about $14 million. Obviously, we're trying to pair at the market with the comps that we're listing it at, but we're flexible to see what the projects are and what the needs are and how much water is needed, how much water is not needed. On the 160 acres, we're getting -- we have the right to buy 392 acre-feet at $5,800 an acre-foot. So we would put -- we're seeing properties, small properties like this, 40 acres, 60 acres, 100 acres, being marketed for $30,000, $40,000 an acre-foot, even -- I'm sorry, $30,000, $40,000 an acre and even higher if it's being subdivided and sold on a square foot basis. So we put the value, to summarize, on any of the water rights. The senior ones are over $20,000. The junior ones we would put anywhere from $12,000 to $15,000 today. On the -- so if you just looked at the 98 acres plus their water as a block, we've got a $14 million valuation on that. If you looked at 160 acres and their approved water as a block, we have a low range of $15 million to a high range of about $18 million on that. The total cost ultimately is for the 160, 400 -- just under 400 acre-feet of water and 200 units of sewer, which fully enables the project for the commercial development, for us would be about $7 million with, again, a value looking between $15 million and $18 million. So the goal is not to be a commercial developer, the goal is to package these properties and water rights for their ultimate development to a developer. Hope that helps, Tom.

It does. And then just really quick, I mean, you touched on it, but what about the hotel? Where do you expect them to close at? What was the cost in the ranch?

Yes. So the hotel, we produced rights of about $800,000. And that's -- we [indiscernible] like $750,000 that's scheduled to close in October or earlier, October 19 or earlier, as what the script in the contract says. We're putting an additional deposit down because it was originally scheduled to close in August, but there is just a little time expansion, just getting some of the titles here, entitlements. Now that's straightened out with the county. There is no obstacles. We're 99.9% through. The ranch and the hotel, that's about what we paid for. It's a unique country and it's [indiscernible]. The ranch, we bought for $2 million, we have listed for sale for $4.4 million. We have one agreement for $4 million to buy it, but it's subject to financing, right? And the feedback, I'll just be very precise on this one. The feedback on the financing has been outstanding, and there was an effort to use a USDA process to get a loan for the development of that property further, which was very encouraged by the USDA, but they needed a personal guarantee. So it kind of threw the buyer a little bit, that they were looking for a personal guarantee. It wasn't required by previous Navada USDA folks. Now it's required. So I think there is going to be an effective workaround to satisfy everybody. We just haven't done -- haven't gotten it done yet. So I think unfortunately that the rate of -- kind of we're looking at a 90-day process from getting the letter of encouragement, and that's still the spot that we're at. So I'm very optimistic, it's just a phenomenal property, everybody that looks at it, right, almost saying how beautiful it is. We just got to be -- we got to be more aggressive in marketing. I've been spending most of my time, honestly, on the industrial and commercial properties, but now I will be focused on all of them.

Our next question comes from Paul Bornstein of Black Diamond.

You just had a question since obviously, a lot of the focus is on selling your real estate properties. If you could get that on the side because we don't know when that's going to happen. You look like you've got some good assets, but you never know on the timing. And -- but that's probably one of the reasons your stock isn't performing because people thought it would be done by now. So that's a negative on the stock even though it should be a positive because we don't know when it's going to happen. But I'm just curious on your mining fundamentals. You have a little money in the bank. You don't want to float any stock at these levels because your stock is at an -- almost near its low again. And I'm just wondering, is there any other people you're talking to, companies or other people that might want to put money into the project instead of going to the equity markets to raise capital if you need to move this along further? Because again, more money in the bank, you might be able to move this along quicker besides the resource report, which I think you have enough capital for, but in terms of trying to get the mining outside of the equation going a little faster.

So the answer is yes. I think that when we announced the Tono agreement, originally, there was valid wait-and-see sort of sentiment. And that sentiment is still valid but much less so now than a year ago. Since then, to answer your question precisely, we have 3 MDAs, and 2 of them were in dialogue with the similar notion, right? So we really do like the notion of good, competent technical parties like Tono investing real capital to advance the project that we'll all benefit from. So there are other discussions. I think I would say one is early stage, one is intermediate stage, and one is a little different, right? So I would say 2 of them look and feel -- like Tono one is very different, but we're very engaged.

Okay. Well, that's a good plan of action given in two years where I get some progress on the -- some actual progress on the real estate side of the equation. You might just have to do that to show the value of your properties. Hopefully, you get some momentum.

I know we will. I also believe that consistent with what I just said, the work that we're doing with Dayton to really bring fully up to speed and published technically, very efficiently, will not only advance the discussions that you just referred to, but they'll give us a much better posture in those discussions, right? Because we already have something very, very meaningful to start with. So I think that's consistent. Thanks, Paul.

Okay. Well, that's a good answer. So that's what I want to see even though your stock is way down. But some of it's not your doing. That's the marketplace on metal stocks, so I can't blame that on management. So looks like you're making the right steps.

Thank you. Well, we've got a lot of work to do, but we're chopping it. Yes. Thanks, Paul.

Next question comes from Ken Fan [ph], Private Investor.

The last few reports that you sent out talked about a $500 million valuation by 2020. That's not in this report. On the -- earlier this morning, the market cap was less than $12 million. I'm looking at a report now on Yahoo! of insider transactions. Over the last 6 months, there were 226,500 shares bought and 1,679,581 sold for net sell of about 1,453,000. That doesn't seem to add up to me. You mentioning before numbers for the gold of $50 million, $100 million, $120 million and tens of millions of dollars real estate value. Can you tell me what I'm missing here?

Yes, absolutely. Thank you for the question. If you don't mind, I'd just like to just start on the trading, just to knock that one off. So yes, but the 226,000 shares bought, that was me. And if I'm not blacked out, I'm going to be buying more because I think the valuation in every mathematical way is stupid. And that's on you too, all right? So I got to break through and make sure people understand these technical reports will help me dramatically, but we can do a lot more regardless. The shares that were sold were technically not sold by an insider. They were by an affiliate, and we understand that there was a very specific tax-loss sale driving that for a June 30 fiscal year-end. So I don't think that, that investor is a seller. I feel really strongly they're not a seller, but they did sell in June. So if you adjust for that, I think that that's net insider buying, and I think it's going to continue because we're just dumbfounded -- we're not dumbfounded. I understand some of the technical complexities of getting reserves established. I understand some of the overhangs that come when you have debt and you're not cash producing. And I understand the expectation of monetizing these assets faster. And I just want to -- I want to footnote that before I come to the big valuation question, which is the best question so far, not disrespecting anybody else, but that if I were sitting here and the activity level in Silver Springs in the industrial parks and in the land and real estate and the water rights was the same as a year ago, I would have massively reassessed our assumptions and changed paths. But the opposite's really happened, and we're getting very motivated, I think. I'm feeling very much that when we talk in October and November, we're going to say, yes, finally, and then we'll get some breakthrough here. In terms of the valuation, in the Annual Meeting -- and I'm going to -- I'll put out another update -- it's something we've been reviewing with the board. But when I mentioned $100 million, $120 million -- I didn't mention it, let me start with that when I mentioned $40 million to $50 million with Dayton, that's putting an initial value on the Dayton property with the existing resource and a very, very small reserve carved out of it. Remarkably, even using an $800 gold cutoff, the open pit stirs off almost $40 million in cash in two years. So there's a nice real starting point there. But it's always been our view that the ability -- and it's about 500 feet or 600 feet of claims on a 1.5-mile strike. And so obviously, there would be some drilling and development to go there. But we have the notion, our view would be -- and as a feasible target, blessed with the fact that the geology could strongly suggest certainly a doubling, but we're looking at a 3x on that number, so to get $120 million to $150 million. And I want to -- I just want to say that these are expectations of value that we will create with these assets. If those expectations were ever invalidated or somehow derailed, then we would be looking at a different tack. But we don't see that yet. So $120 million, $150 million valuation of Dayton. That was [indiscernible] -- that's really a notion based on the strike length of the known geology that we've laid out. In terms of the Lucerne, we've got a 400,000-ounce initial reserve. I haven't run the economics, but when you're talking about 2.5 million, 3 million ton per annum type of operation and you're looking over maybe a 4- or 5-year period, you're going to start to show valuations, again, in that case in the $120 million to $150 million range. And as I talk about those types of valuations, I'm using sort of cash flow, which is obviously the best way to look at values. We historically would see in the mining sector, if -- you would get value on cash flow, but you would also get value on resource and resource expansion that would be known. So the numbers could even be higher. But for me, for Lucerne to achieve a $200 million value, really to me, I can't imagine that Tono would have wanted to be in this project if they didn't see at least that potential and more. So you have a base and -- in my mind, you have a base of these assets that should be, even in the aggregate, a starting point of $150 million, $160 million and then a development point that gets you closer to a $250 million to $300 million and maybe even higher using some of the higher ends of the numbers that I established. Now just with what we're seeing with the clean technologies -- and I'll only talk about the one that we're most advanced on. So with the KAM-Thio solution -- and by the way, thiosulfate, there are 2 majors right now, and we might be the most prominent, investing material dollars into thiosulfate development. So thiosulfate is nontoxic, and nobody knows exactly what this KAM-Thio formula is, but we know there is thiosulfate base in the equation. So we were able to prove -- and this was stunning. We were able to prove that -- and I'm going to take a step further now because when we talk about screening-level economics, we are talking about reprocessing or we're talking about processing the material a different way, and we're talking about, in some cases, even reprocessing material on the leach pad. And let me be specific, the screening-level economics that we're doing with Itronics, we're designing a facility, and it's not big and huge and hairy. It's like a $12 million to $15 million facility that all has conventional mining, it's all conventional mining technologies. So we're just talking about fine-crushing, scrubbing, maybe a slow ball mill, rod mill, et cetera, so everything that's been used in the industry. And the reason we're doing that is because in the metallurgical test that we did with Dr. Whitney, just getting to 100 mesh, we were able to show very, very high yields. We were able to show a full destruction of the cyanide complex on the leach pad, clean, organic, nontoxic residual materials and, shockingly, the core mineralization screened out based on different sizes to the organic original mineral. So we were having -- we had silicas, we had quartz silicas, we had pure silicas. We had potassium-enriched materials and even aggregate-ready materials. So we looked at all those materials and said, "My God, just use the leach pad first, and then I'll go to do it in second." On the leach pad, I mean, we've got a scenario where you have a $7 million reclamation liability. That's what that asset is on our books today, right? You've taken out 85% of the gold, you've taken out 50% of the silver, and you're left with a $7 million liability. That was our plan. Now we're saying, not only could we get a meaningful amount of the residual silver, like 50% of the silver trapped in that leach pad, we can get some more gold. But we can also extract -- and I'll use very little numbers, like $10, $12, $15, $20 -- let's say $15 a ton of resale. If you resold half of what was on that leach pad, silica or aggregate and these materials, they're being used in trucking, they're being used in construction, they're being used in fertilizer, and it's exploding in this area. Now you might turn a $7 million liability into a $20 million to $25 million asset that's producing cash on a daily basis. But that's not -- that was nice. That really wasn't the purpose of the test. The purpose of the test is if it works on spent ore, what does it do on virgin ore? And so then you take the Dayton analysis. And again, I'm going to be specific, probably too specific that we have 6 million tons of mineralized material there. We have 1.5 million carved out in this small dipper pit that's using an $800 gold cutoff. If we -- if the screening-level economics that we're doing with Itronics work comfortably, 1.5 million tons of ore out of 6 million, which is a strip ratio of like 2.5:1, could become 2.5 million tons of ore or 3 million tons of ore. Now you're strip ratio is 1:1. Your cost is up dramatically. Your gold and silver revenues have increased dramatically, but then you're going to have residual sales for other materials like silica, aggregate, et cetera. It's a breakthrough that would be difficult to exaggerate because it could immediately double the economics on the Dayton and could triple the economics on the Dayton. And from my perspective, the $500 million target, not high in the sky, it's based -- and these -- I'm using these examples for all the metallurgical work that I'm referring to, was done in independent labs and proven, the cost work was done. So we really are on the brink if we get the screening-level economics done. And then we'll have a technology. And by the way, so someone says, are we still going to have waste? And so my response to that is, yes, you're still going to have waste. You could idealistically target a zero-waste scenario, okay, but you're not going to sell all that material. In our view, any material that wouldn't be sellable would immediately be used for reclamation, meaning back into the mines, back into the land, it's organic. So you eliminate millions of dollars of reclamation liability in the process. So I know that was a little long-winded, but when you look -- when I was at the Annual Meeting, I was building up to the $500 million valuation, the clean technologies were an absolutely meaningful part of that equation. And there's a couple more pieces there, but Ken, I think what I'll take away from this is we didn't intentionally mean to drop that out of the release. I was just trying to be more concise. What we really need to do, and I'll do this through the board and openly, is build that valuation target up step by step and then show the time line on each one of those projects. And in fairness, we talked about that at the Annual Meeting, but we weren't yet quite to the point where we could schedule it out precisely enough to commit to time frames. I think we're very close to that point now, and we can commit to getting that done and out here in the third quarter. Might be early September, but we'll get it out.

Well, I look forward to reading that.

Thank you, Ken. Thank you for the question.

Our next question comes from Kimberly Shipley from Private Investor.

I've got a couple of questions here for you. With regards to the cash available, you've got $1.5 million. Was that at June 30 or now?

Today.

Today, today. Okay, so if I understood...

Well, I don't -- when I say now, I'm probably talking like within the last 3 or 4 days, five days. So I didn't...

Yes, I get that.

Yes, yes, yes.

I'm talking about a month, okay. And then the question that Jon Howe asked with respect to burn rate and your drawn, you're using about $300,000 a month. Is that my understanding?

On average, correct.

Okay. And then through the five months left for the year, so that's $1.5 million. And then you expect to get about $700,000 from Tono?

That's correct.

Over the course of the next five. Okay, fair. Then so now that's...

No, that's actually over the next three months. And I think that's an important point to highlight because it's the peak of the reimbursement.

Right. Okay, yes. I'm just trying to figure out, towards the end of this year, what construct needs to get us through our 12/30 line. Okay, assuming, yes, it would be awesome if you told me that all this land sells tomorrow, but let's say, it doesn't. So now you -- and so you're looking at about $800,000 for all, but you've got money in the bank. Is that right?

Right. And we can't count -- your point is that we can't count on monetizing any one of these assets, first of all, because 100% of the proceeds first goes to pay down debt, and second of all, because the timing is not certain. But I just -- I want to emphasize that our plan is that we're managing it intimately, carefully but month-to-monthly, right? So it's -- if there is a break, then we don't have to issue equity. If there is a break, then we could -- it could be funded and maybe accelerate a project. So we're just going to manage it every month, but I want to try to be more clear on that, too.

Okay. And then so then your commitment in October for the new ranch is you mentioned that -- I couldn't find anything in the release that's about issuing preferred if you had to.

Right. We have a commitment for the amount of money that's required to exercise on the option. So that was important to me because otherwise, our deposits, we'd be putting at risk. We wouldn't do that. So there's no -- I don't -- capital-wise, we're stable. We have alternatives, but we're just trying to optimize it and minimize the solution. So that's the goal. If -- I wouldn't say this for the land, but I would say, for the water, there's a very likely scenario where that asset turns before we even have to pay for the last payment or two because the interest is very much focused on the water, and the land will go with the water.

Okay. And then your available resources through the ATM, I saw like $2.6 million, and then it looked like you entered into yet another agreement for another two-plus?

Yes, and thank you for asking that. So the agreement that we had was for $4 million. We're just going to reconstitute it, right? So in other words, we -- your number is probably correct, $2.6 million. Let's say it's somewhere around there. We're going to -- we've changed the terms a little bit. They're better for us, and we're going to sort of close out the existing one at wherever it is we're at and then put in another one for, like, basically the same remaining amount, right? So the point to your question is, yes, that's our capacity. Yes, it's available. You might see two little closeups go in and out just to update it. But from a dollar capacity-wise, it should be about the same number that you talked about.

Okay. And then I'm going to yield the line in just a second, but you have also a loan capability, I suppose, of $7 million, but you had an agreement that you can only do $5 million. Is that correct? That's the -- another construct that eventually, you can exceed $5 million, right?

Yes. No, no, I'm familiar. So what happened was when we raised the debt facility, there were more commitments around it, like we could have done more. We didn't want to do more, so we always sort of had that as a fallback. But it is absolutely right to say we would need approvals from almost everybody to do the additional. It's just the point is that the capital is committed, that's really the point, and that's provides some comfort when people are thinking about things like liquidity and going concern and all that, right? So it's very important. It's very relevant, it's very correct, but there would be approvals, right? So that's correct. I think there would need to be approvals from everyone, the existing indebtedness, the committed indebtedness, however you want to describe it. And we're not looking to increase the debt, we're looking to pay it off. So it's still a relevant question.

Well, I just wanted to make sure that I was understanding the numbers correctly and that folks out there knew that you do have capital resources available while we're waiting on the land sale. And then legacy with the current debenture, I noticed the bonds actually went up, and that was because you exercised your option to increase that debenture while carrying forward. Is that right?

Yes. $430,000, we added base for the interest.

Okay, all right. And then expect the market forces to make that -- eliminate that completely?

Completely by the end of the year.

Our next question comes from James Dell, an Independent Investor. Next and final question comes from Carl Frankson, a Private Investor.

Corrado, you've touched on some of this in various questions before me, but I don't have a real, real simple question for you. We were -- GoldSpring were an exploration company. We became a miner under Comstock. We stopped mining to become an exploration company again. I think the biggest problem with the price of the stock is we don't have any revenues. When do we start mining again and have -- show mining revenues?

No question, sir. Thank you for the simple question, and it's a great question. I think you fundamentally hit the nail on the head. We -- so the answer is -- and I'm going to give you two different answers, one for Dayton and one for Lucerne. So with Dayton, I think that once we have the preliminary economic assessment, which we would like to have by the end of this year, we would have sufficiency of data to develop the scope of the mine plans and commence the permitting process. And in Dayton, because it's all private land, it would -- we've calculated -- I mean, if you did the theoretical minimum of the critical chain, it's like a year and three months, right, but we've allocated two years to get that into production. So I know people have heard me say two years away, two years away, two years away, but it's two years away from when we have the mine plan. So I would say the earliest, right, would be the end of 2020 for the Dayton. Lucerne is -- it's interesting, it's more variable because it's fully permitted at the state and county level, and it's already been in production, and it's fully infrastructured. So I believe -- and I will double-check with the Tono guys, but I believe that their schedule for this year is very solid. In other words, on top of the merit report and then the resource report, maybe that's for -- third quarter, fourth quarter, I think is what they're thinking in terms of those 2 reports. And then the next step would be preliminary economic feasibility and then full feasibility. So I think there's 2 answers for Lucerne because -- and I can't commit to a production date like that. Mark would kill me, right, because I don't know what the date is. But there's 2 answers with Lucerne. One is it could be in production really fast. I mean, it could be in production in 2019 or 2020, right, very fast, with the existing permits and the existing plan. Ultimately, they would -- and I think what you're going to see as part of their plan is how they are going to start mining, start generating cash and start producing revenue, and it's going to be exciting. But then how does it then expand because when you come to expansion, there will be some amount of federal permitting that will be required. The one good news there is that -- and I got -- when I was doing federal permitting in the Bush administration, it was tolerable barely. When I was doing federal permitting in Obama administration, I wanted to commit suicide and almost did. But in the Trump administration, it's remarkable what we're seeing. So that doesn't mean it takes a year, but people used to say, "It should take two. Why is it taking five?" I think we're looking at scenarios where it could take Two plus, and that would be really good because there's probably a lot of mining we can do before you need that and then you could get going from there. So I think you really got to have 2020 in your head, two years away as a starting point, with some potential to go faster and potential to go slower. I think what's important and what you're going to see in these reports is those time lines much better specified so that we can very credibly guide the market. And my perception of marketing -- this team's ability to communicate to the market and rally the market, especially when it comes to the technical aspects is excellent. I mean, they know what they're doing in that regard, and I think investors -- all of our investors will benefit from that.

That sounds fine. And we're talking two years. I'm being very simplistic about this, but companies need revenues to stay alive. Do you have two years' worth of selling water rights and land and joint ventures and stuff, two years of money to get you there?

I believe we do, right? I believe we do. Will there be some equity sold there? Yes. Can we minimize it by making these monetizations our number one priority? Yes. And I think it's incumbent on me, but I need to provide much more clarity here in the third quarter. And I don't need to mean to say, "Hey, I know the answer. I'm going to tell you soon." I mean to say, the work that's going to be done over the next 6 to 8 weeks is going to allow me to be much more specific with that because these transactions are happening.

Okay. And in terms of stock valuation then, do you feel that when the 43-101s come out, that there will be a discounting process going where we get valued maybe near term as an explorer in whatever kind of value you get to now, just so...

I believe what will happen because that -- some of the numbers that we talked about with Ken will come up much more specifically on the radar screen. And we want to be specific. We want to say this project is getting us to X value, this project is getting us to Y value, this project is getting us to Z value. Now we can show you how much discounting happens at the resource level, how much discount happening at the PEA level and how much discount happens at the full feasibility level. Obviously, at the feasibility level, it's very little, right? It's a discounted cash flow scenario, so it's little. And so that -- but I think that in our case, what I think you see is you see a markup on the first report, a markup on the second report, a markup on the third report. And we could probably guide to where we would expect that to be, and then to some degree, if you're very effective, incredible at communicating that, I don't want to say becoming [indiscernible], but you actually do manage to those ends, right? And that's what we're going to try to do.

Okay. Well, that sounds good. I suppose it also wouldn't hurt the price of gold going up either.

Yes. I know we're at a tough spot here. I mean, there's some cheap gold out that's out there. And I'm making my head spin, but I'm trying to keep my eye focused on the ball. So I'm going to cut it here. If there's any more people in the queue, I would be happy for them to call our direct line. I just sort of commit to keeping this within an hour, and I don't think we did that, but we're close. So thank you, everybody, for the call. I really look forward to the next 6 to 8 weeks of hard work and updating you as we go here from this point forward. Thank you.

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