Comstock Inc. (LODE) Q2 2020 Earnings Call Transcript

Good day, and welcome to the Q2 Update Conference Call. Today's conference is being recorded. And at this time, I’d like to turn the conference over to Corrado De Gasperis.

Thank you, Casey, and good morning, everyone. This is Corrado, CEO of Comstock Mining, on the line with Zach Spencer, our Director of External Relations and Treasurer, and we welcome you to Comstock Mining's second quarter 2020 conference call. I will provide a brief summary of the information that’s included from our press release from this morning, including our progress on our strategic initiatives, especially with the mercury remediation business. If you don’t have a copy of today’s release, you will find a copy on our new website at www.comstockmining.com, and please just click on the Press Releases tab in the main menu bar. We will file our quarterly report on Form 10-Q next month on time, most likely on or before August 14th as we finalize our full Q2 financial statements. Please also let me remind you that we will make forward-looking statements on this call, including an update on our 2020 outlook. But any statements relating to matters that are not historical facts may also 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 previous reports filed by the company with the SEC and in this morning’s press release, and all forward-looking statements made during this call are subject to those same and other risks that we can’t necessarily identify. Okay, let’s jump in. Our realignment, which we've been really working hard at over the last year, is complete. And now all of our daily activities are designed to simplify focus and accelerate our business activities. So, we're starting to see already in the last few communications movements, and we are driven identifying and developing economically feasible gold and silver in the ground, validating it through our technical reporting and analysis, and communicating it in a way that the market can better value and then grow that value from there. Despite some of the COVID delays, mainly relating to the MCU equipment manufacturing over the past few months and some of our coordination on international travel and shipments relating to the Philippines, we feel like we are now fully driving gold and silver developments forward toward our goal without any other delays. Our goal is to grow our intrinsic value to $500 million with an immediate objective of realizing $120 plus million, or $4 plus per share in the near-term, by advancing all of the known components of our business plan. Those components are: One, MCU's Comstock deployment, which is starting this week. Number two, MCU's Philippines deployment, which is starting next week. Number three, Dayton's standalone resource estimate, which will actually occur under the new SEC S-K 1300 regulations, representing newly enhanced and modernized disclosure requirements for U.S. mining registrants. We may represent one of the first, if not the first U.S. publicly-listed mining companies to disclose our resource estimates in our U.S. filings. So, this is long overdue. I'll talk more about that later. Number four, Lucerne's updated independent resource estimate, ultimately coming from Tonogold. Number five, Tonogold's exploration and development work on Lucerne on the accidental and on the other northern exploration targets they’ve put in the scope of their next development plan, which is very exciting. Next, Sierra Springs opportunities zone, and the advancements there too, including the sale of our non-mining assets overall, those assets that we are selling to the Opportunity Fund are valued at $10 million under contract. But our total non-mining assets are valued at $25 million, and that's actually net of subtracting our $5 million of debt. So, net $25 million of non-mining assets. And then, royalty holdings and equity holdings on all of the above and more. So, ultimately, we're driving towards the goal of $500 million realized value by implementing many more instances of these cash generating, mercury radiating gold and silver projects and expanding our existing gold and silver holdings. The outreach we are getting in regard to mercury remediation from other companies, from governments, from NGOs is almost unbelievable. We've recently reallocated some of our internal resources to more mercury and environmentally expert resources, subject matter experts for managing this growth, if you will. So let me start by elaborating on MCU. As you know, we've partnered and launched MCU, Mercury Clean Up LLC, our clean mercury remediation high growth venture with our first two projects now finally becoming operational. Yesterday, supporting equipment began arriving on site, and we expect the core mercury remediation system to start arriving tomorrow. We’ve included pictures in our press release, and as you can see from those pictures, the system is impressive. It's not a toy. This is an incredibly sophisticated 20-foot-high extensive alluvial mining system with state-of-the-art mercury centrifuges, mercury reactors, and some of the most precise spirals and separators in the industry, all put together in a remarkable system. MCU has also worked diligently, along with our partners at MCU on the front line, enhancing our definitive joint venture agreement with our Philippine partner, Clean Ore Solutions to partner and lead in the cleanup of the Naboc river in the Philippines, with permits secured and now legally formed a new entity called MCU Philippines Inc. So we've formed the entity, provided initial funding, and completed the first mercury control and enhanced sand and gravel system, which is being prepped for international shipment. Ultimately, Comstock will own 50% of this new entity, MCU Philippines Inc. and 25% overall of the parent company MCU, sticking to the model of us participating in 62.5% of the overall economics, especially in the case of the Philippines. We plan on having two systems deployed in the Philippines this year, which is still subject to some potential COVID delays and quarantines that complicate timely access. However, we're going to ship very soon here up to 150-ton per hour mercury system I just mentioned, and then another 75-ton per hour mercury system. Each one of these systems is being custom designed and sized for the specific application that we're sending it over to perform. When it comes to MCU, all the models that we initially built were based on $1,200 plus gold. So again, we cannot think of a better time to begin deploying these systems to begin processing and cleaning up these contaminated materials and extracting the gold, especially now that gold is $700 higher than when we first started evaluating this process. Therefore, we certainly expect positive cash flow from this first Philippine system being deployed this year. Let me turn now to Dayton. We're expanding Dayton's economic resource, meaning that we're in the process of completing geological interpretations and ultimately engineering for an expanded pit shell. We have mentioned before that we retained Behre Dolbear to provide a standalone updated technical report. But now, we're discussing directly with them the project as a U.S. compliant S-K 1300 technical report that will include an updated resource estimate. As an aside, the U.S. Government meaning the SEC, has come out now with modernized reporting requirements under Reg S-K 1300. This is long overdue. Most of the rest of the world, including Canada with the national instrument 43-101, has taken the lead in ensuring that there are sound and strong guidelines for reporting resource estimates and reserves and mining projects. The U.S. had always been deficient in this regard, falling back on the oil and gas Guide 7 standard. But now, with the new rules, which can be early adopted this year, we will actually be able to not only update our technical reports but unprecedentedly include those technical details, including resource estimates in our filings. Our filings include our 10-Ks, 10-Qs, and S-3s—all of our required SEC filings. So, this is a massive market shift in my mind, and we look to be a leader to provide more substantive, clearer, and more transparent technical reporting through our filings as we go forward. Even before the technical report updates and the updated resource estimate, we've based the current valuation of the Dayton resource on an economic shell developed a few years ago using an $800 gold equivalent cutoff. We have not yet re-engineered or expanded that pit shell; that's what we're working toward. However, we have shown that if we use current gold prices on that old economic shell, merely applying today’s current price, it shows a cash value of over $100 million. So, I'll hold that thought with you as I turn to Lucerne. As everyone knows, we partner with Tonogold on Lucerne. They’ve reworked the Lucerne resource estimate and will be updating those standards based on the current environment, making the Lucerne resource quite compelling. They also expanded some of the clean groupings east of Lucerne, so that the actual footprint of Lucerne is bigger, plus they are focusing significantly on some of the southern extensions of the Occidental Lode, which are adjacent to Lucerne and other claims leased in Storey County. Tonogold has put together an incredibly well-planned and expansive drill program. I think these are going to be very exciting over the next few years, and I think this summer is going to be very exciting as they get moving; they've lined up the capital and initial permits. They're working very effectively with our team and their team as well as with the community. So, it's just a matter of time before rigs start turning again here in the Comstock. We’ve actually had some deliveries of drilling supplies arrive last week, so things are getting active and moving forward. Of course, we're still owed just under $5 million from Tonogold on Lucerne, who recently paid us about $0.5 million early in June. We’ve also retained a 1.5% NSR royalty on Lucerne as most people are aware, and we own about $5 million worth of Tonogold preferred stock at over 6 million shares of their common stock. So, at June 30, the equity holdings of those Tonogold instruments were valued at over $10 million. From my perspective, everything that's happening with Tonogold's work efforts, liquidity, and advancements is all positive and improving. If we valued that stock just at today's current share price, it would be worth over $13 million, not $10 million as we reported at June 30. So, from our perspective, it's very fair to say that with all the work Tonogold has lined up and planned, they are exceeding expectations with much more to come from here. If we summarize all of these resources, we're layering in the value of Dayton, potential values of Lucerne, MCU, the Opportunity Fund, and our non-mining assets, because you can see from previous information we've published, that delineates and adds up to quickly over $120 million. If we realize just half of that value in the market, we will see well over $2 a share on our way to over $4 a share. All of our efforts to date have been to better detail who we are, better delineate what we think those values are, and I think we're starting to see some of that value get unlocked in our share price, albeit slowly and painfully. However, from our perspective, once the mercury systems are operational, and once our non-mining assets begin to close on those sales, and once our debt is gone, we'll start to see an acceleration of that value recognition. I can tell you from my perspective and I'll repeat this, I don't expect us to have our debenture at the end of this quarter. I would ask you to mark my words on that. We're going to eliminate that debt and move these business projects forward. Having said that, let me turn to our financial position and outlook, and then we can move to Q&A. At June 30, we had total assets of almost $42 million; that’s the highest our balance sheets have reflected that I can recall. Clearly, we're trading well below our net book value as I just mentioned, which is ridiculous when you consider the gold and silver resources we have in the ground and the $5 million receivable from Tonogold is not even reflected on our balance sheet. We are also going to show a meaningful profit here in the second quarter, driven primarily by a total of about $1.7 million in gains realized during the quarter on our equity in Tonogold. So when their share price improves, the value of those instruments on our books increases and is recorded in the P&L. We’re going to show a profit. The reason we haven’t finalized our financials for the quarter as of today is that we believe we have some additional gains on the note receivable that we formalized with Tonogold on March 20th. So, we are certain we'll have additional gains. The valuation experts and auditors need to properly review and audit those estimates and calculations, which is currently in progress. If it ends up the way we’re calculating now, we may even end up with a profit year to date, not just for the quarter based on these gains, which are driven from favorable conversion features embedded in both equity and receivable instruments. From the equity instruments, we’ve been accounting for it all along because they’ve been around for over a year. This receivable was just formalized at the end of March, so it’s a new aspect for us and it will all be positive. I must conclude on this point that, as a former expert accountant, this derivative accounting stuff, even though it's favorable for us both economically and from an accounting perspective, makes my head hurt, and I wish I didn't have to think about it. Our Silver Springs asset sales are now moving forward again. The Sierra Springs Opportunity Fund spent most of the last three or four months working on local economic development, attracting companies to the manufacturing facility. We just had our first tenant at the Silver Springs airport break ground on building a new hangar and bringing in a new business, which will be retrofitting King Jet airplanes. That’s very exciting. There's a tremendous amount of non-U.S. interest coming into the fund, which wasn’t intuitive in the beginning; we've had interest from Canada, Mexico, and Australia. There seems to be a significant interest in non-U.S. money returning to the U.S. which is in addition to the huge inflows we continue to see from both people and businesses coming in from California. It feels like things are back in the saddle and progressing forward. We have meaningful investors looking at the fund, so hopefully that will all come together within the next 45 days, and those asset sales to the fund will be completed. That would be landmark for us because $10 million of proceeds would wipe out our debt and fund us in a very strong way. Let me summarize the six bullet points for our outlook very quickly and then move to questions. Number one, we will monetize non-mining assets this quarter. Mark my words, extinguish our debenture, that’s happening and will happen one way or another. Number two, MCU will land the mercury remediation system this week. We'll spend the next two weeks assembling, training, commencing test operations documented photographically and via video, and to the extent appropriate, we'll be sharing it as much as possible so people can see and feel what's happening. Number three, MCU Philippines will ship. It'll be the first unit to go out internationally, and we expect that unit to be operational this quarter. That is our second overall unit, and that unit should have positive cash flow before the year's end, which is very exciting for us. Number four, Tonogold has received drilling permits, with more awaiting approval. Everything's going very well; their drilling and development plans for this quarter, as I mentioned, are exciting and will commence in due course as everything falls into place. I don’t see any negatives there, just coordination, planning, and many good things coming. Number five, we may be the first public company to adopt S-K 1300. Just to be precise, the requirement is not to adopt it for 2020 but rather for 2021. We may position ourselves as an early adopter in 2020 regarding our 100% on Dayton resource; timing is quite perfect for us. We were planning a 43-101 update, but this will supplant that, it will equal or be better. This is certainly better for us, and to the extent we were prohibited from including any resource disclosures previously, that is set to change now for those following SK 1300. Thus, I believe this will provide the highest level of disclosure, the highest value of transparency to our investors and the community. Lastly, despite finally getting some signs of improvement in our stock this past quarter, which we appreciate, we're not upset about it, it’s still ridiculously undervalued by any measure we can imagine. We're going to drive towards this intermediate point of $120 million, which is over 9 times where we are now by accomplishing the prior five objectives that I just mentioned. We're focused on realizing the value based on these activities. We look forward to filing the full 10-Q in August on time, of course, as we finalize some of this derivative accounting. I think that’s it, Casey, I’ll stop there so we can turn to questions.

Thank you. We will take our first question from Carl Frankston, a Private Investor.

Corrado, how are you doing? Good. Good. Good.

Doing good.

Yeah. I would like to ask a question. Several weeks ago, there was an SEC EDGAR filing with Leviston Resources and Triton Funds.

Yes, sir.

Could you please elaborate on that? And it appears that it's your option to sell them stock. Could you comment in terms of future dilution? You're talking about getting rid of the debt. Is it going to be necessary for you to draw down on these funds and make it dilutive?

Yes. Thank you, Carl, for the question. So, there were two filings. The first one I'll mention was Leviston Resources. This is an equity facility that we've had variations of in place over the last few years. We've hardly used the facility during 2020, which is a very good, welcome change. But it's important for us to have the facility in place. That was $2.5 million and it would only be our intention to use that facility as absolutely needed. It wasn’t put in place for drawing down to pay down debt. Certainly, it would be available for that if required, but we don't foresee that being necessary. So that's number one. So that's really been in place, and hopefully the trend will continue from being heavy on that facility in '18 and '19 to very light in '20 to ultimately not being required at all. So the trend is our friend, I guess, but there will always be that facility in place. In terms of the other filing that was a direct placement, that's not a facility. That was a direct placement of $1.25 million with a fund; we used substantially all of those proceeds for funding the mercury business. Ultimately, we had hoped to have some of our asset sales done a little bit sooner, but COVID delayed that on us, unfortunately. We're still driving very, very hard on that. The Philippine opportunity, frankly, it’s a double-edged sword; the government has been really driving us hard to get over there, and we couldn’t feel more support and alignment with their motivation in getting those systems operational. I think the Philippines will ultimately be recognized as a leader in embracing the Minamata convention and stopping artisanal and small-scale mining's use of mercury; this is the UN’s biggest push. We didn't initially expect to be deploying our first project outside of the Comstock until at least a year after we were operating the first system on the Comstock. So, it was somewhat unplanned if you want to say it that way. It's a good problem to have. But that money from that fund was a direct placement, and that money is already going toward the Philippine unit, which was already built. Some of that building was completed in advance of the funding, which we were grateful for, as it allowed us to stay on track, and the rest will go there as well. So, does that answer the question, Carl?

Yes. So Triton is already done, that's past tense.

It was done. It was closed. It was funded. Substantially all the money goes to the Philippines' unit first, if you will, which is completed. This one was the one that kind of got advanced funded; and then we put the money in for working capital to ship the unit, establish the camp over there, get some local equipment organized around it, and get up and running. I think that unit is going to be cash positive within a couple of months of being set up and operated. The only thing is we need our team to get over there. We ship it, let's say next week or the week after; within the next two weeks, it'll take three or four weeks to be released through customs. At that point, we need to be on the ground setting up, training, and operating, and in the Philippines, like Nevada, still has a two-week quarantine when you fly into Manila. We can't go over and get stuck in Manila for two weeks; we have to actually get to Davao and get the team. Now we have local partners there doing much of the supportive work with the JV, but ultimately Paul Clifft has to be there himself to set up the equipment, train the team, and get it running fully. I’m sounding kind of monotone, but this is one of the most exciting things I've been involved in for a long time. It seems routine now; I have calls almost every night from 7:00 to 8:00 PM with the Philippines, and it's the next day with me, the whole MCU team, our attorneys, partners, everyone over there. It's just working together, and everyone feels behind schedule because of the government’s real motivation to make this happen. So, it's very, very positive.

No, that sounds fine. I'm just concerned about the, when they get stock, are they getting 144 stock or are they getting free market stock?

So...

After these two announcements, the stock price hammered pretty good from like $1.05 down to about $0.60, and it kind of coincided with these two announcements and they all get, they're kind of listed at a discount to a weighted average stuff. I'm certainly not casting aspersions. I don't know either group.

No, no, no. So, let me just comment. Let's just comment. I mean...

If they benefit from a lower stock price, that would get more shares and...

Yeah. No. So, in both cases, we direct the pricing. In other words, we won’t do a deal if we don’t know what the price is. We won’t subject ourselves to that, and we didn’t in both those cases, number one. Number two, it seems like any time we file a pro-sup, and I understand this; there’s a negative reaction. But I feel like both counterparties are people that we’ve vetted, and in Leviston’s case, we know very well. In Triton's case, they're scheduling to bring some of their investors to tour the site, etc. Our feeling always is that we want to build a stronger base of capital that stays here. When we file a pro-sup, it's registered stock, Carl. It’s not restricted stock. Hope that answers that question.

Thanks.

So, you don't know for sure, but we do our best to be positive. It was...

Again, I'm not casting aspersions, but Wall Street is not benevolent. So, if you can make a book.

Yeah. You’re preaching to the choir on that one. I'm with you a hundred percent. So we’re just trying to be as careful and diligent as possible. Our goal, not through registration statements or stock sales, but our goal through our investor initiatives is that when we look at our top 20 shareholders, we like what we see. They are necessary, they are committed to us, but they're not sufficient. What we want to see four months from now, six months from now is additions to that top 20 by people really believing in the $120 million we are driving to, and then the bigger number we will continue to pursue after that, so we slowly but surely add more shareholders to the base. Right? And hopefully those shareholders who have their arms wrapped around $22 million of value will find that they'll also have their arms wrapped around $120 million, $220 million, and $320 million as things continue to grow.

Thank you. We will take our next question from investor Harvey.

Have you copyrighted the term environmental miner?

I love that term. I'm writing it down. That's a great term.

That may be a good place for us to be using considering what we're doing now?

Yes, I am. It's funny; I've never heard the term before, but I feel that who we are, not because of MCU, by the way, right, we've gotten three top awards for environmental excellence in Nevada, county, and federal government; I mean, we are at the top level. I believe that these activities not only attracted the MCU team to us but also the Nevada Department of EPA, who we worked closely with on the Carson River mercury cleanup, directing people to us, almost like a partner feeder because we are environmental-minded.

So is it copyright, or would you certainly jump on it right away?

Yes, it's a great idea. Let me also say that we’ve been reached out to, when I say we, I want to say MCU. We've been reached out to by the United States Environmental Protection Agency policy group in Washington. We’ve had full conversations with the State Department about what we're doing in mercury remediation, and the conversations couldn’t be more positive. The UN adopted the Minamata Convention in late 2017, with the objective of removing mercury from artisanal and small scale mining. The acronym is either ASM or ASCM. The world, through the UN, has rallied around eliminating mercury overall, but particularly from artisanal and small scale mining. Our system is designed to do that; not only Paul Clift and Oro Industries' core competency in building these smaller scale mining systems, but there’s not a lot of people doing what we’re doing. We don't know of anybody that could both clean up the environment with our systems, like we're doing on the Comstock or the Naboc River, while also being able to mine chemical-free without mercury. This has raised the eyebrows of regulators. We work very well with the US EPA district nine district eight, and the Nevada EPA regulators. They are good people, true partners, and we strongly believe we're the best solution for mercury remediation, and there’s virtually no competition we see. So, this is going to get very exciting. We hired an archaeologist who worked for many years with abandoned mines in Nevada, and there are literally thousands of abandoned mines in Nevada, a significant percentage of which have mercury contamination. I can't even grasp the size of the market—it’s global. So, we're very excited about what's happening, and we're working very hard to keep up; it’s also why we’re reallocating costs rather than adding new expenses. We’ve hired an environmental manager who’s run mine sites and an archeologist to look at the markets for mercury. The MCU team is working around the clock to get these systems built and deployed.

Okay. Is Mark Reichman from Noble Capital on this call? Do you know?

I think Zach would know. I don't, but I would suspect the answer is yes. Assume he is and say what you’re going to say, and then I'll convey the message if he's not.

I've been reading over the research report that Noble put out, and they’ve got a target price of $4.50.

Yeah.

Is that to be understood to be within a year?

I don't have the report in front of me. Typically, there are 12-month targets, but I don’t know if that’s what Mark stated. I’d need to double check that and get back. Because...

What is your target?

My feeling is we're going after the $120 million that we’ve delineated as fast as possible. It’s not linear, right? I think what’s going to happen is that when we pay off our debt, you're going to see an uptick. When the first unit is operating and people can see videos of it operating, you're going to see a step up. When the first unit generates cash, people will start projecting, 'Holy shit, what if we have 20 of these units deployed?' So, I would say within a year, yep.

Okay. What is your role with the Opportunity Fund, Silver Springs Opportunity Fund?

I have a huge role, right? A year and a half ago, the Board of Comstock approved me to coordinate the facilitation of setting up the fund, building a governance team around it, and then a management team. I was working hard on that, and one thing that became evident was that there wasn’t a lot of investor interest in just buying one or two pieces of property. Some real estate developers showed interest, but the project is on a much bigger scale. The positive is there’s so much flow into Northern Nevada, it’s hard to exaggerate; the negative is Silver Springs requires infrastructure. If you were going to do one project, you might not be inclined to build roads and sewer systems. As we were forming the fund, we brought in excellent people, and the thesis expanded to not just acquire a couple of Strong properties but instead consolidate the district. We’re taking a page out of Comstock’s consolidation of historic silver discoveries. I was intimate with all that, and I started negotiating on behalf of the fund. Ultimately, we formed the fund with my involvement. We will benefit not just from high-value monetization of our Silver Springs assets but also retain ownership. We ultimately expect about 9% of the fund, which could potentially be worth a couple billion dollars with what’s being pulled together here. So, in my roles at Comstock and in the fund, I’m creating maximum value for our shareholders. I believe that’s what we’re doing.

Probably on the mercury cleanup where you mentioned you paid about $1.7 million in cash and stock. So, $1.25 was it cash; what was the value of stock involved?

Yes, let me answer that question very carefully. The first agreement, which was done in June 2019, committed $2 million, and that gets us 15% of the parent company MCU, and the right to 50% of the first U.S. joint venture, which most likely would be formed with the equipment that’s landing here this week. Okay, now of that $2 million commitment, we have monetized $1.7 million in cash to MCU, the parent company, and they're holding 625,000 shares of LODE, which are restricted. That restriction will list in November, and their goal will be to monetize an additional $250,000 from that 625. Obviously, given today’s share price, that 625 will well exceed the 250,000 remaining requirement. That money either would come back to us, or we would put it towards our commitment to the Philippines. So that's number one. Secondly, we've committed up to $3 million in MCU and MCU Philippines, giving us an additional 10% interest in the parent company. Thus, we'll end up with a 25% interest in MCU and a 50% interest directly in the joint venture in the Philippines. The way this is structured is that, if it plays out as intended, we’ll have 50% of the project as a joint venture and then 25% of the remaining 50% through MCU, leading to 62.5%. If it plays out this way, we plan to consolidate MCU’s results into Comstock results, which I think is correct—it’s the way it should be based on our economic interest in our plans. Now, let me say one other thing regarding the Philippines; we’ve committed up to $3 million in equity and debt to ensure two units get deployed and become cash positive based on our model, which used approximately $1,400 to $1,450 gold. Our payback is about 16 months on that $3 million, and more excitingly, once these first two projects are up and running and generating cash positive, we would aim to deploy unit three, unit four, and unit five from that cash flow. That is the model we want to pursue, showing how this could expand rapidly.

So we have the right to pick up 50% of every one of the projects?

Correct. That’s right. We have the right of first refusal on each project. We have the right of first refusal on any capital that comes into the entity, and the people we are working with—Paul Clift, the owner of Oro; Tom Manzt, Brad Huburger—are world-class in my opinion regarding their competency. Paul might be one of the last remaining expert alluvial/surface mining experts. The fact that he builds all of his equipment himself is impressive. Jokingly, I told him that he builds Chevrolet; he said, 'No, we build Maseratis.' You’ll see when you witness the first system. It’s so precise, so specific, and let me just say, besides the engineering and equipment itself, it's customer-centric. Paul's whole career has been focused on knowing how to build exactly what the customer needs, then camping out with them until it works as designed. I’m having a lot of fun with this—this is structured well, and I think it can grow significantly.

Okay. I'm going to go to the end of the queue and let other people ask. If there's more time, I'll get back on.

Thanks, Harvey.

Thank you, Corrado.

Thank you, sir. We will take our next question from Jeremy Aiden, Private Investor.

Hello, Jeremy.

I'm not sure if this question was addressed, but I just wanted to know for the real estate sales; do the current potential buyers seem able to step to the plate, or should we consider another potential buyer?

No. So, the fund is buying the assets. The fund raised over $11 million last year, owns a 150,000 square foot manufacturing facility, and owns and operates the Silver Springs airport. It has zero debt and considerable investment interest in the thesis of consolidating this Northern Nevada enterprise zone. I truly believe the COVID event sort of paralyzed the markets; there were positive and negative sides to that. The dramatic drop in March paralyzed everyone but triggered a lot of capital gains. Then the market rebounded, which was somewhat surprising. Many are feeling more stable regarding their portfolios, but with capital gains needing resolution. There’s a lot of interest in investing in this thesis; the negative side is that they’re in pretty tough areas. By definition, these areas require economic development. Silver Springs fully qualifies as that, but with the new highways built and expanded around it, it’s become a key hub for Northern Nevada's economic activity. I believe they’re going to raise tens of millions of dollars and, importantly, the fund has substantial access to economic development dollars, private activity bonds, USDA loans, and new market credits. Therefore, the fund is debt-free, having only raised equity. We are looking to bring in one more equity round before we start accessing those very inexpensive economic dollars.

Just one more question. Do the actual buyers have any skin in the game? You're just holding a non-refundable deposit?

Yes. We’re holding a non-refundable deposit, indeed. But all board and management of the fund are direct investors. Not only are we holding those deposits, but all the money has come from the management or board.

Thank you. We will take our next question from Jeremy Harrison, an Investor.

I think we just talked to Jeremy.

I'll keep it short, because I know it’s running long. Regarding the fund, can you clarify the last week's notice about the million raised initially? I see the filing about the $18 million. Has any other money been raised and secured, or are we still waiting on commitments?

So, we've only received a few hundred thousand in hard numbers, but we’re actively talking to three reed industries who combined could comprise more than the $18 million. So, that's a bit of a hybrid answer: hard commitments, no, but significant interest. In the first raise of $11 million, we had about 20 investors; that group was strong—none of them seem eager to abandon the ship. I believe that for this next round, it could be 20 or it could be 5 investors, and then the base will be so strong. We believe we’ll accelerate the listing and registration, with a potential public offering in the third round looking out to appeal to a broader mass of investors. It's coming together nicely in that context, and it’s frustrating; the last three or four months have been hard to gain traction. Anyone we reached out to showed interest but were deferred; no one’s saying no, but we couldn’t secure meetings due to other obligations. Now we’re getting those meetings; it feels like things are progressing.

Okay. Regarding the $4.1 million in debt: that's, I think, everybody's main concern. Is there a backup plan for that? If this stretches out, is it delaying or can that be adjusted? I know it's due by January?

Yes. We’ve had great conversations. I can say at least three backup plans are in place, but I prefer not to share details right now. However, I assure you there is no scenario where the debt puts us in trouble.

Got you. Will do. As for the Philippines, the first unit going in is the sand and gravel unit, correct?

Yes.

Okay.

Just to elaborate a little on that, right? We had planned on units being specific to mercury remediation, but the government pushed us hard to deploy a unit at the bottom of the river, and we weren’t thrilled about that. We wanted to clean it from the top down because otherwise, how do you sustain that clean activity? But they mentioned sand and gravel—an intriguing approach. It took us a bit to understand what they meant, and we realized the demand for sand and gravel. There’s probably lesser mercury contamination down lower. We know there’s mercury contamination pretty much everywhere, but it's significant at the top, less at the bottom. When considering a saleable product like sand and gravel—the amount of mercury reduces, which in turn lessens the urgency of gold content. We took a high-quality sand and gravel unit and retrofitted it with mercury centrifuges and controls. So, it’s not what we initially thought we’d be doing, but we're excited about it. It’s a simpler system overall; if there weren’t mercury, it would thrive in sand and gravel processing. As such, it generates base load profit and revenue for us to establish, yet at the same time, if there’s mercury there, it will capture it, making it much more exciting.

And does it recover the same amount of gold as the other units or no?

It should.

Okay.

It's equipped with the same type of centrifuges. Each situation is different, right? We’ll see how effective it is, but we’re confident it will be able to achieve the necessary standards with the controls in place. We'll witness its performance closely. However, both units should operate well.

Got you. And the Comstock unit is still at 25 tons per hour, right?

Yes. It’s important to highlight that the Comstock unit was designed primarily to perfect the process, right? While we've achieved high cleanup levels and effectiveness with units that only had one centrifuge, the Comstock unit is designed to include three centrifuges—a full mercury reactor in addition to centrifuges. This is something we are in process of patenting; it also includes spiral separators, de-watering equipment, filtration units, etc. This is where we perfect the process to achieve the highest remediation levels, extract the cleanest material out, and subsequently scale that. The Philippine effort has kind of leapfrogged our timelines a bit, to be honest; we had initially planned to do the Comstock thing first. Nonetheless, both will ultimately work.

Okay. I think that answers my questions. I really appreciate it.

Alright, sir.

Oh, one last question. Are you still planning on doing a blog just about the fund coming up?

Yes. There’s a lot of that activity going on. I’m just trying to help get more things done first. But, we'll provide more transparency and updates on that as we progress.

And also a documentary in the Philippines would be great while you guys are doing that.

Yes; we’ve been approached by a couple of outlets, such as Discovery Channel, about that. So, yes, we will see how that plays out. There’ll likely be something on that.

Thank you, sir. We'll take our last question from Charlie Patent, an investor.

Yes. My question is regarding what was mentioned on previous calls, but not too much about waste. I think there was a PA meant to get completed in the third quarter. Any more information on that?

Yes, let me address that briefly. So, on the Dayton resource, we intend to publish an updated resource estimate. I mentioned earlier that we’re going to do this under the SK 1300 guidelines. Although it won't match the level of a preliminary economic assessment, there will still be economic dialogue in that report surrounding the resource estimate. So, it’ll be more than just that estimate but less than a PA. The intention is to have one more or an intermediate drill program. The biggest debate has been about drilling before or after we publish a report. I think we will end up drilling before the report, laying out new geological interpretations, laying out drilling intentions, and in the subsequent drilling round and updated engineering, we could be very close to, if not already on, a preliminary economic assessment for Dayton. The second point, which may have been what you were referring to, is that the Tonogold team has accomplished a lot to update the resource submission for Lucerne. I know they performed preliminarily on the economics for sure. It’s almost required to conduct those assessments under the new standards. I cannot ascertain if their resource estimate will match PA standards or come close, but economics will certainly be analyzed. So, I do not want to speak precisely for them, but I know that this is the intention—a resource estimate with some economic assessments accompanying it. This is crucial for our journey to market recognition as we pursue the $120 million of recognized value. Detailing this through third parties like Mark Raymond will be immensely significant for our progress. More technical reports that validate geological and economic assessments form essential prerequisites to attain higher values.

So, you still expect to release some numbers regarding the resource estimates this quarter, or do you think it might stretch to next quarter?

No, I believe it will be this year. We’re not far off, right? But I think with the S-K 1300 rules being new, we already opened dialogue with Behre Dolbear on executing this properly; they haven’t executed this yet, which I think might impact timing. But we will be out; hopefully sooner rather than later, certainly before the end of this year.

Okay. Thank you very much.

Alright, thank you. Casey, I think that’s it. Great call; great facilitation. We can wrap it up now.

Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect.