Comstock Inc.

Good morning, everyone. This is Crowder DeGasparis, and welcome to our first quarter Zoom call. I'll provide a brief summary of the financial information included in our press release from this morning and from our quarterly report filed on Form 10-Q last night, including our progress on specific performance objectives, especially our silver and gold exploration and developments, MCU, our mercury remediation business that is now up and running in the Philippines, where we actually recorded our first revenues this week, and the good progress is on the lithium-ion battery recycling business, Lineco, whose scope is even expanding and some major, major achievements on our financial position. If you don't have a copy of today's press release, you'll find a copy on our website, www.comstockmining.com, by just clicking on the Press Releases tab on the main menu bar. Our Form 10-Q is also available via EDGAR on www.sec.gov. Please let me remind you that we may make forward-looking statements on this call, including our 2021 outlook and our plans for the next three years. Any statements relating to matters that are not historical facts may constitute forward-looking statements. Our 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 and the SEC and in this morning's press release. And all forward-looking statements made during the call are subject to those same and other risks that we can't identify. Once we complete the prepared remarks, Zach will direct all Zooming inquiries, which please use the raised hand function, and he will convey them to me and I'll happily answer them. If you're not using Zoom, you can follow up with us after the call directly via our website with any additional questions and inquiries that you may have. Sorry. If you guys can use the Q&A function rather than the raise hand function for Zach so that he will then direct all those questions to me and I can answer them. Okay, so in just three short months, we saw a dramatic leap in the strength of our balance sheet, where our assets increased from 43 million, just at 43 million at year end, to over 70 million by the end of the first quarter, with our debt also completely eliminated. We've made strategic investments. We've made strategic secured investments with MCU, Linaco, and PSI, all yielding and all with unique IP that will commercialize into growth, high growth sales, and cash generators for us. The huge asset increase was driven primarily by these five things. Increases in our investments from a little over 3 million to almost 10 million. driven primarily by Linaco and MCU in the Philippines, extinguishment of all of our debt obligations and an increase in cash to over $10 million. So debt is zero, gone. An increase in our secured monthly cash interest paying note receivable with Tonal Gold by over $1 million. And an increase in a new derivative asset, which relates to shares, the 3 million shares that were contributed to Lineco as part of our investment, the derivative asset is actually the economic value of those shares in excess of our commitment that comes back to Comstock that we've retained. So tremendous, tremendous improvement in the balance sheet. Turning to the P&L, Our operating costs were down dramatically in the quarter. They were driven by a couple of non-recurring but very positive items. We had one item, which is the accounting for a large reimbursement receivable, a new reimbursement receivable from Tonal Gold during the quarter of over $800,000. That was associated with an accelerated land payment that we had made during the quarter that we get reimbursed for. the reimbursement was actually added to the secured interest bearing note that Tono pays us cash interest on monthly. We also had to update our estimated reclamation liability. That update resulted in a decrease in the liability by almost a million dollars. Both those items benefited us positively during the quarter. We also recorded overall TAB, Mark McIntyre:" net income of over $8 million principally driven by the value of that increased derivative asset that I mentioned related to the investment liniko and our quarter ended with our total outstanding shares at March 31 of 42,455,515. That's the same exact number that we reported on our last quarterly call. And that includes the $4 million that was issued during the recent capital raise. And it includes the $3 million that was issued with the Linoco commitment. So that number is all in. As reported, again, our cash remains over $10 million. Plus, we have multiple current non-core asset sales that are in progress and waiting to be closed, including our industrial and commercial non-mining properties. totaling 13 million, all under contract for sale. We do expect those to close this year. We're seeing a tremendous now progress in the opportunity zone, not just progress in the fundraising capital, which it's doing very effectively at a very significantly higher valuation than last year. But we've been literally getting inquiries on a weekly basis for companies coming into the opportunity zone, for companies looking for land, for companies looking for buildings. And as of last month, our manufacturing facility owned by the Opportunity Fund is now fully leased with two brand new tenants. The airport is fully open and operational. And the $335,000 that Comstock has on its balance sheet, that $335,000 being part of our 70 million dollars of assets on our balance sheet is now valued just based on the most recent capital raised at over 12 12 million dollars as i mentioned fundraising money at a dollar eighty that puts our investment value at over 12 million dollars but when you look at the valuation of the assets held by the fund when you just do the range of land comps water right comps, sewer right comps that the fund owns, the value of those shares are closer to $3 to $6 a share, putting our investment at closer to $20 to $40 million. That's not a market validated assessment. The $12 million is. The $20 to $40 million is what we see the land, an underlying land value of that fund holding relative to our investment. So all in all, in any context, tremendous progress there. We still hold well over 11 million common shares of Tonal Gold. That's in addition to the 5.55 million secured note receivable that's due in the next 10 months. And so today, using today's value, both those assets represent over $7.5 million of combined value. When you take those assets, contracts to sell our properties at 13 million when you take the tonal gold securities and secure note values and you combine them to be over $20 million, combined with our existing cash representing 30 million in potential liquidity over the next 12 months. It also is in conjunction with us currently sitting with zero debt. So that's the balance sheet that's financial position, let me turn to our three lines of businesses and considering that gold and silver is up over 1820 today, let me start with those. With those gold and silver properties during the first quarter, we finally received the full airborne geophysical survey of the entire. Comstock District properties. We've published some of the high-level pictures associated with those. The survey includes both magnetic and proprietary electromagnetic surveys within almost 1,200 line kilometers surveyed with the data now finally fully received, fully incorporated, you know, into our database and full interpretation ongoing. I think I mentioned on the last call what's very remarkable about this data is the clarity of the three-dimensional images of our district's geological structures. But what's even more remarkable is that 3D clarity is at depth and often in excess of 1,200 feet below the surface. Our updated modeling on the Dayton is now well underway. We will publish a series of interpretations and developments once the data, the geophysical data itself is properly interpreted. But that'll be done even well before it's fully incorporated into our models and well before we publish our full technical report. We've engaged Barry Dobert. We've had a number of planning sessions with them, providing detailed overview of our geological cross sections, our level plans, and all the work that has been done on the Dayton to integrate that into a final updated resource model. Their work will include auditing the completion of the model, and the review and publication of all the technical data that will go in the report. I probably should have mentioned that we already have a previously published existing resource estimate for the Dayton. That estimate was almost a half a million gold equivalent ounces in measured and indicated and inferred resources. These are near surface oxide ore resources and we've even done some preliminary economic shelves where just 80,000 ounces of that gold and 800,000 ounces of that silver could produce nearly 100 million in cash over a very, very short mine life. Our work will continue to build and develop on those already existing resource estimates with the new technical report that will be standalone for the Dayton resource coming this year. For Occidental and Lucerne, Tono has finally made some very good progress on publishing drill results. And these are properties, all of these properties are where we hold significant numbers of NSR royalties, a portfolio of NSR royalties, if you will, on all those Northern mineral properties located in Story County, including Lucerne, including the entire length of the Occidental strike claims and including all the Gold Hill targets. Tono is now preparing a technical report with resource estimates that are already completed for Lucerne and are now developing and working towards the addition of a potential resource estimate for the southern part of the Occidental. Tonno has recently published the results of three new drill holes from the southern part of the Occidental, which I'd just like to overview with you for just a couple of minutes here. These are not deep hard rock drilling targets. These are very, very near surface oxide ores with all three holes hitting excellent lengths and grades of near surface mineralization. They reported hole number TC007, which included 70 feet of over a tenth of an ounce of gold, including about 25 feet of over a quarter of an ounce of gold per ton, all near surface. Each one of those reported results included nearly one ounce per ton of silver. I mean, that's literally 0.95 ounces per ton of silver concurrent with every ounce of gold. that was discovered. They also reported a hole TC006, which hit over 50 feet of over 0.05 ounces per ton of gold, including 15 feet of a tenth of an ounce per gold. And again, in that same scenario, almost an ounce of ton per silver. concurrent with the ounces of gold. Just to put that in contrast, gold grades of 0.03 ounces per ton, not a tenth of an ounce, not a quarter of an ounce, you know, but 0.03 are strongly economic, you know, in this environment, strongly economic. So Tony's finally ramping up the near surface drilling that, and they just recently announced that they're going to add another drill rig to the Southern Occidental in strong part because of these good results. Planning an additional 23 holes, an additional 7500 feet of near surface higher grade targets. They plan now. to fully complete, accelerate and fully complete that near surface Occidental drilling, hopefully come up with a resource estimate related to the southern part of the Occidental, adding that to the Lucerne resource estimate and putting out a technical report, you know, for sort of those combined multiple resources. Again, we have royalties on all these properties, but in overview, the tonal transaction has turned out extremely well for us. We have annual recurring reimbursements of over $2 million. We have a monthly cash income now that would be annualized at almost $700,000 on that 12% secured cash paying note. Remember that security is on the entirety of the Lucerne and this mineral resource package. We have 1.5% NSR royalties on all the properties, including Lucerne, including the Occidental. We have 2.5% on the higher grade, more prospective Northern Comstock load claims, and we have an option to take that up by an additional 3%. So 5.5% royalty on the most prospective parts of the load, which is just huge. Let me get more granular here for us, turning to the mercury remediation business. During the first quarter, we invested our full 25% of MCU. So we took that ownership plan and option right to fruition. Plus, of course, we own directly, in addition to that, 50% of the MCU Philippines joint venture, putting us at 62.5% of all of MCU's participation. Last week in the Philippines, we received our first order. for 300 cubic meters of clean sand and gravel. And the last truckload of it was picked up yesterday. This is for a contractor of a flood control project, just seven kilometers away from our operation. And they already require another 4,000 cubic meters of two inch clean gravel, plus a whole ton of cobble rock. Our process cleans the mercury out of these soils, but it also cleans these higher, larger rocks. all of which we cleanly produce. We have two other sand and gravel buyers that are currently negotiating with us for more of the clean offtake. There seems to be monstrous demand for Grand and South sand and gravel, certainly in the Philippines with all the construction that's going on. Having said that, there is an even bigger sand and gravel scarcity, apparently globally, that we've been reading up on and understanding. So we're in a very, very good position there. The gold and mercury contents have been very, very low to begin with. That's as expected for the lower part of the river. Basically, we're starting in the lower part of the river and we're continuously moving ourself upriver. Later this week or next week, we'll publish some photographs of the operation operating, you know, in current situ and as it moves upriver. So you can get an appreciation for the scale of what we're doing. We're starting to see now more meaningful amounts of mercury content. And as we sample upriver, we see even more. So this is really honestly the first month. where we've had what I would call stable, continuously operating activities. You know, in March, we just got started with a lot of government oversight. In April, we had moved the facility twice as we get situated. And there was some flooding and, you know, with typhoon weather, all that settling in and May has been really great so far. So we look like this month is really the beginning of this thing moving forward. I want everybody to recall that we've earned our 50% equity, our additional 50% equity in the Philippine operation with a $2 million secured loan. And that $2 million secured loan has accelerated repayment provisions. So as the revenue starts generating, as the cash starts generating, we start getting repaid on that loan. We retain our 50% ownership in a project that has a potential lifespan of six to nine years. So paying very, very well, you know, beyond even the repayment and recapture of our investment. Moving on to Lineco, during the first quarter, as everyone knows, We acquired nearly half of Lineco in one fell swoop with the rights already committed and the resource already committed to owning over 64%. Critical to this acquisition was securing the previously permitted existing state-of-the-art battery metal recycling facility right here in the Tahoe Reno Industrial Center in Story County, just 10 minutes, 10, 15 minutes from our Silver Springs properties. The plant sits on 11 acres of prime industrial land, and could not be in a better position in the US directly across the street from the Gigafactory to move into this business. We assess the plant the building, the lab facilities, the water treatment facility, the air quality control equipment to be valued at well over $25 million. Linaco secured the acquisition of that facility for $14 million. Comstock has the security over that facility. And so it couldn't be more perfectly situated to receive crush separate battery materials into black mass. The first When we first secured the facility, then we committed $10.75 million for that 64% of Linoco, which puts it at a post-deal valuation of only about $17 million. As I mentioned, we feel like the facility is already worth that, but that's not what's exciting for us. What's exciting for us is to have a 20,000-ton battery metal recycling facility that can produce pure cathodes, And just last week, Linaco has selected the ECM, Renewable Process Solutions, in conjunction with another company called Plainsight Innovations, highly experienced designers and builders of large-scale renewable material manufacturing facilities to build our crushing and separating system that produces the valuable black mass, plus, of course, separating all the byproducts, copper, steel, et cetera. This will allow us now to finalize our permit submissions and enable the first major phase of our business plan while Green Lion and their associated engineers finalize their engineering design and construction for the phase two part of the operation, which is then to take that black mass all the way to pure cathode materials. We've had another development, though. Lineco's also engaged PSI and RPS to develop a second process for taking WAC masks to pure lithium carbonate, nickel, cobalt, magnesium, and graphite. We've always intended to have multiple product lines downstream, but we were so impressed with the work that RPS and PSI is doing on the crushing system and with the technology that they already have in-house for solvent extraction to allow us to develop our own IP that would produce the pure scarce commodity metals. So the business and markets are expanding from the very same source of the battery metal material. Let me conclude my prepared marks by emphasizing that we've established and published in last year's annual general meeting very, very specific performance objectives that's consistent with everything that I just updated you on and everything else that we're doing for the next three years. So that includes commercializing these high growth ESG compliant renewable businesses, It includes acquiring additional high growth cash generating ESG businesses, establishing, of course, and growing our existing mineral properties and monetizing the non-strategic assets to fund the growth of these new businesses. The bottom line is we're extremely focused on only the items and timeframes that we've published. And during this timeframe, we believe it'll become extremely clear, clearer than it is now for sure, but clearer than it even could be until we're communicating some of these businesses beyond MCU, beyond Lineco, that we're pretty hardcore, right, when it comes to these renewable climate smart manufacturing businesses. Our money's where our mouth is. The program was designed and directly links these strategic performance objectives with our goal of delivering half a billion in shareholder value, at least $12 a share, and then aligning all of our people with 100% performance-based, stock-based compensation. That program's been published since January. It's crystal clear. If we deliver, our shareholders are rewarded. If we don't deliver, we don't get anything. So I'll pause on that, Zach, and maybe turn to the Q&A through the Zoom Q&A mechanism.

Yeah, that's great, Corrado. Not surprisingly, we received quite a few questions while you were making your presentation. And also, not surprisingly, you addressed a lot of those questions with your presentation. However, we do have a question that wants just a little more detail. The person's asking for a little more detail. What is the timing of the mineral resource estimate and preliminary economic assessment and feasibility

Great question. So we have a schedule now. It's precise. Mike Norred, who leads all of our resource engineering and resource estimated work, has taken the data that Larry Martin, our chief geologist, and Wyatt Cohen, our junior geologist, have spent, I'd say, almost a year pulling together. The schedule has about three months, right, to create the resource estimate, which is now fully underway. update the resource estimate and corroborate with Barry Dober for the review and publication of the report. The preliminary economic assessment, and so, you know, to be clear, the second report that would follow this one would include a certain amount of drilling that would occur in the Dayton That drill program has already been defined by our team. As we review it, we will incorporate it and publish it as part of the first technical report. The first technical report will discuss certain economic considerations, but it won't be technically a PEA. So what we intend to do is publish the resource estimate first, then do some amount of drilling some amount of development, some amount of economic profiling. And then the second report would include a preliminary economic assessment or a PEA. We wouldn't expect that report until 2022 because in between the first report and the second report, we have some really exciting drilling to do.