Good day, ladies and gentlemen. Welcome to the Comstock Mining Q4 Update Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. [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.

Thank you, Patrick, and good morning, everyone. This is Corrado De Gasperis, CEO of Comstock Mining, and welcome to our 2018 year-end conference call. We are substantially but not completely done with our year-end audit and plan on filing our Annual Report on Form 10-K later this month well ahead of course of any filing deadline. I’ll provide a brief summary of the financial information that was summarized in our press release from this morning and update on the two transactions that were announced and both of our mine projects. If you don’t have a copy of today’s release, you’ll find a copy on our website at www.comstockmining.com under News/Press Releases. Before I begin, please also let me remind you 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. 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 our reports filed by the company and the SEC and in this morning’s release. And all forward-looking statements made during the call are subject to the same and other risks that we can’t identify. After my prepared remarks, we’ll have a Q&A period, but we will limit the call as customary to one hour. If you don’t get a chance to ask a question on this call, please do follow-up with me after the call and I’ll look forward to getting to everyone. My prepared remarks will cover Lucerne and the recently announced Tonogold transaction, the monetization of our non-mining assets, especially now in the opportunity zone, our date and progress, our capital base and use of equity and our next…

Thank you. [Operator Instructions] We will take our first question from Robert Lambert. Please go ahead.

Hi, good morning.

How are you?

Good. A little question about – I mean, you did a very good explanation on showing us that we have a path now to profitability. But my question has to do with our hybrid technology now. Once this proves out, would that be something that we would not only use ourselves, but we would also engage Tono, and then what does the entire gold mining industry, how would they look at that hybrid development if this really works?

Thanks, Bob, for the question. Let me see if I could phrase it or frame it this way. So we – and just make a point I highlighted the update with Itronics, which I’m going to talk about right now, I didn’t mention and I maybe should have mentioned that Cycladex is also working actually with two international clients that are very heavy in silver with that processing and different applications of use of their technology with some success. It’s actually fascinating to watch it develop. With Itronics, we had remarkable results on the reprocessing of the already reached material, and so far as it related to silver. With gold, we just didn’t have any conclusive results because there were so little gold left in leach pad. So we went to virgin material. As expected, it worked fantastically on the silver, reasonably okay on the gold. But when I say reasonably okay, let’s make the point that cyanide seems to work superior to gold. So when I mentioned hybrid, there’s just a fascinating completion of taking the existing process and I’m one of the guys who hates the word bolt-on, but in this case, bolting on in an advanced plan way an extra step. So if you have material that is extremely well yielding for gold and cyanide, which is the case on the Comstock, already proven. A second process of extracting more silver as planned, going back and doing it after the fact, obviously could be more expensive. But doing it sort of right upfront as planned has potentially remarkable implications. One, obviously, you get more if not most all of the silver. Number two, the solution detoxifies the cyanide. It destroys the more on cyanide complex and turns the material back into an organic form. That notion alone…

Of course, cyanide is it environmental horrible hazard. So if we can really sue this, it would be pretty incredible for the…

Yes, so let me say this too. Like, so there’s probably scenarios, where it will work straight out on, let’s say, silver only or silver major deposits. In our case right now we’re looking at it as sort of a hybrid. We would still be using cyanide on the front-end, but we would completely recycle clean and destroy it before you got to the end of the backyard, right. So we still that’s why say its still green, it’s still 100% green in the end, which is the most important thing, because most of the reclamation costs for cyanide come with the post monitoring, right. It’s sits there forever. The bigger the pad, the longer and more money you have to spend, in this case, we’re hoping. Now I want to put a caveat on this. We haven’t – we’re not in the final proof more. We haven’t concluded the feasibility study, but we’ve seen enough evidence and we’ve done enough high-level process mapping that we’re feeling pretty good about it. Good enough about it where we want to work with Dr. Whitney going forward in one form or another. And I think if we’re able to do that, it wouldn’t be just for our side, it would be, what would we do together beyond our side.

Right. And one small little point. I know you said we’re going to have a new website and I know you’ve been so busy, you have…

Yes, well, there’s just two things, right. So first of all, the new website is substantially complete. And time constraint of our team was part of the reason I thought it was my personal/professional decision to pause it. We’re already ready to launch. So it’s build, it’s ready. We’re not looking to spend any more money to do it. But with the transactions that were coming and maybe more importantly with the forward strategy that really is going to map out our path to profitability, we wanted to make sure the website captured all of that, right. So these two transactions give us 80% of what we need. We’ve got one more series of work to do. I’m not going to say that it’s going to be done by the end of this month, but our goal is to synchronize it with the filing of the 10-K, the announcement of the go-forward strategy and the content reflecting all of that. So if you want to use a term new Comstock, you can, right. New Comstock, new extreme focus on precious metals, gold and silver, clean technologies, other gold activities and all communicated through our new website. It’s coming very soon.

Great. I’ll let other people ask questions. Keep up the good work.

Thank you so much. Appreciate it. Right.

[Operator Instructions] We’ll take our next question from Lawrence Danny. Please go ahead.

Good morning, Corrado. I have two questions. One is how did you value Lucerne at about $30 million, including the royalty? And the second question is, if you’re leasing the American processing facilities to Tono, and down the road Dayton becomes a mine, how are you going to – even though you had your hybrid, maybe different, how are you going to integrate all that?

Sure. Thank you for the question. So when I talk about valuing Lucerne, obviously we hope that the mine plans, the range of mine plans that Tono has been looking at. And to some extent has talked about in their publications, annual meetings, we hope that they will exceed all that, like we could – we couldn’t be a stronger cheerleader obviously for them. That’s the beauty of the way the things structured. We’re more than fully supportive of that and they could make tremendous amounts of money, tremendous amounts of money. Mostly, because they are good miners and they have a fully permitted infrastructure, which, when I say fully permitted, they have the county permit and they have all state permits totally in effect and they’re evaluating the expansion possibilities and how that would impact federal. So they’ve got a great thing with short lead times. We evaluated with the following three components and each one has a different layer probability. The first one is the $25 million, which is simply the $15 million of cash purchase price, $58 million assumption of liability, plus ultimately will save us $2 million per annum in operating expenses. So just taking a 12-month view at the world, we have $25 million of benefit to Comstock. I know that’s a huge number relative to our current valuation and debt and that’s what’s wonderful about it for us. It’s not a huge number in terms of what we’re trying to achieve, obviously. So $25 million, we almost think of that as like the guaranteed piece of the sports contract. The next piece is the royalty. If you look at some ranges, the potential mine plans, in terms of the potential tonnages of ore that they could be processing and even with $1,200, $1,250 type…

The second question is if Dayton becomes the mine, and your lease at the American – how do you integrate it all or does your hybrid keep going?

Yes, yes, yes. So thank you for the question. I think that as much as American Flat is central, centrally located to the Comstock District, it is really incredibly well positioned in Storey County. For the Lucerne asset, it was built for the Lucerne asset and the other mining claims in Storey County. I mean, it’s ideal for that purpose. There is – it’s hard to imagine any obstacles for using that facility for Lucerne, beyond Lucerne, expanded Lucerne and then in Storey County assets in the north. When you go to the South, there are some geographical obstacles. I’m not saying you couldn’t overcome them, but most of my technical team has lobbied very hard economically. So – not emotionally, so on an ideal – in an ideal second facility for the Dayton, which we can’t finalize until we have a better handle on the mine plan. So most of what we’ve talked about in terms of value in Dayton and then the cash flow comes from the idea that we would have a smaller sort of dedicated facility in the South. If you put a facility just South of Dayton in Lyon County, not only would it be more efficient in terms of operating the Dayton, but then it would be almost ideally positioned as you expand to the South and Spring Valley. So that is inconclusive. There’s certainly could be a notion of sharing facilities of optimizing, but right now it’s important to know that, although, we can continue to use that facility for metallurgical testing, for all of the great green technology, things that we’re doing with the existing leach pad, Crowe crusher, et cetera, it’s really dedicated for Tono for their mine plan as a priority. So we’ll have to see how it all plays out. I’m sure that to the extent that there’s other synergies either way, we’ve worked incredibly well together. But a likely outcome would be the Dayton Spring Valley would have a dedicated pricing. So you now potentially hybrid type of notion that we just talked to Dr. Lambert about. I mean, I think, that, what I hope, and I don’t know if we’ll be able to do it in one technical report, I’d love that, the feasibility report, so we update the Dayton report technically for the resource. But then once we start talking about economics, I’m ultimately hopeful that our engineers will have sort of two appendices. One that’s here what it looks like conventionally with the straightforward zinc-precipitate, Merrill-Crowe facility using cyanide and here is what it would look like with the hybrid facility. And our hope is that the total capital cost and the total operating cost will be much lower and that the yields will ultimately, especially for silver be much higher. That’s where we’re heading.

Great, thank you.

Thank you, sir.

We’ll take our next question from Steven Shipman. Please go ahead.

Yes, good morning. Corrado, how are you?

Good morning, Steven. Great to hear your voice. How are you?

Great, thanks. I have two questions. The first one is what was the thinking and the decision-making behind actually deciding to sell off the Lucerne versus keeping the JV?

Yes. So I think, as – it came down to – there are a number of variables. But let me see if I can just hit on the most salient, right, the three most salient. First and foremost, I think, that instead of us owning 51%, I’m sorry, instead of us owning 49% of Lucerne and ultimately 49% of the American Flat infrastructure, there really wasn’t an optimization of the partnership. With Tono owning 100% of the Lucerne Mine and us retaining 100% of the American Flat infrastructure, it was a big positive for them, in my opinion, because obviously they would get all of the upside that comes with owning 100% of the mine. And then we retain upside both in terms of the royalty and the use, the productive use of that facility, but in the capital sensitive way for them, but also in a way that, from our perspective, accelerates the profitability for us. So in the old agreement, we could have been three years to four years before we even saw $1 net return of cash flow. And frankly being a 51%-49% owner, there might be additional capital requirements that could use up some of that near-term cash flow over the first couple of years. So the prospect of waiting four, five or six years for cash flow, even if the ultimate valuation ends up to be higher was very attractive to us, so number one. Number two, the absolute certainty of getting some payments upfront, while retaining enough of the valuation through the royalty and American Flat made it attractive to us. And again, I think, it’s not unique, but it’s a wonderful scenario, where both of these points are positive to both of us, right. Ultimately, mining is a heavy capital-intensive business. So to the extent we could use our already deployed capital to accelerate and increase our returns, while relieving them with some of the requirements, really were thought to be extremely well. The third part is that and there’s two – there is A and B to three is to absolutely accelerate the development of our other properties. And obviously as it pertains to the South, we can now focus on a very attractive project that we wanted to move forward. And we just been financially constrained and being able to do it. As gold and silver are moving up, it’s a real opportunity for us to move the Dayton Spring Valley project forward. But also in leasing Tono, the Occidental Lode and the Northern targets, the Kentuck and the Yellow Jacket. I mean, there are tremendous amount of high grade targets up there that were just unperformed. So they now have a lease to be able to start drilling and developing even beyond Lucerne. And for us, it just felt like the entire Comstock comes alive in structuring it this way, while again, we retain royalties on those properties ultimately if they go into production. So does that help?

Yes, just one minor clarification.

Sure.

You’re saying that Tonogold actually has now lease opportunity beyond Lucerne, is that what you just finalized in your last sentences?

Yes. So let me be explicit. So not yet, but the agreement that is final and signed and written includes that if they buy Lucerne, they will enter into the lease American Flat, which we’ve already talked about, but also enter lease for the northern mineral properties. There’s two groupings beyond Lucerne. The Occidental and they’re on targets. That actually saves us $100,000 per year in addition to what we talked about before. They pick up $200,000 drill commitment for this year. And where we have been differing some of those drill commitments, Tono is keen on getting some drilling going. So we retain royalty, it’s just lease, but we still own those properties, right. There are 10-year renewable leases, but ultimately if they put the exploration capital necessary into advancing and developing the resource and then if they put the development capital into necessary for defining a mine plan, that will be a wonderful return for us without deploying additional capital. So everything we’re trying to do is capital sensitive, while retaining the return. So yes, that’s correct. But at the same time, 100% owned Dayton and Spring Valley complex, which has well over a mile and half of the strike lines, which we drilled about 500, 600 feet of that, a mile and half is waiting for us to go and develop. So it’s almost like dividing concur. They’re drilling to the center of North and we’re drilling to the center South.

So again, just to amplify on your comment. Does that mean there are no more targets available to Comstock Mining after the agreement other than the two in the South?

No – yes, which we have all of the Dayton and there’s tremendous number of claims there as well and then we have all of the Spring Valley strike, which – if you look at the Comstock as a whole, it’s not quite right down the middle, but it’s a very, very logical separation. Also, those are all in Lyon County.

Okay. The second question I had refers to clarifying the press release about releasing the Comstock Mining liabilities on the Northern Comstock joint venture lease to Tonogold. Do I read this correctly that after the agreement is affected, that Comstock Mining has no other long-term liability associated with the Northern Comstock joint venture lease?

Yes, as designed, right – as designed, they’re currently reimbursing us for those payments under the current. But upon closing, they will have assumed the entirety of that. Because those claims are very integral to the Lucerne project, very integral. That’s correct.

That’s great. Okay, thank you so much, Corrado. Appreciate it.

Thank you, Steven. Thank you.

We will take our next question from Mike [indiscernible] please go ahead.

Hey, Corrado. How are you?

Hey, Michael. How are you? Fine, thank you.

Doing good. So most of my questions have already answered. So I just have one corporate question in compliance with the Stock Exchange. Do we have any sort of a backup plan or did we applied for extension? I cannot find anything on the website?

Yes. So we have till the end of this month, we have at least two backup plans. We’re in constant dialogue with NYSE. There is no scenario from all of our conversations, where we would be delisted. So the New York Stock Exchange listing for us is critical. I mean, it’s critical to our identity. We’re on top of it. We would make some final decision in terms of how we restore the compliance within a week or two. We’ve got plenty of time. We got open communication and it’s probably just – I can’t – we’d like to do it organically. We have to see how it’s going to end up, right. We’re working very hard. We believe that the most critical thing here is that we get all of the underlying value unlocked, recognized, and just moving forward, do this $0.20 threshold. We feel we’re on track, but we’ll deal with that one way or another. We haven’t commented other than just the initial disclosures, which obviously tells you we prefer not to do a reverse split or anything of that nature, but we have all of the mechanisms at our disposal to ensure that we have a sustained existing. And the New York Stock Exchange has been phenomenal. I think that they’re extremely user-friendly, they’re extremely open door. And we felt it was important, frankly, to get these announcements out and behind us before we look forward to make any kind of final decision.

Great, all right. Without my question, you answer [indiscernible] I’ll let the next caller get through.

Thank you. Thank you, Mike.

Have a good day, Corrado.

Thank you. You too.

We will take our next question from Harvey Mordka [ph]. Please go ahead.

Hi, Corrado.

Fine, Harvey. How are you?

Good. Can you tell us the size of the net operating loss?

I can. Let me scratch my head, $178.100 million – $178 million is the net operating losses that we have at our disposal, not – that have not expired. And so theoretically, when we talking about sheltering a $5 million gain in Silver Springs or $5 million gain in Lucerne, we’re absolutely just scratching the surface. When you talk about $25 million of revenue from an American Flat, we’re just scratching the surface. That’s why we’re working on additional plans, that all have to do with generating cash profit. Because we can shelter those for almost as far as we can see.

Could you just say $25 million value on American Flat?

No, I said $25 million revenue coming out of American Flat from the deal that we just talked about. In practical reality, even if that was over the next five to seven years, we have absolutely no problem sheltering that income from tax. We still have well over $125 million, maybe $150 million of NOLs to go.

Okay. Do we have any new institutional investors that are looking at us?

We do. I think that the – I want to say it’s – because we announced the transactions, that’s not really the biggest impact. What we’ve seen is since the Newmont transaction and maybe even more so a couple of very, very large institutional funds being raised, BlackRock raising $0.5 billion gold fund and then even individual investors coming in a much bigger way with gold, what’s been absolutely dead and I don’t want to say for five years, but it sure feels like five years is turning around and we’re getting a lot of inquiry. So we have two or three new investors already in the portfolio, not necessarily small to our size, but certainly initial positions that they look to want to grow from, but I think, we’re just getting started.

Anyone with a 5% or greater position?

Yes, we had one investor take a 7% position, I would say, he’s probably our second largest investor. It’s actually a local high net worth person, that has an operating facility in the Tahoe Reno Industrial Center, working on certain metallurgical things. I think he is also invested in Itronics. So that’s very good to see. In both cases, his investment was restricted stock, right. So a long holder in that context. But we’re getting more and more very, very legitimate type of inquiries from institutions. And I’ve actually had like four outreaches just since we announced Lucerne on top of it. So I think that – even though we view our debt as safe, I think, there’s absolutely a large contingent of people out there that are waiting for it to go away. And so we’re going to start seeing people trickling in from this point right up until these deals are closed. I think you’re going to see value accretion happening between now and then, which is between now and two months, between now and three months, between now and four months. And we’re going to couple that with outreach. Because now we have at least after we announced this next phase of our strategy, we’re going to have a lot of meaningful path to profitability that we want to be telling people, and I think it’s going to be great.

Okay. I believe I heard you say that we’re going from 75 million to 80 million shares by the end of the first quarter. What’s 5 million is going to be used for?

So essentially we just have to ensure that we maintain solid liquidity between now and closing these deals. That’s something I never blink on. Anybody betting on us to not be a liquid is making a mistake. And so we’ll be as judicious as possible without question. The world changes, when we closed just one of these two transactions, I said to the Board in September, I thought it was 99% that will close one, greater than 50% that will close two. I’m now at greater than 95%, we’re going to close both. So I just got a bridge to that point. Now it’s light’s there right at the end of the tunnel.

Okay. Two last quick questions. One is there was an option for Tonogold to exchange $3.5 million of their stock instead of cash. Is that – and that’s not showing up in this report. Is that…

No, no, it’s not. So we just had some nice deliberation with them at the – just before we signed a deal and the conversation was they like the existing structure very well. They like the structure that we’ve articulated very well. And – but they said that they wouldn’t mind having the flexibility to do it differently. So the alternative structure – so the current structure is $10 million cash at closing, that includes the $1 million deposit we’ve already received, right, so $9 million more at closing. The first step of closing transaction and then there is $5 million payment due on the first anniversary, that would be through a senior secured note on the Lucerne property. That’s the current structure. And I guess, I would say, Plan A for them. The alternative structure is that instead of $10 million at closing in total, it’s $11.5 million at closing in total and we’d be willing to take $1.75 million of Tono stock. We believe in Tono. We actually like that structure a lot and then – say it again?

This is their new stock?

It would be – so the way that the deal is written, is the $1.75 million would be exactly identical to their offering placement, which means we’re 100% in their book for their offering and supportive, skin in the game. And then a year later, we would get a second $1.75 million worth of stock. So we – I mean, if you could talk to our five board members, you might get 2.5 of them saying they like one and 2.5 saying they are like other. We are kind of neutral to it. We’re just trying to be as supportive as possible. And I don’t think they need much more support from us. They’re doing really great out there.

The second tranche would be at the same valuation?

No, the second tranche would be at the current share price. So we would get the value of the $1.75 million. We wouldn’t be playing option on their stock.

Okay. So my last question is, you’ve indicated in the past in the forward-looking statements that we would be at $2 a share by 2020. Are you still of that belief and how are we getting there?

Yes, so I’m going to articulate, the answer is yes. The answer is generating $450 million to $500 million valuation and we’re in the final stages of putting the renewed plan in place. There is just too much work that had to go into the Tono and so these transactions for me to be able to get it done with the board by today, but we need a couple or three weeks, it will be out there, and we’ll talk it about it at a great length.

Very good. Thank you.

All right. Thanks, Harvey.

We will take our next question from David Brigham with Brigham and Associates. Please go ahead.

Hi, David.

It’s great to hear that the company has opted center and your wheels aren’t spinning any more.

Thank you. It feels better.

Up and around these diggings allow us to know what you’ve been through. Is it safe to say that even if Tonogold can’t get the $15 million out of the IPO? They can do it some other way with their backers or something. I mean, they’ve got – it’s not just $15 million they’re looking for, they’ve got to get a lot more than that.

Yes.

Do you have that kind of confidence?

Yes, I do. Absolutely, a year ago or year and half ago, I had that confidence, but it was difficult to corroborate it. So like – we’ve had again to debates with some of our investors, look at their balance sheet or look at this and look at that, and I’m hard-pressed to prove somebody wrong, right. What I was saying to folks a year ago is look. We have very, very precise milestones, we have very, very well delineated time frames and objectives. Let’s see how it plays out. And frankly it isn’t just that they’ve hit all their milestones. They’ve been very meticulous in their developments and it’s even more that the team that they have together, it’s a very, very – it’s an expert team, it’s a good team, but it’s also very tight, and they have capital resources. So I think that it’s optimal, it’s certainly optimal for them to get a listing on the big board in Toronto. It’s certainly optimal for them to expand their capital base. I think they’re going to make a lot of people a lot of money by doing that because you have a good projects in front of them. They will enhance liquidity. When I say enhance liquidity, I now mean in the stock, right. They’ll get meaningful institutional investors. I think when people see the names that have already committed to the book, they’ll be surprised pleasantly. And then to supplement that with liquidity and some retail, I suspect that’s what makes the most sense and they’re very sensible and then they’ll go forward. But they already have the capital commitments to make the next few phases of advancements. And they could do it themselves, right. I don’t think it’s the optimal way to do it and, I think, they’re going down the optimal path. So to answer your question, yes, right. I think they’re going to make it work one way or another, but their plan is really optimal, it’s really outstanding what they’ve laid out. And so I know their board has been excellent. Their board has been engaged. The board has been doing their right responsibility, making sure that they’re checking each box, each step of the way that the results are bankable, that the results are credible, all of that is positive for the Lucerne and the Comstock projects. And I’ve been dealing with them. We were three of us were up in Vancouver together January 20, 21, 22. Mark’s been onsite literally almost every week. If he’s either up at the mine and we know working with the engineers and the geologists. I mean, just incredibly well engaged.

That sounds all good. So it’s all good.

And just the opinions are worth that much. The hard evidence now as I mentioned when we first started, they’ve got not just $6 million hard end of the project, they’ve got money years of work, right, personal commitment invested, this is not promotional.

Sorry. Thank you, ladies and gentlemen. The time allotted for questions and answers has come to a close. I would like to turn the call back over to Mr. De Gasperis for closing remarks.

I just want to thank everybody for obviously their patience and their time and questions today. We are working extremely hard on the next phases, obviously closing these deals is paramount. We talk about that extensively. We’re looking forward to doing it. But then what comes beyond that in terms of exploration, development and expansion of our gold properties is what we want to talk about next and we look forward to doing that in the very near future. Thank you, everyone.

This concludes today’s call. Thank you for your participation. You may now disconnect.