Comstock Inc. (LODE) Q3 2020 Earnings Call Transcript

Good day, and welcome to the Comstock Mining Q3 Update Conference Call. Today's conference is being recorded. At this time, I’d like to turn the conference over to Mr. Corrado De Gasperis. Please go ahead, sir.

Thank you, Nick, and good morning, everyone. This is Corrado, CEO of Comstock, on the line with Zach Spencer, our Director of External Relations and our Treasurer, and we welcome you to Comstock Mining’s third quarter 2020 conference call. I will provide a brief summary of the information included in our press release from this morning, including our progress on our strategic initiatives, especially with our mercury remediation business and the monetization of our non-mining assets, which has really picked up some incredible momentum. If you don’t have a copy of today’s release, you will find a copy on our new website at www.comstockmining.com by just clicking on the Press Releases link on the main menu bar. We’ve also filed our quarterly report on Form 10-Q last night, which is also available on the website as well as the EDGAR on www.sec.gov. Please also let me remind you that we will make forward-looking statements on this call, including an update on the remaining 2020 outlook and also looking forward into 2021 and beyond. Any statements relating to matters that are not historical fact may constitute forward-looking statements. These statements are based on current expectations and are also 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 and 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 identify. All right, let's jump right in. I tried to shorten my prepared remarks to allow a little bit more time for Q&A. But going into our update, with the closing of the sale of Lucerne, which we completed in September, our realignment and all the work that has been going on over the last two to three years is essentially complete with some very positive financial implications. Let me summarize about half a dozen of those or more for you. First and foremost, we recorded an $18.3 million gain on the sale of Lucerne, which resulted in net income this quarter for the three months ended of $17.3 million or $0.54 per share. We also recorded net income year-to-date of actually $18.3 million for the nine months ended or $0.63 per share. The company doesn't expect to pay any federal income taxes on these gains or incomes based on our existing net operating loss position. As most people know, the company has over $175 million in net operating loss carryforwards that stem back 15 years of exploration and development. Total assets as of September 30th grew to over $48 million; that's a remarkable number, and it includes about $26 million in current assets. This compares to current liabilities at that same period end of $6.6 million. Remarkably, we've already paid down about $3 million of that $6.6 million just in the last 30 to 40 days. From a balance sheet perspective, our net assets have likely never been stronger. The $26 million in current assets includes investments in Tonogold's common and preferred shares that were valued at almost $10 million as of 9/30. It also includes a 12% cash-paying coupon convertible note receivable from Tono of $4.475 million due in just about 10 months. The company expects to monetize all of these assets within the next year. On October 2nd, as we announced that week, Tono redeemed the remaining $2.16 million of our convertible preferred stock for a large premium at over $2.6 million in cash proceeds that came in from that redemption. Those proceeds were immediately used to pay down the debt obligations on the balance sheet at September 30th of $4.8 million, down to just under $2.5 million. The company actually expects to pay off the remainder of that debt from a variety of sources. It could easily come just from the continued monetization of a small portion of those Tonogold securities. So we're on the cusp of being debt-free, around the cusp of very strong liquidity and we're on the cusp of being able to implement our three-year plan through our own financial resources. Remember also that we currently receive about $2 million in annual reimbursements with Tonogold subsidizing our production platform, resulting in one of the lowest cost production platforms that I'm aware of, regardless of what happened in terms of the timing of Lucerne going back into production. So we still have less than $2.5 million of debt, almost $12 million in Tonogold securities as we sit here and speak today to be monetized and another $10 million in assets held for sale relating to Silver Springs. Plus, the company recently announced the sale of the Daney Ranch for $2.7 million really putting total cash proceeds from these monetizations at almost $25 million against residual debt obligations of just $2.5 million. We are incredibly well-positioned financially and otherwise to move forward. On that note, looking forward, we have just completed a three-year planning process, which we will detail a little bit more specifically tomorrow at the Annual Meeting. But that planning process is broken down precisely to grow our intrinsic value to $0.5 billion by 2023. We have published a dozen or more performance objectives related specifically to delivering that value by 2023 with the full intention of linking all management incentives 100% with the performance of those objectives and the delivery of that value. That value today would represent somewhere between $12 and $15 per share, which is what we're locked and loaded to do. We will do it by commercializing our environmentally enhancing precious metal and strategic metal-based products and processes. Almost everything we are focused on now in terms of forward activity has some form of positive cash flow returning to the company associated with it. We want to deliver that cash flow from our Northern Nevada-based platform while still increasing the long-term value of our mineral assets. So the next three years are dedicated to this. We've published those performance objectives and I'm just going to review them with you right now essentially in three categories. The first one is establishing growth, the value of our mineral property. The first objective is to establish the date and resource in a standalone mineral resource estimate. Objective two is to expand that complex through exploration, drilling, and geophysical modeling. Objective three is to develop and expand the date and complex towards a full economic feasibility report supporting a decision to go into mining. Fourth is to fully entitle that complex with all the permitting that's required to do so. Lastly, under the topic of our mineral properties, we aim to validate and grow our royalty portfolio. As many of you know, we've set up Comstock Royalty, and we are in the process now of segregating all our royalties into that entity. I will talk a little bit more about that in a bit, but it's growing and could be remarkable for us in terms of the asset value that we're compiling. The second category is to commercialize our globally profitable mercury remediation system. We have three strong objectives here. First and foremost, establish the technical efficacy of our Comstock system. I will give you an update on that in just a minute and protect the intellectual property. We just filed a patent on the system, so that is very exciting progress for us. Secondly, we want to deploy and operate the first international remediation system. As most of you know, we've already shipped the system over to the Philippines and are expecting to deploy it over there within a week. So great progress indeed. Within the same period, we wish to identify and prioritize the pipeline of potential new mercury projects and deploy at least our third and fourth projects over this time period. The pipeline is growing fast. The projects are seemingly feeling like they are unlimited; they’re not, obviously, but they're huge. In the next three years, we want to have at least four projects up and running as we look at a huge growth market. The last component, the last category is the completion of monetizing our non-strategic assets. This has now built up a momentum of its own, and we’ve broken it down to monetizing the total growth securities that we previously talked about. We talked about monetizing our other non-mining assets. We are not — and this is news; we are not intending to sell the Gold Hill Hotel. We have an extraordinary view of this cultural value, both to the Comstock and the company. With all the other asset sales now being contracted and scheduled for completion, the Gold Hill Hotel will be kept as the only cash-profitable entity in our non-mining portfolio. We're also going to grow the value of our investment in the opportunity zone and grow other strategic metal-based opportunities that we are currently in the midst of developing. We are laying this out in a very specific schedule and sequence. But as we build these blocks specifically to the goal, we expect the value of these components to grow to an aggregate of over $500 million, which will be at least $12 a share. I'm happy to talk more about that. I just want to give you a little bit more color on MCU, and then I’ll turn to Q&A. With the MCU, as I mentioned, we had last week the system running on the Comstock. We had all components of the system running independently. Then last week, we got all the system components running interdependently except for the mercury reactor; that’s the last piece that will activate. The intention is to activate the mercury reactor this week, which means that we will have all our centrifuges, spirals, separators, and systems working in conjunction with the mercury reactor. We've also developed, at the highest EPA standard testing protocols using cold vapor testing processes to ensure that we know precisely how much mercury is going into the system and precisely how much mercury is coming out the other side of the system. We created that testing protocol in conjunction with the Nevada Department of Environmental Protection and the EPA, so that everyone will have validated certified accepted results on the system's efficacy. We’ve also enhanced our joint venture with our counterparty in the Philippines, which is Clean Ore Solutions, and we've formed the venture there. As you know, we've shipped our system over to the Philippines. We are now accumulating peripheral materials and operating equipment to get that system up and running. As I mentioned, we should be sending Paul and the team out as early as next week. Keeping in mind that we built all our initial models at $1,200 gold, we think the timing of our systems coming online and starting to be productive could not be better. We couldn’t be more excited about the size of the market aggregating around us, and it seems that we're really the only solution that we're aware of that could not only clean the mercury from the soils but also extract the metals from the mercury and can be used on a sustainable ongoing basis, chemical-free, for many of these types of mining operations. So we couldn't be happier there. Meanwhile, we're expanding — we've completed all the foundational structural geological work that we had been working on for almost the entirety of this year. We'll profile some of that tomorrow at the Annual Meeting, but it's come together incredibly well. We now move from geological level plans and cross sections to full integration, engineering an expanded pit shell from that information as well as laying out the drill program that would complement and grow that resource. As most of you know, we also completed the geophysical survey via helicopter in October, and we recently received the data and report from that information. Frankly, we haven't even had the ability yet to delve into the details of all that geological data, but it’s impressive. It's directionally corroborative for what we know and directionally looking to be expansive to what we didn’t know. I'm honestly telling you that I'm giving you that real feedback based on the superficial view of the highest level of the report; the details and data are tremendous. It's still shocking that we can get this level of depth and detail so efficiently, but now we have it. And so what will happen is not only will our engineers update our model, our resource estimate with all the geological data that's been collected, but we will integrate this data into one coherent whole with two results. Obviously, we will enhance the precision of what we already know, but I think the biggest benefit will expand dramatically where we believe the target prospecting will lead us. It will expand and modify — it will modify both ways the drilling program to reflect what we can see as the highest prospect target. I think as you guys know, we talked last report that we retained qualified geologists. We’re planning to file a US compliant SK-1300 technical report. This is a first where we are able to report under SEC standards, not Canadian National Instrument 43-101 standards but SEC SK compliance standards for our resource estimate. We may be the first to do that in the United States — and it’s not going to be required for SEC filings until the 2021 calendar year. We're looking to do it as part of the 2020 results this year. We're ecstatic about that because of the disclosure it provides to our investors. But we're also thrilled that the rules require the information be maintained in current form. So you won't have a scenario where you have a 10-year technical report or a seven-year scale data set. You will have current data being updated continuously in our US filings as a US registrant and NYSE listed company. We think it will represent a leadership point for us in resource reporting. It will also include our drilling plans, which we look forward to in 2021. Just before I wrap up, let me talk a little bit about our royalty portfolio. From a genesis standpoint, this all came about when we sold the Lucerne mine to Tono. We retained a 1.5% royalty on what we believe is an incredible resource that Tono will ultimately publish their technical report on Lucerne, which will give us much more clarity to the value of our 1.5% royalty on that mine, which is great. Tono is also expanding their claim grouping east of Lucerne in an area that we consider the southern extension of the Occidental load, which has some preliminary resource connotations around it and also has an additional two miles of extended mineral strike, all which is part of Tono's exploration and development program. We also retained a 1.5% royalty on Occidental, one of the more exciting claims we have on the Comstock. Tono has already launched what we believe is an incredibly well conceived and expansive drill program that will also include some of those eastern extensions of the Lucerne and will include Occidental. Moreover, they will also start on the Gold Hill target. We believe the Gold Hill target represents some of the most prospective claims with some of the highest grade potentials on what was the heart and soul of the original Comstock load. We also retain a 1.5% royalty on those claims and through our acquisition of 25% of Pelen, which owns the Sutro Tunnel Company, we also have effectively 25% of an additional 4% royalty on those Gold Hill targets. In addition, we have the option to buy out the rest of that entity, which would give us 100% control over the Sutro Tunnel Company and, more importantly, 100% of that 4% royalty. Sitting here with anywhere between 1.5% to 5.5% royalties on some of the most incredibly prospective claims on the Comstock has created a value center for us that is attracting a lot of attention. You will be hearing more about Comstock Royalty and the potential values of these components as well as possibly expanding it beyond what we know already have. Let me just wrap it up by saying that our focus now is strengthening. Closing Lucerne and monetizing some of these assets and getting these things behind us has created a sound financial position but more so it has created a narrowing of our focus to only these objectives that will drive $0.5 billion value. Our capacity, our capability, our momentum continues to get stronger, and we're very much looking forward to 2021. Nick, I’m just going to stop there. Let’s go ahead and turn to questions.

Thank you. Our first question comes from Mark Reichman.

With respect to Dayton, and I know you're still kind of interpreting the geophysical results. But what would your expectation be in 2021 on the exploration program dollar spent? And what do you think is the timing to get to a full economic feasibility study for both Dayton and Spring Valley?

I didn't say it as precisely, but I think that over the course of those performance objectives that I mentioned, there are probably three technical reports. Meaning in the publication of our made and resource estimate, which I think we are trying to wrap that work up this year, probably looking to see that published in the first quarter, with the intent that it be part of our 10-K filing as well. So we will be able to publish that report but also be able to incorporate it as part of the 10-K filing. Secondly, the drill program — we already have a focused drilling program sort of pulled together from all the geological work that has been done this year. I think the last step now is to refine that based on only geophysical data. And I know you say we're still looking at it. I mean we literally just got it. It shouldn't be viewed so much as a final report; it is a very robust report but really is just a mountain of geological and geophysical deep data. Our team will now look at our drill program, and my expectation, to answer your question more directly, is that we will probably have some real refinements to drilling. I think there will certainly be added targets from what we're seeing already, which is very exciting. But I think the first drill program will be modest. When I say modest, I mean they're probably in the range of $1 million to $2 million. The reason I say that is because we have so much data that we've reassembled and recalibrated, and we have a very precise set of information gaps that we would like to fill in with this drilling program. It will strongly enhance the resource, upgrade it, and expand it. I think 2021 will allow us to set the new platform, identify the first real phase of drilling. I think it'll be very exciting, but it'll be very focused. While we’re working on that, in other words while we’re drilling for explicit expansion and explicit connection of what we know, we will then continuously evaluate the geophysical data to create what I would think would be as a second phase of drilling program, with the intent to expand based on what we learn in 2021. That would likely result in a second stronger expanded resource estimate. We don't have it scheduled yet, for example, to say by the third quarter or first quarter of the next year, but certainly that would feel reasonable in terms of a modest drill program that would entail drilling, filling in data, updating a known data set, and then updating the resource. And then in parallel to that, we would be working on the economics of what that all means to us. We already feel like we have a good strong economic shell to start, but we will then start adding engineering and what we refer to as pre-preliminary economic analysis. With the idea that by 2022, we would publish a technical report that would have preliminary economic analysis. It wouldn't be a full feasibility mine plan production decision, but it would essentially be the step before that. We would then look to 2023 to publish a full feasibility report. One risk factor on full feasibility is to the extent that these step-outs and this geophysical survey show so much more than we could have an economic feasibility that we would still want to expand before moving to a production decision. So, one way could be to get success, and then we could step out even more. I mean, conceivably, you could spend another two plus years drilling and developing to come up with a much bigger model. But the positive aspect of this scenario is that we know we're going to have a good outcome. It’s just a question of how much further could we grow it and let the economics dictate that to us. I know I’ve answered more than what you asked but I guess let me just make sure that I at least answered your question.

And just one quick follow-up before I get back in the queue. You've been very successful in paying off most of your debt, even prior to executing the sale of some of your non-core assets that still remain. In light of kind of a modest exploration budget in 2021, how do you think about how you might allocate the expected proceeds? Do you think it will still be dedicated to Dayton and MCU, or do you think there will be some portion maybe available for returning capital through a buyback or something like that?

In terms of Dayton, I mean, the economic potential, as we look at — we just look at some of our preliminary economic shells. We look at $1,400 gold, $1,600 gold, and $1,900 gold. We see a range of $100 million to $150 million of economic value. To invest $1 million or $2 million to expand that number, the returns are exponential; they’re very high. If you could spend a million or two drilling to not only support and validate $100 million to $150 million of value in a more robust third party technical way, that is very high priority allocation for us. But if you could spend $1 million or $2 million and add $20 million, $25 million, $30 million, or even $50 million of value, that’s an extremely high return for us as well. We have said until now that we weren't — and this is still true, we're not committing the capital until it's available. The difference now is we have absolute clear sight to those funds becoming available. We have clear visibility even before we close on the Silver Springs assets for over $10 million and now the Daney Ranch for $2.7 million. We have a clear pathway to those funding sources with agreements. But even before that, we have almost over $10 million of liquidity coming through Tono. I think Dayton is going to be green-lighted. As soon as the drill program is updated, expanded, and reviewed with the board, we would look forward to moving on that. MCU's commitments are less than $2 million to go, and we also have clear sight. We obviously want to see the efficacy of the mercury remediation on the US system, which is happening as we speak. We want to see the efficiency of the Philippines system, meaning the generation of cash flow there. From our perspective, deploying $1.5 million to $2 million for a system that can generate $1 million to $2 million a month will be done as fast as the organization allows it. There are some constraints if you're going into different jurisdictions; there are lead times, as we see in the Philippines, even though it's come together very nicely. There is a three to four-month lead time for building one of these systems. So we want to be deploying those as fast as we can get the cleanup and the cash flow moving. Those two things are at the top of our list; that’s what we've prioritized. But we have other mineral processing technologies that we're developing. We have other opportunities, but it’s way too early to talk about those. The likelihood is that there could be some excess liquidity; canvassing the board will show there is receptivity to the idea of buyback. But we're only going to do it in the most financially diligent and disciplined ways. We've just gone through three to four years of absolutely brutal restructuring to reposition our liquidity. I’ve hated it; it's been miserable. But I'm pleased with where we are. It wasn’t always obvious that we would get to where we are. We're very pleased with where we are, and we will consider those things very diligently. As we look at the landscape, we have the liquidity to deploy in high-return, high-cash returning opportunities, but we may also have more liquidity. If we have more liquidity, then yes, we would consider doing something like that. It might be modest, but I wouldn’t go too exaggerated; it might be very intelligent. So good question. If we did make a decision like that, we would communicate it immediately.

Thank you. Our next question comes from James. Please go ahead.

What kind of throughput are you getting on your mercury system, and the response per hour or anything like that?

To compare and contrast, that’s a great question. The US system is really designed to prove concept, and the proof of that concept is intended to show operations at a range from 2 up to 25 tons per hour. What we've been doing so far, Jim on the US system, is that this range is not just possibilities; it's the rate we want to scale it up from. We want to operate at 2 tons per hour; we’re going to be operating at three to four times per hour and we want to slowly but surely move that up to 25 tons per hour. The reason for that is we want to have absolute certainty that it's effective. The definition of effective to us is that from any amount of mercury fed into the front end of the system — let’s use an example of 100 parts per million — our goal, of course, would be to have zero parts per million come out the other side, but our objective is to try to get below 11 parts per million. Eleven parts per million is the EPA standard; if it has less than 11 parts per million mercury, then the material is considered clean and not harmful at all. The goal here is to prove that as we scale it from 2 to 25 tons per hour, and all of that data will be monitored and corroborated with third parties, which is critical for us. One of the most critical success factors is coming up with a sampling methodology. Many of these protocols are fully accepted, universally accepted, certainly by the EPA and the NDEP. We came up with a cold-vapor sampling process. It existed, but we developed a way to obtain materials, mixed materials, sampled materials, and third-party proven materials. Until now, we've been running each part of the system. Quite frankly, each part has run excellently; we feel really good about it. Last week, we got all parts of the system running without the mercury reactor, the core technology of our IP, with tremendous results. In other words, without the main mercury remover, all other parts of the system ran with tremendous results, getting the vast majority of all mercury out. We plan to activate the reactor and run the entire system. To your point, I expect we're going to be running at a 2 ton per hour rate for quite a while. We want to run it at that rate with varying types of materials—different types going in—and at each step of the way, prove we're getting all the mercury out, which we fully expect to be the case. Let me contrast that to the Philippine unit, where we're starting at the lower base of the river. This system — there's much, much less mercury. It wouldn’t need four layers of technological sophistication to get the mercury out. That system will run at 150 tons per hour right from the onset. After a week or two of just getting it up and running, it will run that pace almost from the onset. Our models would show that system running at that rate would be profitable even with no precious metal. So even if you had a tenth of a gram or fifteenth of a gram, it starts generating substantial cash, given the higher operational rate. So there are two very different profiles; I don’t want to make that seem to be comparing them unfairly. They are both alluvial mining systems but designed for different environments. Once we get the US system running at the higher end of that 2 to 25 ton range with the same result, then we will build the first fully integrated mercury system to go to the Philippines. That one will be more like the Comstock system in some regards. It’s also different in others, because each of these is designed for customized deployment to the environment they’re entering. We are looking for that system to be a 75 to 100 ton per hour system with the higher end sophistication; that’d be the second Philippine system. We could see the Philippine project having four, five, six of these systems deployed simultaneously. Each project could have much more than one system deployed depending on its size and scale. I know I contextualized beyond what you asked me, but did I at least address your question?

You did. What I'm thinking of is, are you using leach pad material, right?

We started off using leach pad material just to run the system for material flow wise, then we began taking from some tailings and dumps in proximity, known as the Baltimore dumps. We’ve identified a dozen targets across the Comstock that we would bring in feed material. The US project aims to prove the concept across a variety of different materials, contamination levels, and frankly, different types of materials—like some rockier, some sandy; we’re testing the full spectrum.

Are you crushing the material before you feed it in?

We're not currently, but we're trying to target material. We didn’t with the leach material; we haven’t with some of the other waste that we tested. To the extent we identify material with excessive sizing, like bigger rocks, I wouldn’t imagine crushing, but we would probably screen the material before running it through the system.

What size screen are you using? Under one quarter?

We're not currently using sizing, but we’ll probably be looking at something below an inch or an inch and a quarter, perhaps smaller. The systems can handle larger components; it’s just not an efficient use. The more granular the material is, the better it’s processed. It’s just a matter of optimizing supplies and determining whether to deploy some sort of screening, which is simple and easy to do. We haven’t confronted that yet; we can choose the material that we prioritize.

What does the output consist of? Is it a slurry, liquid, or more sand?

Yes, it’s like all of the above. We are separating and capturing mercury. At this stage in our process, we’re capturing mercury, building an amalgam. To that extent, we would have subsequent processes here for retorting and refining. We have slurry, we have all the residual materials except for the gold and mercury that gets separated cleanly. In our case, those materials would just be placed on the leach pad on a fully contained unit. That is one of the beauties of our platform; everything is approved and contained while we’re running tests.

Are you finding — I don't know if you've done any output analysis or looked into it — are you finding any other valuable minerals aside from mercury, like gold or silver?

Just gold and silver.

Is there any way to spin this material into your mineral growth plan?

There could be a way to use some portions of that process—particularly the retort for final stage refining—but we're not planning to do that right now. Our goal is to prove overall efficacy of how much mercury we can remove from the soil. Once that's proven to others like we are confident in what the system can do, we will strive to be deploying the system in larger scaled modes in many projects worldwide.

Let's switch gears a little bit. Any prognosis on when you're close on the Daney Ranch and Silver Springs property?

So Daney is very precise. What we did was we signed a two-year agreement with a drilling services company that is actually currently being used by Tonogold. They are very good. The owner of the company wanted to buy the ranch, so we agreed to sell the ranch for $2.7 million. The way we did it was we signed a lease; if they close within the two years, the $9,000 a month will apply to the purchase price. There’s a high prospect of that happening, but there’s an additional feature in the agreement that allows us to use their drilling services. If we did $0.5 million or $1 million worth of drilling, it would be liquidity-friendly for us. For instance, if they do not close on the ranch in that time period, those dollars would be forfeited by them. If you ask me my opinion, I'd say the probability of closing is about 95%, I would be surprised if it didn’t. So it’s solid with a two-year window here—looking at perhaps September 2022 or 2023. For Silver Springs, COVID has slowed down some of the capital raising activities by the fund; they have really restarted in good haste. I believe there’s been some good reconnection in September, but now it’s quickening; we are getting a lot more interest. We’re getting a lot of interest from people who would typically be 1031 exchange types, selling real estate and looking to roll the capital gain into another project. They’re realizing that investing in an opportunity fund is a more efficient, flexible, user-friendly way to roll those capital gains. There’s significant potential of closing these things by the end of this year. I think there’s a strong prospect for that if not early next year. But the important aspect for us to appreciate is that there was almost urgency in selling the Silver Springs property, as it was seen as the most probable means for us to stop selling stock. It was the means to fund ourselves initially to pay off our debt, remove that risk factor, and then provide funding to start our business activities, be it MCU, Dayton, or otherwise going forward. The reality in the last three months has changed dramatically. We have paid off our senior secured debt completely. That risk has been removed from the equation. We did that primarily through funds that came initially from Tonogold, reducing our debt from over $10 million down to less than $5 million. More money from Tono then contributed further, allowing us to refinance a tight senior secured stringent debenture due by year-end into a flexible extended-term, unsecured promissory note. This was a significant victory. With Tono’s monetization accelerating, it has allowed us to pay down our debt. Now, the non-mining asset sales become the gravy on top. Previously, Tono monetization was deemed the gravy, and people placed less priority on it. The important aspect of this thesis is that we’re capturing great investors at higher values, which is a good thing, along with the value of the assets that have been assembled. Perhaps more importantly, northern Nevada appears to be immune to COVID when it comes to industry, and companies keep coming in that want industrial capacity. We have a list of maybe ten that want to come to Silver Springs alone, and we’re signing leases with these companies coming in. The value of real estate and water rights continues to rise. I think the urgency correlates to our number one priority to monetize all of these non-mining assets. Not only does that improve our financial standing, but it also simplifies our operations, focusing on the dozen objectives that create $0.5 billion value. I believe the acceleration of Tono activity, closing deals, and monetizing securities creates a better position than before. I’m very confident that these deals will get closed; we’re just trying to do it with the best investors and the best timing. I think we all wish it were faster—there’s no question. There hasn’t been anything that equates to a setback or a fatal flaw in any considerations. I just wish it were done. But I feel very confident it will get done; it’s coming and it seems to ramp up every week. More inquiries keep rolling in; a lot of capital wants to suit these real estate projects, so it’s going to happen.

Our next question comes from Carl Frankson.

Just a real quick aside kind of from what I feel, lithium is hot as a pistol and Nevada is, I guess, probably one of the centers of lithium deposits. Is lithium on the radar at all for any of your mining claims or any byproduct or anything like that?

It's interesting that you asked that question, Carl. Last month, we had two board meetings because we've been incredibly focused on our strategy. And if you look at the verbalization of our strategy, we want to commercialize high-value, cash-generating precious metal-based materials that are also environmentally friendly and socially responsible. Before I answer your question, let me say two things. First, the amount of investor interest we’re receiving due to the mercury remediation is impossible to exaggerate. We went from last year having short-term capital looking to do short-term things, uninterested in the long-term investments—which our responses have been no, to ESG-type investors asking how much capital we need. It creates a fun situation to be able to say, we don’t need the capital, but we are interested in enhancing our shareholder base. Switching — before addressing your question again, our shareholder base has been positive. We know who our investors are, we understand what we're doing, and people definitely want to see huge value jumps; we think it's on the way. So, we need to enhance this top 30 base; we're not looking to subtract any investors but, instead, we’d like to see new names popping up consistently. Thus, instead of the top 30, we're looking at the top 45. We believe that is a primary driver to elevate us to $4 per share and aim for $12 per share in the future. Pivoting back to your question: When we discuss mercury remediation or metal recycling, these are the two areas we’ve been investing time into metallurgical processes and metallurgical and engineering processes that are to be commercialized. The investor response has been overwhelming. It’s truly something that gets me excited for 2021 by doing a non-deal roadshow and talking about mercury and what we’re doing. Not to mention that precious metals are gaining favor; significant organizations based on their records have allocated substantial capital to the gold industry for the first time. So we are enjoying the trends we see in precious metals. But in these recent board meetings, we decided to tweak the strategic statement to include 'precious and strategic metals.' This is not insignificant because we've been approached by lithium-ion battery recyclers and other critical minerals opportunities that fit our profile. We are not straying from our focus or core competency. When you look at a process that involves crushing, leaching, and metal reprocessing, we've done all of that. So we are being approached about lithium, nickel, cobalt, and magnesium. We’re getting interesting offers—more than just ideas. They are more advanced than mercury remediation as it all began. I think both from an economic opportunity standpoint, it's being approached effectively, and the investor feedback is encouraging. We’re in a position for incredible growth here. Consequently, in response to your question, it is premature to communicate any opportunity, but we are strongly examining those, including lithium, nickel, and cobalt. As long as it's economically feasible, these models we're generating show extraordinary returns. I mean, for example, you invest $20 million and generate $15 million a month—it’s hard to ignore these great offers. We have broadened our scope but do not want to impair the focus we've spent two years creating. We want to sell non-mining assets not just for financial gain but because we do not want to invest brain power into managing those or non-mining activities. We want Tonogold to succeed and potentially work with them. We want to invest brainpower into only two or three things that carry huge potential—huge cash-generating opportunities that we're able, if not more so, to commercialize. I’ve perhaps over-contextualized, but your question is something I will elaborate on at the annual meeting tomorrow, highlighting this strategic focus.

One other quick one. As far as the Dayton, wouldn't it be possible to speed up a little of that process? I'd be quite honest; I’m a little disappointed in how far out we're looking at this. Couldn't you explore this a little bit with some of these streamers, like the smaller ones like Maverix Metals or Eli Gold to finance it and perhaps get it going a little earlier?

I think so. If you had asked me this six or nine months ago, we might have debated a little. But I believe we are there now. Because with this contract to sell Daney, we effectively have $2.7 million in non-dilutive financing available. Theoretically, we could conduct up to $2.7 million worth of drilling with Luke's firm which would be fully funded. The key for Dayton was that I didn't want to allocate capital to it—not that it didn’t qualify return-wise, but that we simply didn’t have it. Now that we have access to capital, the only step now is refining the drill program with the geophysical work we've just received. Once we have that, we will be moving faster. Even though there’s a timeline here of two to three years, the economics and appreciation of what we have there are going to grow immediately. As soon as we start publishing this technical data and reports—which we plan to do in several months—we should see value recognition of that. We could also consider additional funding sources beyond those available right now; I’d rather consider that only after we have published and know the resource capacity instead of speculating and losing value without current data. The process is going to move faster; you will be happy knowing we will start moving faster as the obstacles we were previously waiting to remove, frankly, with all that now happening right now, are being effectively removed. It’s simply a matter of internal work to finalize drilling based on the latest geophysical survey.

Our next question comes from Lawrence Danny.

Thanks for all the hard work. I like the way it's moving forward. My question is regarding the mercury remediation. Can you give me a quick version of, do you sell the machinery? Hypothetically, if you sell it to another gold mining company, do you then go help implement it and install it and consult? Is that the whole picture?

First, let me give you a couple of givens. MCU, the company into which we are invested, gives us the right of first refusal to participate 50-50 in every project alongside MCU. The way this is structured, we end up with 25% of MCU and the right to do 50% of each project together with them. So in theory, we could obtain 62.5% of the economics from each project as a structural consideration, which we like. To answer your question, first of all, we're not limited in any manner. It's up to MCU. We can decide how we want to deploy the systems, and we haven't ruled any model out. MCU has exclusive rights to our intellectual property and global rights to deploy these systems. How would we do it? Our first preference is strictly to source the contaminated material, and we would like to process that material. We would prefer cleaning it, where we keep all profitability from the gold extraction associated with that material. For the Philippines example, the country doesn’t allow for 100% foreign ownership. Our local partner effectively owns/control the mine claims. Thus, we have a 60-40 venture where they hold 60% and we obtain 40%; we drive clean-up of the site and share the profits. We do maintain an accelerator on all profits until our original capital is recaptured, and then they get 60% while we take 40%. This setup is very supportive for us. Could we license the equipment to someone? We could. There’s no restriction. Could we sell the equipment? Sure, we could. No restrictions exist there either. However, that is not our intention right now. We have so many projects globally that we feel we can select based on that having the most impact. We mean that in terms of the greatest economic feasibility and profitability, but also its social impact; these communities are damaged by this mercury, and we will indeed strive to clean them up.

Interesting! That's great; sounds good.

So you can envision us a couple of years from now as a major miner with a dozen mining projects around the world. The only difference is that we are cleaning up the environment rather than damaging it, whilst making that money and experiencing that progress. That’s how I see it. We have a flexible strategy; even if the EPA came in and wanted to pay for cleanup, we could do that too — just take a fee for performing the work. There’s no prohibition.

Plus the new administration is going to be more pro-environment, right?

There's no question about that, but we are starting from a position where the UN passed the Minamata convention, which targeted 2020 to begin eliminating mercury from industrial mining, especially artisanal and small-scale mining around the world. This is the year we initiated that, and we've been engaged with Washington policy groups at the EPA. We’ve been heavily engaged with the state department, too. They are all pursuing an acceleration of Minamata not just in the US, but globally. They are monitoring our progress closely because they see us as one of the few, if not the unique solution, that can not only clean the environment but also create sustainable ongoing solutions. We feel we have substantial federal support, and I believe it can only improve to your point. It can only get better.

It sounds interesting. I like the flexibility. Sounds good.

Thank you. We have no additional questions at this time.

I want to thank everybody for your interest and attention. We have our annual meeting tomorrow, which will emphasize the topics discussed today. I hope everyone keeps their families safe during COVID. It’s encouraging to hear about the vaccines, but we must remain cautious. Other than the delays in the Philippines, our operations have remained unaffected and we are marching forward. Thank you again.

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