Comstock Inc.

Good morning, ladies and gentlemen. Welcome to Comstock's first quarter of 2024 results and business update. This is Trevor Brucato with RB Milestone Group, Comstock's US-based investor relations firm. I'd first like to thank everyone for joining at this earlier start time as we were trying to accommodate different time zones during this cycle. This presentation is being recorded today, April 30th, 2024. and will be made available on the company's website at comstock.inc shortly after today's event. Again, that's comstock.inc. Comstock trades on the New York Stock Exchange under the symbol L-O-D-E, and joining us today is the company's executive chairman and CEO, Grata Degasperis, and its COO, William McCarthy. At the end of the prepared remarks, we will open up the call to questions that were submitted during the registration process and those that surface throughout this presentation. If you have any questions, you could submit them in the Zoom Q&A module. Please note that the investor surveying period for Comstock's Q2 stakeholder perception analysis report is now open. The survey can now be accessed on Comstock's website at the top of the investor section. We recommend filling out the survey throughout this presentation while the information is still fresh and completing it after receiving the full update provided by Grotto and Billy. The final report will ultimately provide trends on Comstock's perceived strengths, weaknesses, and milestones, and will be published shortly after the end of the quarter like we've done previously. Your participation will be much appreciated as it will help strengthen Comstock's investor communications efforts and will help guide the focus of future events. Please note today's presentation may contain forward-looking statements that are subject to risks and uncertainties that may be out of the control of the company, in this case, Comstock Inc., and should not be construed as a recommendation or solicitation to buy or sell any security. For Comstock's full disclaimer, please visit their website at comstock.inc. Lastly, RB Milestone is not a registered investment advisor or broker dealer. For more information on us, please visit rbmilestone.com. And now it is my pleasure to introduce you to Comstock's Executive Chair and CEO, Corrado DeGasperis. Corrado, the stage is yours.

Thanks Trevor, and hello everyone, and welcome to our first quarter update. I'm gonna allocate a little more time this morning to our strategic investments and innovations, then cover fuels, metals, and mining. And after my comments, Billy's gonna provide a deeper insight into our now operating solar panel recycling business, including our view of the markets, operations, tactics, and importantly, provide real guidance on the robust amount of net cashflow that we now expect metals to generate in just a few years. After that, we'll turn to questions. Okay, let me start with the corporate update, again, focusing on our strategic investments and how their own progress positively impacts both us and their own valuations before I then turn to our businesses. From a corporate perspective, financially, our first quarter itself was very stable with spending in line with plan and prior periods. Although the mix reflects a higher allocation to investments in R&D and particularly investments in our technology partners. Our commitment to higher R&D investments like Renfuel, Genmat, and now certain others are all based directly on specific opportunities that we have identified and now secured. that further extend our leadership in this massive energy transition. The investments were also structured such that we could experience returns beyond just the direct impact that they may have on our businesses. Renfuel is a great example. We have now executed both an exclusive license for their technology in the Americas and just last week completed the investment agreement with Renfuel, effectively combining the power of our IP portfolio with theirs and bringing this world-class technology and team tightly into our innovation network. This investment is senior secured. It was safely and intelligently structured to ensure our efficient access to Renfuel's critical IP. We've already physically deployed Red Fuel's proprietary esterification process to refine our biolium oil at our Wisconsin facility, and we're now producing our own samples for our own customers to test and ultimately use in their refineries for direct blending with their existing vegetable oil feedstocks. Renfuel's technology is incredibly complementary with ours and has already positively impacted our commercialization activities. However, we haven't stopped there, nor can we. In fact, you're going to see in our disclosures that we've made and are making additional investments into new breakthrough technologies with new development partners that can dramatically advance the efficacy of our solutions. You might be wondering to what end. Well, our ultimate longer-term goal, and frankly, the goal of the whole renewable fuel industry, is and should be what we internally refer to as the Holy Grail, which means to us achieving cost parity with petroleum. This notion was unrealistic just a few years ago. However, with the advancement in yields and costs that we've already established, And the new pathways that we have now identified, we believe we have line of sight on breakthroughs for further increasing our fuel yields and further reducing our operating costs, all towards this ultimate objective of achieving cost parity with petroleum. I know and respect how huge of a statement this is. And we're tempering our excitement internally because there is still real work to do. However, our leading and now expanding IP, our pioneering innovation team and our expanding development network has brought this objective closer and into much plainer sight for us. We'll have more to say on this and specific developments as they occur, but I can assure you these new allocations have been extremely diligent and support our biggest goals in this energy transition. Our existing solutions are already changing the renewable fuel game. But to sustain and grow our technology leadership, our strategy must ensure that achieving our goal actually wins the day. And that is what these innovations are designed and intended to do. Let me move over to Genmat, because our investment in Genmat is motivated by the same goal, accelerating these commercializations of these energy enabling breakthroughs. I'm thrilled to announce that we have realigned our investment in Genmat, taking something rather complex and simplifying it. We've invested $15 million over the past three years, and we now own 32% of Genmat, full stop, and hopefully with no confusion. We also retain the rights for using Genmats AI for both biofuels exclusively and mineral discovery and mining, positioning us to lead in these fields of use. This restructured investment puts our initial valuation at $47 million. And we believe this should already easily reflect at least a 10X return when compared to other comparable commercial ready AI companies. Although it's nearly impossible for us to find an AI company capable of what Genmat is currently demonstrating to the market. And they're proving it in the market, as they are now in discussions with several early adopters, including globally recognized stakeholders in high-value applications, starting with batteries and semiconductors that will leverage their physics-based AI for material development applications. Remarkably, GMAT's also developed and deployed a fully operational and new proprietary mission control software for managing GMAT-1, its low earth orbiting satellite and hyperspectral imaging system. GMAT's also now engaged with even more customers for their imaging and predictive mineral discovery algorithms, of which of course Comstock's very interested in, and also with customers signing up for satellite control system software. So they built their own satellite They deployed their own hyperspectral imager. They built encryption technology, programmed it themselves into the system, and then developed an entire software control system to control the missions of the satellite. And other companies who are putting satellites into orbit are saying, we'd like to pay you for leveraging your system. Our restructuring positions gem out for both their commercialization and monetization efforts in every single way. And it was designed to support their ability to raise much more capital from third party sources at much higher valuations, which we expect will occur later this year. This would both validate their technology with third parties and their valuations. And ultimately that would terminate our future funding obligations, which will reflect the powerful win-win-win all the way around. It should be clearer and hopefully clearer and clearer that our innovation system, this extended innovation system, which includes GEDMAT, which includes Renfuel, and now includes new partners, is already world leading for technologies that are enabling the energy transition. And amazingly, each and every one of them independently is commercializing. Greenline's another example that we're proud to highlight. Greenline just launched their first commercial scale facility in North America, and they have differentiated themselves in a very difficult EV recycling market with a very high value product proposition. Their Oklahoma plant is now producing battery grade precursor cathode active materials, and we understand that they're receiving offers for more capital financing at even higher values. This is in line with our plans to monetize summer all of our Green Lion investment this summer. In fact, Green Lion and Sierra Springs Opportunity Fund were both very early stage investments for us. We were literally in the seed round in both cases and both have seen enormous appreciations in value over just the past three years. Yet both are also directly supporting and or have advanced specific aspects of our individual lines of businesses. Our initial green line investment alone has grown over 10x and Sierra Springs values growth has been even higher. Some of you may not realize it, but Sierra Springs Opportunity Fund has the only large scale manufacturing complex in Silver Springs. And Comstock Metals has secured this capacity for both its existing production and its next industry scale facility. Silver Springs, with all of its new highways and infrastructure, provides immediate access to California and to Las Vegas, which is perfectly suited for Comstock Metals. Our sale of 2,500 Peru last year and our ability to pivot so quickly to a new solar panel operation would not have been possible without the availability of this Nevada platform. Silver Springs also just received and executed an LOI for the purchase of one of its properties that more than doubles the last known transaction value and hence correlates and doubles the underlying value of our most recent investment and represents another significant increase in the value of Comstock's original investment in this equity. These two advancements position us to monetize both our green line investment and our directly owned real estate, Comstock's directly owned real estate in Silver Springs at over 60 million in cash proceeds. And again, to be clear, that 60 million does not include our equity investment in the Sierra Springs Opportunity Fund, but just the 250 acres of land that Comstock owns separately in Silver Springs. Also, to be clear, the LOI is for lands owned by the Opportunity Fund for one parcel of land adjacent to our Comstock properties there. Let me turn to our businesses and just give some brief updates. And as I mentioned, Billy will take you through a deeper dive with our metals recycling business. So let me start with mining, then fuels, and then I'll segue and wrap with metals. Our mining team has advanced our monetization plans for the northern part of the district, primarily our Story County mineral estate, including the northern targets that are currently under lease, where we're experiencing current revenues and the possibility of even higher cash flows from expanding those transactions, again, just in the northern part of the district. More excitingly, internally, our mining teams have advanced our internal economic feasibility assessment for the southern part of the district during just the past few months. We've updated our mine plan for the Dayton resource using current pricing assumptions. You should be thinking $2,300 gold, not $1,800 gold, $27 silver. Our published technical reports use a cutoff that was actually equal to gold prices of 1800, where gold prices have now increased by $500 since then alone. So our internal assessments are showing nearly a doubling of value of the Dayton resource, both on a net cash flow and a net present value basis from our analysis just over a year and a half ago. We've also advanced Dayton's expansion plan as we build a new model together with GenMAT's geophysics team and prepare a new geologic baseline for the full imaging scans by GenMAT-1 of our district, which we should be in a position to commence shortly. So we build a base, we've expanded the base, and now we're going to add that data to the base to ultimately come up with a whole new predictive ability to expand our mineral resources. So in 2024, We're still looking to receive cash proceeds now well above $2 million that we originally predicted for the mineral leases in the northern part of the district and potentially entering into additional sales agreements, as I just mentioned, while we develop this date and resource and expand the mine plan ultimately for production. Turning to fuels, which by the way has been keeping us by far the busiest of all of our businesses. As most of you know, last year we validated industry leading yields exceeding 100 gallons per dry ton of wood, and we confirmed extremely low carbon intensity scores from our solution. We're now engaged across the industry for both commercial adoption and monetization. We're advancing multiple client discussions for monetization and deployment of our technology and very much expect multiple commercial agreements this year. We're in active and advancing conversations in the United States, in South America, in Europe, and now even in Asia. We expect multiple commercial adoptions with industry leaders this year. I know this is what people are very interested in and waiting for. And I'm confident as our teams convey offers to our partners that will not only validate our leading technology, but also unlock tremendous value for Comstock. And let's talk about that for a minute. Everyone's very, very focused on the first revenue, the assumption being revenue will cover our costs, the assumption being revenues will minimize dilution. That's all good. But we're receiving and entertaining strategic interest by various partners for investing directly into Comstock Fuels, the subsidiary. and accelerating our deployments with these partners. This will have tremendous impact on our liquidity, on this notion of dilution or rather accretion of value in exceptionally positive ways. These impacts will certainly be faster than when our technology starts pouring its first gallons, which will also be huge, but later than the monetization that I'm talking about and that we expect to consummate this year. This is all consistent with what we've been saying about commercialization and monetization with early adopting partners. We're just getting very, very close and it's all coming together. Let me conclude with metals. Last and certainly not least, where we cross the finish line with a successful commissioning of our first zero landfill solar panel recycling business. And it's now producing three distinct, fully renewable and saleable products from those end-of-life panels. We had a little excitement last week with our senior senator from Nevada, Senator Catherine Cortez Masto, visiting and touring our new facility. And to be crystal clear, we're now receiving panels, processing panels, and effective this week, recording revenue on the completion of processing those panels. I mean, just in this quarter alone, we secured all the required operating permits and commenced production. We secured revenue generating contracts and began receiving large quantities of end of life panels. We commissioned and successfully tested every stage of production, producing 100% saleable materials from those materials that were coming in. We collected cash payments on receivables for substantially all of the panels that have been received to date. Remember, this is a tipping fee model. We get paid up front. And we've now selected the site in Silver Springs, the same site, the same complex for our industry scale production facility that's going to represent up to 100,000 tons of annual production. And that's not all. We've prepared and already submitted permits for the first expanded industry scale storage site. And we've expanded our revenue generating contracts into California, into Arizona, into Texas, where we're getting tremendous interest. Our metals team really rocked it this quarter. And I'm gonna let Billy now take you into a deeper dive of our plans there, including what I feel is just a remarkable economic profile that we feel really, really good about executing on. Billy.

Thanks Corrado. That's very true. Our metals team has been quite busy this past quarter and it's not gonna slow down. So I'm gonna share some slides and talk a bit today about where the business is gonna go from here. And I'm gonna provide some more precise forecasts for this business. Before we dive into that though, I wanna take a minute and go back and talk about how we got here in this space of electrification product recycling. In 2021, Comstock acquired Linoco, which was a development stage lithium battery recycling company. And there's some pictures here on the screen. That's me at the 2022 annual meeting showing off our pilot system. And we showed a video of the system in operation, recycling batteries and producing black mass. Now in early 2022, battery metal commodity prices were at all time highs. The market was really frothy. And we were doing what we like to do, which is to try to de-risk our process by looking for partners that can enhance our capabilities and de-risk our plans. As Karado and I made the rounds with our competitors, we're sitting in the conference room of one of them in early 2022, and they were bragging about their market leading economics in their battery recycling process. Karado and I looked at each other, I had to bite my tongue, because they showed us a model that was based on expectations of Commodity prices at all time highs going up perpetually for decades to come. Now you probably know the story and how it actually played out. Our competitors race to build up capacity for primary battery recycling, hoping the market was gonna keep going up, hoping the supply of batteries was gonna grow extremely quickly. And instead those commodity prices fell, the tsunami of supply didn't materialize, and pain became the norm throughout the industry. Many of these competitors have not relented and they continue operating on the hope that the market's gonna perform to their models. We made the strategic decision to exit this market. We executed an opportunistic sale of our battery recycling facility in 2023. And we partially realized our investment in Green Lion. Now as Krata says, we believe Green Lion has a unique position in this market as a value added operator downstream, but we still see future monetization of that position as well. Now in 2023, we pivoted to solar panel recycling. The EIA is projecting a million tons per year of end of life solar panels available for recycling by just 2030. The first solar boom was really over 10 years ago in the Southwestern United States. Now, solar panel manufacturers quote an average life of around 20 years. What we see in the market is that the reality is much shorter than that, and these panels are already starting to come into the recycling space. In early 2023, Dr. Vilamanya joined us and came with a proven process to recycle these laminated systems with prior success in other materials. We've been able to develop a first mover advantage, including an advantage in sales with California being our primary source market, as well as building on top of an advantage in permitting and operation in Nevada. We have longstanding relationships with the Nevada Department of Environmental Protection that have allowed us to move very quickly on the permitting side. Today in 2024, we're operational. Our demonstration facility in Silver Springs, Nevada is processing panels today. We're quickly filling up our existing storage capacity from customer contracts. And we're getting recognition on the local and the national stage. As Carter mentioned, Senator Cortez Masto visited last week to tour the facility and learn more about our process. Not only is Senator Cortez Masto our Senator from Nevada, She also sits on the very important Senate Energy and Natural Resources Committee that defines a lot of policy around this area. And her support has been very welcome. As we move forward from here, we're planning to build at least three 100,000 ton per year facilities with an expected cost of $12 million each to get to operation. We're gonna bootstrap this with project level financing for each of these projects. And this is gonna be publicly supported financing, including industrial development bonds, USDA rural development financing, and potentially 48C tax credits from the Inflation Reduction Act of which a new program was announced this week for renewable energy projects. The best part about this business is it moves very quickly and we expect it to be self-financing in just two to three years. We're planning to stage our expansion over the next four years. Facility number one is our demo facility that's operating today. That facility is gonna scale to full capacity operating three shifts later this year. We're using this demo facility to shake out our process and to ensure a rapid and successful scale up as we move to the larger facilities. And you see here, the expected timelines for these projects are short. One year to go from funding to initial operations and one year to go from that initial operation to operating at full capacity. We're staging this out over several years. These are conservative projections. We think there's a good chance that we can beat this schedule and move even quicker than this. As we think about our capacity build over the next several years, we're looking at 75,000 tons of capacity by 2026 to 150,000 tons by 2027 and over 300,000 tons by 2029. The pace of this growth is gonna be dictated by the demand. For each of these facilities, we're establishing storage capacity in advance of the production capacity. We're filling up that storage capacity with revenue producing inventory. This is an interesting industry because inventory is a source of cash, not a use. And that inventory contributes to the funding of the build of these facilities. We're not gonna do what the battery guys did. We're not gonna build excess capacity. We're gonna manage our market risk and we're gonna move at pace with the demand in the market. Again, we think these projections are conservative and we expect this market to grow much quicker than this. The projection results from this plan would produce over 125 million in top line annual revenue in just five years with 100 million in net profit for an 80% operating margin. It's a very capital efficient business, a very capital efficient growth program. And again, it becomes self-funding in just three years, which sets us up for future growth to continue to pace growth in the market. Before I finish, I want to touch on one last point. I'm getting a lot of questions about how do we price our services? What does it cost to recycle a solar panel? And I mentioned last quarter that this is not information we're planning to share publicly. There's a few reasons why. First off, this is truly a service business, not a commodity business. Every contract is unique, every contract is negotiated, and our sales team is motivated to seek the highest price possible for our services. Secondly, our customers are really marking up our services. We're acting as a destination. The solar installer who's taking down old solar panels is also seeking for the largest price it can get for the removal and disposal of those old panels. And those customers expect that we're gonna keep our pricing confidential in order for them to have the best position in negotiations. Our competitors here today are really landfills. We're cost competitive with hazardous waste landfill pricing. which is also generally a negotiated non-public price. For this reason, we think it's prudent to keep this information confidential and let our sales team operate to the best of their abilities. So I'm gonna wrap up there and turn back to Corrado and look forward to any questions on this as we move.